Do Credit Unions Have a Friend in the CFPB?


By Robert McGarvey


The headline in a recent issue of Credit Union Times made my heart smile: “Credit Union Comes to the Aid of CFPB.”  

The fact that this is news is disturbing but it also is fact that it is news because – generally – what I hear from credit union leaders is a deep seated hostility towards the Consumer Financial Protection Bureau and I just don’t get it.

That’s why when Self-Help Credit Union joined with the Center for Responsible Lending to offer support to CFPB in court actions that indeed is news.  

As for the CFPB hostility, it is thick. CUNA for instance has slammed CFPB and, per CuTimes, in the Trump era, it has “painted a target on it.”

The puzzlement is that the only credit union that has been slapped hard by CFPB is Navy Federal, the nation’s largest, which in late 2016 signed a consent decree admitting some unsavory debt collection practices.  Navy was ordered to pay $23 million to affected members as well as a $5.5 million penalty.  

Navy, earlier, had had figured in CFPB reporting over complaints filed against it.  The only other credit unions that rated a mention were PenFed, State Employees’ and BECU and, well, when only four credit unions warrant notice by a regulator this hardly seems a crisis to me.

Besides, CFPB mainly spends its time pursuing very big banks and also sleazy law firms, mortgage lenders and such like. Here’s the list of recent enforcement actions.  What’s not to like in it?

Why were credit unions formed in the first instance? Because banks largely ignored the financial needs of working Americans and often, too, they ripped them off as opportunity arose. So the bold and noble idea took hold that the cooperative framework could be harnessed to enable workers to lend to workers and to offer kindness wherever possible.

In the height of the mortgage crisis I recall conversations with numerous credit union CEOs who told me they were working hard to never foreclose on a mortgage, to find smart ways to restructure members’ loan agreements, to do what could be done – legally -to help people stay in their homes.

And they meant what they said.

Bankers, meantime,issued statements assuring shareholders that their interests were protected.

It’s a wholly different world, credit unions versus banks.

CFPB of course has a $10 billion size threshold before it exercises direct supervision – and that is about five credit unions.  Out of roughly 5900.  That means about 5900 have no direct relationship with CFPB.  

Credit union operations experts tell me that – as Marvin Umholtz elaborated – “nearly all of CFPB’s rulemakings affect CUs of all sizes.”

I’m sure that’s true and I am also sure many credit union executives – most – resent yet more layers of federal supervision and mandatory compliance steps.

I don’t blame them.  

But here’s the deal: CFPB is in the business of doing what credit unions also are supposed to do. Watch out for and help protect Americans who need help in navigating the financial services universe.

The other day the New York Times ran an editorial, “Hands Off the Consumer Finance Bureau.”  

The Times, in the piece, said that Republicans in Congress want to fire Cordray, the CFPB chief, and weaken the agency.  That would be a mistake, said the Times: “The consumer bureau is the only federal agency with the sole mission of looking out for the interests of ordinary Americans in their dealings with banks and other lenders.”

The Times added; “Mr. Trump would do well to let Mr. Cordray finish his term. After all, he has done a very good job protecting ordinary people from the powerful elites Mr. Trump spent much of his campaign raging against.”

These are thoughts credit union leaders need to mull. It is easy to rail against CFPB and regulation. But what if CFPB’s chief enemies are also the enemies of credit unions and many of their members?
What if….

The Next Credit Union Frontier: Personalizing to Succeed


By Robert McGarvey

Sometimes the simplest ideas are the truest.

When I ask credit union executives how they plan to innovate to remain competitive with banks – and at least the big banks are whirlwinds of tech experimentation and innovation – I hear back about chatbots, instant messaging, hoped for improvements in antivirus, and a lot more. All good. But – in my view – none is likely to move the competitive needle for any credit union.

But a new survey from TimeTrade, a developer of appointment scheduling software, just may have fingered the exact differentiator credit unions need to stay viable in a world of every bigger and slicker banks.

The 2016 survey asked 1064 credit union members about their experiences and the answer came back that they very much want one thing: “Results reveal that credit union members desire more personalization and more in-person interaction at the branch than bank customers do. This is supported by the survey data, which shows that not only is personalization an in-branch priority for credit union members, but they visit their branch more often than the typical bank customer.”

What is dazzling about this insight is its simplicity: Credit unions excel at what in their hearts most credit union executives have long believed is their strong suit, that is, people skills and personalization of the member experience.

You have never heard a credit union CEO say his/her institution is winning over more members because it spent millions on a new core system – at least I hope you haven’t heard that.  I happen to know what core my credit union runs on and, honestly, I don’t care and I am a tech guy.  I would care if it didn’t work but it works fine and that’s the end of the story.

I don’t know many members of any credit union who have a clue about cores and why should they?

Besides, banks can win the tech spending race every day, all the time.  J. P. Morgan Chase is spending $500 million on cybersecurity and probably that is much more than all of the US’s credit unions added together will spend.

Other banking behemoths do likewise.

Pick fights you can win.

Person to person is a winnable fight.

The TimeTrade survey gave credit unions the lead in personalization: “85 percent of members feel they have a personalized experience with their credit union, versus only 79 percent of customers who feel the same about their bank,” said TimeTrade.

Millennials too are on this bus: “Among millennial members (respondents ages 20 to 35), 43 percent said they value the personalized experience they receive from their credit union,” said TimeTrade. That is, it’s not just older Baby Boomers.  

Interesting, too, per TimeTrade, is that “77 percent of millennials are willing to schedule an appointment to visit their credit union branch for specialized service, compared to 68 percent of all members.”

So there is no proof – per these data – that millennials have written off branches and personal interactions at them. Quite the contrary.

A staggering factoid in 2016 is this: “43 percent of members visit their credit union more than 10 times a year,” reported TimeTrade.

Many of us – this reporter included – have predicted the death of the branch as slick technology (mobile banking, mobile remote deposit capture, etc.) has made it unnecessary to set foot in a branch.

Just maybe we have missed the point. Just maybe a substantial subset of credit union members go to the branch because they want to.

What that means for credit unions is simple. Train employees to excel at member service and always hire frontline people to whom that matters.

While you are at this, think hard about buying up abandoned bank branches – which in many markets are available at distressed pricing.  That advice represents a reversal of much prevailing thinking (mine included) but if the credit union secret sauce is personalization and if branches are cheap in many locations, it becomes a simple and cheap equation that may lead to greater marketplace visibility and perhaps victory.

Always ask: will this next step help us personalize service to more members?

When the answer is yes, it just may be a good idea.

Even better is that winning the battle for personalized service is within a credit union’s skill set.  It’s a fight where intimate scale becomes a plus.  Where local management and leadership can help an institution triumph over a behemoth with Wall Street leadership.

Sometimes the path to victory is shorter than we might think.