(a follow up to my last blog post about trying to start a credit union in New Mexico for Artists & Craftstmen)
Last night was the night. I had been preparing for a week. I was to get up in front of artists and craftsmen and explain how hard it is to start a credit union today. I work for a trade association that was founded to do just that. Nine years ago was the last time a new credit union was formed in our state. Only 2 years ago they meet their capital requirements. It’s hard to start a credit union today.
Naturally I began the presentation with a brief history of credit unions in America. Edward Filene, the signing of the CU Act in 1934 by FDR, the alarming stats that showed the peak of credit unions (1969 – almost 24,000) to the dismal fact that today there are less than 8000. I showed a brief alphabet of the regulations that will haunt them. In the spirit of transparency (in case anyone googled corporate credit union) I carefully laid out the recapitalization of our system by the NCUA. Sigh.
Is it really possible that we’re done with people helping people?
Everyone I talk to politely scoffs at the notion of starting a credit union today. It can’t be done. Why would you even try? I can only assume their filter for this reaction is the credit union of today. Struggling to remain all things to all people in an interest rate environment that is strangling the bottom line. A financial coop that finds themselves shoring up the system (again) and fighting off legislation (again). I see a tired movement. One that is willing to not only allow big mergers, but encourage them. But to what end? For the last ten years I constantly hear the predictions of the next ten years: There will only be (insert shocking number) of credit unions in the US. So, are we done?
What is our long term plan for people helping people?
Rein Whitt Prichette is an artist. It’s not a hobby, it’s his life’s work. He told the story last night of how a $1200 loan would have made all the difference in his life. He’s been banking at Wells Fargo. There’s no way they would give him a loan. He has no credit score. He has no W-2. But he does have art in the Albuquerque Art Museum. His serigraphy is featured in a first edition Franklin Mint collectors book. Would your credit union give him a loan? Not likely. So, I have to ask again, “Are we done?”
I see a movement hanging on – not planning for the future. I see CU leaders squinting down the lane to the finish line, blinders on, clutching what’s left of their 401k. I experience tellers that have a job, no hope for a career. Loan officers that are trained to pull the credit score lever and belch out the A+ paper and toss the rest in a pile of doom.
Wow – that was bleak. I know not all credit unions are like that. But let’s be brutally honest here for a moment. Size breeds anonymity. And the larger the financial institution the more they rely on technology to make decisions and sort the masses out. We’ve stopped talking to our members. Listening to their stories. Assessing their character. I fell as if we’ve stopped helping people. We make loans. Non-risky, middle market, credit driven, A paper loans. I know a lot of this has been driven by the regulators. I get that. But it’s not lost on me that we may become the reason credit unions were started in the first place. Rein cannot get credit. He’s the little guy of the 21st century.
The future does not bode well for the small credit union. So it begs the question: Are – we – done?
Rein was very nervous telling his story last night. He does not want charity. He wants to leave behind a system that will enable artists to take care of each other. He’s lost everything at this point, except for his passion. He ended with this proverb:
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
I’m not done. Stay tuned.
The 2020 Vision of Marketing 
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January 12, 2011 at 6:20 am
James Robert Lay
Nor are we until we swag out every single credit union member. Keep rocking. Keep the faith. There are people to help.
January 12, 2011 at 8:21 am
MB
Yes, exactly. I would hate to see the credit unions become the big banks too but too often the talk seems to be aiming that way.
It was so inspiring last night to see credit union-ism in a pure form. Why would anyone want to go to the mega-banks when they would belong to a financial institution in which they themselves hold a stake? I felt uplifted thinking about the idea of a group of people all caring for each other within the credit union model.
This week, after seeing a plea on my Facebook page to vote for one of our New Mexico credit unions in the REAL Solutions video contest (link below – vote for Oscar!) My brother in California, a long-time credit union member, sent me a nice follow-up note after voting.
