SECU - Risk-Based Lending: A Sleight Of Hand On Good-Hearted People, Your Family And Friends..

Almost all  financial institutions in the U.S. have jumped into the practice of risk-based lending.  A few were just flat-out duped and fooled; but the vast majority were willing victims - they really didn't mind playing the fool at all.   

Lot's of money to be made fleecing folks with risk-based lending!  For decades lenders were repeatedly caught purposefully overcharging and exploiting the unknowledgeable, the vulnerable, the too trusting - y'know good-hearted folks, your family and friends. Lenders looked like heartless loan sharks when exposed - and were. 

Lenders  needed protection from this type of constant harassment by "do-gooders" - y'know good-hearted folks, your family and friends..

Faux "statistical legitimacy", consciously misapplied via credit score pricing, has now provided risk-based lenders with the political cover, which today makes the shearing of the sheep mere child's play - easy pickings!!  

And generally, when given a choice between "good and gold"... well, you know how that usually comes out these days!

In risk-based lending, credit scores are used to establish a tiered-rate chart with members with lower scores paying higher rates. The statistically valid idea is that if lower credit scores create higher loan losses, then those members causing the losses should reasonably be charged for those higher losses  No problem with that!  

😎 The problem arises when you overcharge the wrong people (over 80%+ of the time!) for those higher losses. An 80% error rate in any product or service should be unacceptable, shouldn't it? Borrowers who default don't pay for the losses - as they say "duh-h-h-h"! They don't pay anything at all - that's what "default" means - got it?!?  The "wrong people" being charged for those losses are of course the SECU members in the group who faithfully do repay their SECU loans. And, you know who those folks are? Yep, you guessed it - good-hearted folks, your family and friends. 

Let's take a look at an example of why RBL is a really bad deal for SECU borrowers.

See the five face-down cards below? There are 4 jacks and a queen in the hand.  All five represent regular working folks, who all have low credit scores of 580 for various reasons, which implies that 1 in 5 (20%) of these folks will default on their loan over the next 24 months..  All are, therefore, charged the highest ("E-paper") interest rate.  Let me help you with a hint in this exercise (which you wouldn't get in real life.) The surefire fact is the queen is the card which will default in the future.

Pick the Queen!
Your odds are 1 in 5 - 20%.

Now just for the sake of argument, let's assume you used a bit more rational, fair and defensible method of determining the risk of the borrower, rather than just "eenie-meenie" or the "pick a card" risk-based lending model.  

Imagine that you actually sat down with each loan applicant individually and went over their financial condition, asked for explanations of the credit blemishes, and listened to them honestly as fellow members and human beings. Through the face-to-face interview and additional information gleaned, here's what the five borrowers would start to look like to you:

 

Your odds of picking the Queen have vastly improved... now approaching 100%! Too simplistic you say!  No not really, it works in real life (and SECU had an 85 year low loan loss rate to prove it!)..... if you want it to, if you're really seeking to help people - y'know good-hearted folks, your family and friends.... But lots of folks don't want it to work.  

 

Why? Because the four jacks - with that old bad queen gone - are now "statistically certain" to pay, won't cause a loss, and deserve a much better rate.  You won't be able to "statistically" discriminate - with a straight face or clean conscience - against them any longer and there goes the "The Strategic Plan",  there goes the "record profits" year, there goes the bonus and hubris....

Risked-based lending is a statistically "stacked deck", a bad hand, an unfair deal, a falsified game of chance played ruthlessly and recklessly by lenders against people - y'know good-hearted member-borrowers, your family and friends.

And you know who holds all the cards... on this sleight of hand, this slight of the membership?

 

 

 

 

 

 

Becoming a house of cards?

 

 

 

 

 

North Carolina - Government Of the People, By The People, For The People? Depends On Who You Ask, Evidently...

Tue, Nov 28, 4:55 PM

Dear Mr. and Mrs. Blaine,

The North Carolina Credit Union Division (NCCUD) regulates North Carolina state-chartered credit unions. NCCUD is under the supervision of the Administrator. Neither the Administrator nor NCCUD provide legal advice to members of the public.

Please refer to my response dated October 19, 2023, regarding your questions. 

 Sincerely,

Kristina Ray 

Administrator of Credit Unions

 ✅ Prior letter: 

Ms. Kristina Ray, Administrator of Credit Unions November 19, 2023 Dear Ms. Ray, We are writing to request a response to our letter to you dated October 25, 2023. In that letter we requested clarification from you on the following two questions: ✔  Q: 1)  Is the N.C. Credit Union Division required by North Carolina law to monitor and enforce compliance by state-chartered credit unions with their bylaws? ✔ Q: 2)  May a N.C. state-chartered credit union adopt rules, policies and procedures which effectively amend its bylaws without approval by the NCCUD?  Your earlier response on October 19, 2023 was as follows: "Among other responsibilities, the North Carolina Credit Union Division (NCCUD) reviews North Carolina state-chartered credit unions’ bylaws for compliance with required information outlined in North Carolina laws, rules, and regulations. Each credit union’s bylaws contain procedures for requesting amendment approvals from the NCCUD Administrator. Additionally, some provisions within the standard form bylaws, which may be used by credit unions as guidance, allow for the credit union Board of Directors to adopt policies and procedures, as long as the membership is notified within a specified time frame before becoming effective. The Administrator approves or disapproves proposed bylaws amendments after a thorough review of the request. If you have additional questions relating to this matter, consult legal counsel." Your October 19, 2023 response failed to address directly the two questions asked. This will be our third request of you as Administrator for a clear answer on two simple questions. We would like to also point out that our first inquiry with you on this matter was on July 25, 2023. We believe the answers are clear given: "G.S. § 54-109.4. Amendments.(a) The articles of incorporation or the bylaws may be amended as provided in the bylaws. Amendments to the articles of incorporation or bylaws shall be submitted to the Administrator of Credit Unions who shall approve or disapprove the amendments within 60 days." "G.S. § 54-109.12. [Credit unions] ...shall be subject to the management, control and supervision of the Administrator of Credit Unions as to their conduct, organization, management, business practices and their financial and fiscal matters." ✔ But despite our belief Ms. Ray; as the Administrator of N.C. Credit Unions, you are the one State official designated with the statutory authority to interpret credit union laws and regulations.    ✔ We simply ask that you do your duty in your role as the Administrator on behalf of the people of North Carolina We would appreciate a timely response. If you intend to refuse to respond further would you please let us know. Thank you. Jean and Jim Blaine       ... an entirely unnecessary "dance" on determining Ms. Ray's role as CU Administrator!  ✔ Why there seems to be an erosion of trust in our government?

 

 

 

Tue, Nov 28, 4:55 PM