Does field of membership definition matter to a financial cooperative?

first_imgOn Tuesday, I read an opinion piece from CUNA President/CEO Jim Nussle suggesting that we eliminate field of membership (FOM) requirements. This was based upon the Supreme Court upholding the NCUA’s 2016 field of membership rule.Nussle goes on to point out that the Federal Credit Union Act focuses more on our overall mission “to promote thrift and provide access to credit for provident purposes” than field of membership.  He also suggests that FOM definitions were directly tied to credit-worthiness, at a time when we didn’t have the tools we have today. When I was explaining what a credit union really is to a marketing friend of mine that knew nothing about our structure he summed it up pretty nicely “It’s like borrowing from your friends, co-workers, family or neighbors, only in a less awkward way.” Precisely! That is what field of membership did for us. I started my career in credit unions 40 years ago, and I can tell you that “common bond” matters when it comes to the success of a credit union, especially in the early stages. Early on I worked for United Grocers Credit Union, $4 million in assets. It was really a co-op for co-ops. United Grocers was designed to help independent grocers (mom and pop shops) compete with the big chains by pooling resources and leveraging buying power with volume. When a new employee started at UG they were instructed to open an account at their credit union so they could deposit their paycheck automatically. You can’t get better marketing than that. We promoted thrift by encouraging new members to “pay themselves first” before dumping their entire paycheck into checking. We had a credit committee (a kind of jury of their peers) that reviewed loans outside of our guidelines and decisions were indeed made based on their employment history, their probability of future employment, what they were purchasing (was it a provident purpose?), what is their history with the credit union? By his argument FOM definitions have become obsolete because we have this great tool called the credit score now so we can manage risk another way. Let me first say that I’ve always admired Mr. Nussle and don’t envy his position today as the leader of the trade association that is charged with representing all credit unions in the United States. However, I was really taken aback at the notion that we should eliminate completely one of the few differentiators left to help define our unique cooperative structure. There are two points of contention in my view. First is the notion-the credit scoring system we use today is sufficient. Under the old system (clearly defined common bond) we would make a 20-year-old a loan to buy their first car in a heartbeat. We knew them, we knew where they worked, the likelihood they would be able to pay off the car based on that information. They had no credit, they were just starting out. We also knew that by taking a chance on this young kid starting out, we were likely building lifetime loyalty. Today we won’t touch that loan because everyone is born with a credit score of zero. If you look at most credit unions’ balance sheets, their loan yields are woefully low because they are primarily loaning to A and A+ paper (older people with established credit history). The average age of a credit union borrower is 3 – 5 years OLDER than the average age of the credit union member (which nationally is still 47, or too old). Credit scores, in my opinion, are flawed and have hurt us more than helped us. They were originally intended to help “price” the risk, but were used to judge and deny, especially by the banks who did not have the type of relationship with a customer that a credit union has with a member. I have argued that the loosening of common bond has interfered with the true definition of a target audience (from a strategic marketing perspective). When it was teachers, that was pretty specific and easy to market. When you have a FOM description that states “Anyone who lives, works or worships in a five county area”….well, not so much. Thus the proliferation of “shiny happy people stock art” on most credit union’s websites. They all pretty much look the same. The second notion I’m not a fan of is eliminating our history. In other words, many times I’ll go to a credit union’s website and click on the “About Us” page only to read this rhetoric “We are a not-for-profit financial institution owned and operated by our members with a volunteer board of directors.” What I love to read is “In 1936, five school teachers deposited 6 dollars each to charter the credit union.” This was field of membership, the founders, our history. Let’s not erase it. Also, we need to START new credit unions and the timing couldn’t be better. History is repeating itself and we are dangerously close to mirroring the Great Depression in terms of overall unemployment rates. Credit unions BOOMED after the Great Depression. Why? Common bond. People really needed to help other people. I do see a great opportunity with the looser common bond definition but still see it is a critical piece to defining the market, or the cause if you will.Consider this…one of the hardest hit industries in America right now is hospitality. Restaurants, hotels, transportation. They are bonded in this crisis. And credit unions in their purest form can be summed up in this way: those that are able to deposit money in the credit union will get a reasonable rate of return so that those members that need to borrow money can get a loan (regardless of their score) also at a reasonable rate. If a new credit union were to start today, say the National Restaurant Association CU, I would imagine with our financial cooperative structure that it could be very successful and a wonderful way to tell the REAL story of the financial cooperative movement. All tied to a common bond and people helping people in a time of financial crisis. 4SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Denise Wymore Denise started her credit union career over 30 years ago as a Teller for Pacific NW Federal Credit Union in Portland, Oregon. She moved up and around the org. chart … Web: www.nacuso.org Detailslast_img read more