>>Done. Voted for him. Thank you for including me because I want to help. Oscar has a beautiful story! But I have to admit that the woman in the video above him on that same web page talking about “Schools First” credit union almost had me. That’s our credit union!!! “Schools First” CU has truly have added so much to our lives.
The beautiful thing about these videos is to remind me how much a good financial institution has helped me and my family’s life. It’s true. I never really thought about it before. Mary, just remember that you’re doing wonderful work for families. You’re in a great profession because it helps families. These videos sort of conk people like me over the head to realize the contribution of my credit union to the goodness of my (and my family’s) life.
Isn’t THAT what it’s all about? Isn’t THAT what we in Credit Union Land are most proud of?
Here’s some more good credit union stories to get everyone inspired. Vote for Oscar!
http://www.realsolutions.coop/2011/1/7/cast-a-vote-for-your-favorite-member-story?sms_ss=twitter&at_xt=4d27382cb5e03673%2C0
And let’s all cross our fingers that the artists’ dream credit union becomes a reality and reminds us of what credit unions are all about.
January 12, 2011 at 1:37 pm
Glenn Coble
Please excuse my ignorance but can’t a few friends get together to loan another friend $1200? Can’t we have someone hold the money of the rest in a tin can or as in our case a lunch bucket without asking the government for permission? I know this won’t generate enough money to pay a CEO $90,000 to $250,000 and it won’t buy a pretty shinny new building with cologne dispensers in the bathrooms but it might be the beginning for your artists… a real human cooperative.
January 18, 2011 at 11:12 pm
Tim McAlpine
Keep pushing Denise. We need a happy ending to this story.
January 19, 2011 at 10:24 am
Matt Davis
I hate to start my response to this amazing post with a less than serious observation, but I will: Tim just said “happy ending.”
When Desjardins formed the first North American credit union from his house in Levis, Quebec, his intention wasn’t to compete with banks. Rather, he wanted to help the people that banks would not. These people had no one to turn to if they had an entrepreneurial spark, an unexpected financial hiccup, or a desire to build wealth. Desjardins’ caisse populaire fixed that problem in Levis, and the idea spread to America because it promised to fix the same problems here.
Today, it seems like we’ve forgotten that it’s the Rein Whitt Prichettes of this world that we are supposed to be helping. The question has turned from “How can we fundamentally improve people’s lives through the spirit of mutual self help?” to “How can we minimize risk, improve net income, and grow?” We’ve forgotten that Desjardins didn’t have any desire to be a business owner…he wanted to help people help themselves financially. The future of the caisse populaire was much less of a concern than the future of the people it was built to serve.
100 years after Desjardins and his wife, Dorimene, put everything on the line to serve the people of Levis, credit unions too often move mountains to serve only themselves. Blame the NCUA and the economy all you want, but this is nothing short of a lack of focus, willpower, and historical context. Helping a middle-class family earn .5% instead of .4% on deposits isn’t transformational. Lending to borrowers who have no other options is.
I’ve used the word “movement” to describe the collective of credit unions way too often. Until we have more Denise Wymores doing what you just described, we’re an industry. An industry that has lost its way.
January 20, 2011 at 8:36 am
MB
My long-time friend Brian got turned down yesterday for a loan by his credit union. He is hard-working, honest and needed the loan to buy a much-needed used 4WD vehicle for his work as a part-time computer installer and 24/7 time (and then some) as the owner of a small northern New Mexico ranch and the son and caregiver of elderly parents who also live on the ranch.
As many local people do in that rural area, Brian makes a small income by his part-time work but sustains his family by cutting wood, hunting, growing a garden, bartering, fixing his own superannuated vehicles and trading labor on other ranches and local businesses in exchange for food, help on his own ranch, vehicle repair, and other needs.
He doesn’t have credit cards or mortgages. Everything is paid for in cash, barter or labor. He has no credit score because he has no credit history.
He designed and built his own house and workshop. He built his own wind generator that provides the power for his house. He and his brother keep the forest and meadows on the ranch like a well-manicured park to prevent wildfires. All long, hard, year-round grueling work.
