“If you look around you right now – If you’re riding in your car right now, your car does not need to exist, it is contingent. It’s not necessary. And if you think about the road you are driving on. The road does not need to exist. It is not necessary, it’s contingent. Its existence is based off something else. And in fact, if you look at the world around us, the entire planet is contingent, right? It’s not necessary. In fact, none of us are necessary. We don’t have to exist. So the entire creation is contingent, meaning it doesn’t have to exist, it’s not necessary and yet … it does exist. And since it does exist, there must be a prior necessary being that brought all other contingent beings into existence.” – Father Mike Schmitz, Jan 4, 2023 from Catechism in a Year.
This made me think of the credit union movement. Credit unions do not need to exist, they are not necessary, as is evidence of the massive, unchecked consolidation that is happening. And yet, they do exist. There must have been a prior necessary being that brought credit unions into existence.
That being was Edward Filene. Credit unions were formed in the US over 100 years ago as a way for people with a common bond, such as employees of a particular company, to pool their money together to make loans to each other. This allowed individuals who may not have qualified for loans from traditional banks to access credit at more favorable rates.
So, if you think about that word contingent, it can be used to explain the existence of a credit union both as a noun and an adjective. For example, a contingent of railroad workers created a financial cooperative that was contingent on their participation. If there is no participation in a cooperative, it ceases to exist.
It’s fundamentally different than a customer using a bank. People helping people isn’t just a nice phrase, it’s at the heart of the credit union difference.
Our structure was designed to not line the pockets of a few shareholders but rather return all revenue back to the members of the cooperative in the form of higher interest rates on deposits, lower fees (or no fees) and lower rates on loans.
This used to be the case for all credit unions. At least the many I worked for beginning in the 80’s.
Today there is a trend of extracting value from the co-op for the benefit of a few as the financial cooperative is merged into another financial cooperative leaving nothing for the members that built it. We are seeing “change of control” payments being disclosed in mergers that are included in CEO’s contracts. Chip Filson’s blog explains why these “change of control” clauses are anti-credit union:
“Change of control in executive contracts is primarily for those leading publicly traded stock or privately owned companies. Credit unions are coops, not stock owned firms. Management is not threatened by hostile takeovers. Member-owners cannot sell their voting interests to a third party. Proxies are not allowed. Management alone is in a position to initiate a merger and negotiate the details.”
I am not anti-merger by any means. I know there are many instances where it makes sense. The number one reason credit unions merged in 2022, according to the NCUA website, was for “expanded services.” This doesn’t make sense to me.
Many years ago I worked for the Oregon Credit Union League, and we had a League Services Corp. They offered access to item processing, loan underwriting, card services, collections, etc. so that any credit union could afford to compete. Over the years as credit unions grew, they began to buy outside of the system. Eventually these businesses were no longer profitable and either sold off or shut down.
Why aren’t we forming a CUSO that can help credit unions “expand services” without merging!
In 2015, three state leagues formed their own CUSO, Plexcity, that provides shared back office services to associations so they can gain economies of scale and avoid merger. This is exactly what we need today. A CUSO of CUSOs that work together to make their products and services affordable for the 3,484 credit unions in the US that are under $200M according to CUNA’s asset trends report dated September 2022. There are only 1,252 credit unions with assets over $200M.
What is most troubling to me is that we, as a national financial cooperative movement, don’t seem to have a plan. If our plan was to become like Canada, I could probably get behind that. I feel like we are just “letting it happen.” When that does not need to be the case. That should not be our story … that the small credit union in rural America doing the Lord’s work will be forced to merge out of existence because we ceased to be cooperative.
The good news is, we have the most collaborative and innovative conference in the credit union system coming up, where we can work together to create a plan for the future of credit unions! At the NACUSO Network Conference this year there will be two 45 minute sessions, one on March 28th and 29th.
The 28th will be a panel discussion facilitated by Mike Kelly with panelists:
- Kevin Scott – CEO Las Colinas FCU
- James McBride – CEO Lion Share CU
- Scott Prior – Connection CU
- Peter Barnard – CEO Rekindle CUSO
The 29th will be a roundtable discussions also led by Mike Kelly
Roundtable leaders will be:
- Kevin Landel – Revolution CUSO,
- Sandra Szymanski – CEO Family First FCU,
- Lily Newfarmer – CEO Tarrant County CU,
- Tom Sakash – CUNA Small CU Initiatives
Please join us at what could be an historic event. It’s time we work together to solve the problems small credit unions face, by getting to the root cause. Lack of cooperation and collaboration. Cooperation is in our DNA. Let’s do this!
Credit unions are not going down on my watch.