Climate policy ‘gaps’ hindering low-carbon investment, investors say

first_imgJointly organised by the UN Environment Programme’s (UNEP) finance initiative, the Principles for Responsible Investment (PRI), the Institutional Investor Group on Climate Change (IIGCC) and its counterparts in North America, Australia and Asia, the letter estimated that clean-energy investments currently stood at $250bn a year but needed to increase to $1trn annually to prevent a 2 degree Celsius increase.“Stronger political leadership and more ambitious policies are needed for us to scale up our investments,” the signatories argued.UNEP executive director Achim Steiner said the perception prevailed that there was a choice between economic well-being or climate stability.“The truth is,” he said, “we need both.”Signatories’ proposals to governments:Provide stable, reliable and economically meaningful carbon pricing that helps redirect investment commensurate with the scale of the climate change challengeStrengthen regulatory support for energy efficiency and renewable energy, where this is needed to facilitate deploymentSupport innovation in and deployment of low-carbon technologies, including financing clean-energy research and developmentDevelop plans to phase out subsidies for fossil fuelsEnsure national adaptation strategies are structured to deliver investmentConsider the effect of unintended constraints from financial regulations on investments in low-carbon technologies and climate resilience The letter called for an “ambitious” global agreement to be put in place by the end of 2015 – the date of the Paris climate conference.“This,” the signatories added, “would give investors the confidence to support and accelerate the investments in low-carbon technologies, in energy efficiency and in climate change adaptation.“Ultimately, to deliver real changes in investment flows, international policy commitments need to be implemented into national laws and regulations.“These policies must provide appropriate incentives to invest, be of adequate duration to improve certainty to investors in long-term infrastructure investments and avoid retroactive impact on existing investments.”Alongside the letter, the investor groups also published a report detailing investors’ current activity in climate-sensitive investments – and cited AP4’s low-carbon equity portfolio.Additionally, it highlighted a fund set up for BTPS by Legal & General Investment Management, which adjusted the weighting of FTSE 350 companies within the index according to their carbon footprint.The report also praised green real estate and the advantages offered over what it deemed “conventional” buildings, such as lower energy consumption and operating costs.In a move that is likely to be controversial, the call for “reliable and economically meaningful carbon pricing” was backed by several Australian investors, weeks after the domestic government abolished its emissions trading scheme (ETS).However, an ETS remains in place within the European Union, with China currently considering one.European pension signatories (34):Denmark (3): PensionDanmark, PKA, UnipensionFrance (2): ERAFP, Fonds de Réserve pour les RetraitesNetherlands (7): ABP, APG, bpfBOUW, Mn, PMT, Woningscorporaties, VervoerNorway (1): KLPSpain (1): Pensions Caixa 30Sweden (6): AP1-4, AP7, Folksam         Switzerland (1): Ethos FoundationUK (13): BBC Pension Fund, Bedfordshire Pension Fund, BT Pension Scheme, Church of England Pension Fund, Greater Manchester Pension Fund, Kent County Council Superannuation Fund, Merseyside Pension Fund, Northern Ireland Local Government Officers’ Superannuation Committee, RPMI Railpen, South Yorkshire Pensions Authority, Environment Agency Pension Fund, Universities Superannuation Scheme, West Midlands Pension Fund,WebsitesWe are not responsible for the content of external sitesLink to letters and report Institutional investors with more than $24trn (€18.5trn) in assets – including APG, PensionDanmark, the UK’s BT Pension Scheme (BTPS), the Universities Superannuation Scheme (USS) and Sweden’s AP funds – have argued that delays in implementing a global climate policy are increasing the risk profile of their investments.In an open letter ahead of the UN Climate Summit in New York next week, more than 340 institutions – including 34 pension investors from Europe – urged governments to aid the deployment of low-carbon technologies and strengthen the regulatory support for the energy-efficiency and renewable-energy markets.It argued national governments should offer up an “ambitious” policy response to combat climate change and said the signatories were concerned “gaps, weaknesses and delays” in climate change and clean-energy policies would increase the risk to their current investments, while also necessitating more radical action at a later date.It insisted governments needed to consider the “unintended consequences” of financial regulation on low-carbon investment, and called on governments to phase out fossil fuel subsidies.last_img read more