Unfortunately, that is the kind of work history and income that doesn’t look good on paper. As a matter of fact, there is no paperwork that covers neighbors helping neighbors and just plain hard work that doesn’t fit into the tidy category of a ‘career’ and regular income.
I was disappointed first because I had urged him to try his credit union but second, because the credit union did not look at the person, but instead looked at the paperwork. There are many people like Brian in these rural New Mexico communities. How can a credit union truly serve the underserved and serve its community if it doesn’t consider this part of its population?
January 20, 2011 at 9:45 am
tinfoiling
Sometimes you have to just say ‘bullshit’ to those that say this movement is on it final chapter. Keep listening to those types of pundits and you will eventually believe it. I think the U.S. CUs are just going through the self-serving (to a few) selfish (to a greater few) merger mania phase. It will end at some point when the weaker and those that see no point in continuing give away their credit unions (and equity) to someone with those economy of scale eyeballs.
In the end those CUs now and new ones in the future will be stronger and have a greater understanding of who they are and what they can do. Last night we got a call because we told a member that we would cover his overdraft and he didn’t have to go to Money Mart and pay +700% interest on a payday loan. He said he didn’t want to approach us for a small loan because he was embarrassed to ask. That is how bad it can get out here in CU land. If we can’y risk a few hundred dollars for a member to save him from that type of usury then we need to go back to the kitchen table and start again.
The ability of a credit union to be able to do that is such a powerful reason to keep going. Believe me there are a lot of your members that feel the same way. Just ask them.
The question of the day – ‘Just what color is your Kool-Aid?”
January 20, 2011 at 11:44 am
Matt Monge
We’re only done if we give up the fight. There are many restless and tireless voices out there (and I think the number is growing) who are committed to seeing the movement not just survive, but adapt and grow. So while some may be throwing their hands in the air in despair, others are locking arms and marching into the fray. Count me among the latter.
I think part of the problem is that for too long we have just expected people to buy into the movement because we say things like “Banks have stockholders and are therefore bad. Credit unions have members and are therefore good.” We’ve got to connect our employees and members both with the larger vision of the movement. We need more passionate, engaged employees and members; but that will only happen to the degree we help them live, experience, and feel the credit union culture.
January 20, 2011 at 1:07 pm
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January 20, 2011 at 2:39 pm
Jason Sherrill
So this may open me up for a tongue lashing, but reading MB’s comments above, which I learned about from a tweet by @cuwarrior, I’m struck with wondering if P2P lending (http://www.prosper.com) fills the need that apparently the CU MB’s friend visited wasn’t able/willing to fill?
I understand that P2P investors have a profit motive, but P2p also has a cooperative look to it as well.
January 20, 2011 at 6:18 pm
Bob Canterbury
I am very familiar with the P2P model on account of the fact that I am one of the Ps who uses this model. The other P is named Lefty and he loaned me the money I needed to pay the bookie on account of the fact that I took the Falcons last week and they are bums. Anyway…. the juice on the P2P loan aint too bad at 2 percent a week and if I pay it back in time then Lefty wont send Bobbie V to see me on account of the fact that he’ll break my leg if I say I aint got the money. Anyway….P2P is a good model, generally speaking that is. And the Falcons are still bums.
January 23, 2011 at 6:09 am
Brian Rodgers
I’m MB’s friend from northern New Mexico. I am actually a part-time Wireless Internet installer. Minus the rant which I offer on my site http://outfitnm.com for free, I’ll try to keep this laconic, while not my normal style: I’ve got a ultra high-tech job that I have tuned and trained for, I am college educated, and self employed for almost three decades now. Although the government says it wants to help the working poor, what we experience is a much harder life than people living and working in urban areas.
Honestly I assumed naively that becoming a member of a credit union would help me when in need. My need at the moment is akin to lyrics from country song: My father is dying of old age and cancer, dog is on his last legs, mom hurt her back due to osteoporosis, now I spend every chance I get caring for them, or worrying about them, which is harder. Then topping off my troubles, my damn work vehicle, up and dies.
Normally I would be doing the work on my truck myself, but I have that pesky dying parents issue next door. So silly me thought I would get my CU to help me buy a used vehicle. Sometimes I think city folk believe us country folk are lying when we report our income, to avoid taxation I think the loan officer was implying. We did our budget we can afford payments. My wife has a nine to five job.
Anyway I did look at the people to people site but the third question is: rate your quality? My quality? If I had a credit score I wouldn’t have had so many flags go up at the CU. There is no place to check “no credit score,” only good to worse. Why would they ask that of us? I don’t know what they want? I clicked off the site with no valid choices.
See that’s me not ranting.
More questions than answers and as my dad used to say, “I don’t understand all I know about that.”
Brian Rodgers
January 20, 2011 at 8:08 pm
Matt Davis
@Jason In my opinion the early credit unions were P2P lenders. Members lent to members, using the credit union’s credit committee (comprised of members) as a middle man. Time, risk, scale, etc. have shifted credit unions from this intimate, character based lending to a more scientific, risk-management (avoidance) approach.
So too have P2P startups. Underwriting at many of these firms has become even stricter than that of banks/credit unions. All of this is in the name of systemic risk due to centralized deposit insurance funds or regulations, and their caretakers.
Gene has it right (as usual). Until we again become willing (and in some cases, able) to take a chance on our members, we aren’t fulfilling the promise of our mission.
January 21, 2011 at 7:44 am
Denise Wymore
I have been sitting back enjoying this conversation, so now I’ll ring in.
I believe that P2P lending is the answer. It is the original credit union model after all. However, few boards are going to change their loan policies BACK to helping people of modest means and, god forbid NO credit score. The examiner’s job is to make sure the credit union follows THEIR policies and complies with Regs A-ZZ.
It’s not against the law to make a loan to a person that needs one. Riskier? Sure – but we are in the risk business. If you don’t have the stomach for it – get out.
January 21, 2011 at 5:36 pm
Hap Landies
Denise, you work for the New Mexico Credit Union Association, yet, by the content and tone of your reply, it seems you are unhappy with the policies, practices, attitudes and behaviors of your Association’s members. Wow, what a sad case of narcissism. Let me put it another way; you work for them, they don’t work for you.
I have an idea for you and the likeminded people who also work on the fringe of the credit union community. If you don’t like the direction credit unions are going, grab a shovel and get in the trenches. There are tons of corner office jobs vacant all the time. Not surprisingly, many of them are in small credit unions where the demands are ridiculously high, the pay is low, and creativity is begging.
Who knows? There may be a successful model in lending to people who, by all appearances, have no demonstrable way of paying you back. However, until you are ready to sign your own name to this plan; I suggest you give it a rest. You sound awfully whiny.
January 22, 2011 at 10:27 am
Denise Wymore
Hap,
Thanks so much for your comment. And welcome to the conversation. You are right. I work FOR credit unions – they don’t work for me. My job at their trade association is to further the credit union movement. Not to sit back and watch it erode. You may have missed the point of this post – I am working with a group of people with a common bond to try and start a new financial cooperative. I don’t know how much more “in the trenches” you can get than that. I hope my 30 years of experience in the movement will come in handy.
You also make a good point about small credit unions demands. That’s why I came to work for a trade association. My career began in such an office. Four people in the front of a house recording deposits on ledgers. You’re so right about ridiculously low pay. I could make a lot more money working in banking, but I chose credit unions and continue to be a cheerleader for passion and commitment to the cooperative principles.
I’ll keep you posted on my progress. I think you’ll see that I’m a doer – not an on the fringe complainer.
January 22, 2011 at 8:15 am
Glenn Coble
Maybe credit unions aren’t dying. Natural selection may be turning some (many) into banks and true credit unions into what Desjardins envisioned. There will be far fewer CUs when greed is taken out of the equation but the financial needs of of the underserved may be better met. I know… I know… I’m a communist