To: SECU Board of Directors
Dear Chairman Ayers,
Fraud is an interesting word. Think we all know what it means, but just for a refresher: Fraud - wrongful or criminal deception intended to result in financial or personal gain. Pretty clear, right? Are we all together on what fraud means?
Good, let's take a look at fraud in connection with risk-based lending at SECU and how it affects the SECU membership - you and me.
1) When a loan officer makes a loan at the Credit Union - whether it is in the A, B, C, D, or E risk-based lending tier - that loan officer expects that loan to be repaid. If a loan officer makes a loan which she doesn't believe will be repaid, then that loan officer is committing fraud. Easy enough, right? If you make a loan that you believe will not be repaid, you are committing fraud against SECU and its' members. SECU loan officers in the past had a sterling reputation for intelligent, sound lending. How do you know? Because overall loan losses have historically been less than 1/2 of 1%. An excellent performance.
2) So therefore, every loan made at SECU is a good loan when made by the loan officer. Every loan is expected to be repaid, that includes every A, B, C, D, and E loan made. But as Mr. Spencer Scarboro, SVP of Lending Integrity, so clearly states in an SECU press release (!) about lending: "Bad things do happen to good people". Yes, over the years, "bad things" did happen to @ 1/2% of SECU borrowers. SECU members have an exceptional record of repaying their loans as promised!
3) Despite the fact that every loan is good when made - or else the loan officer committed fraud - Chairman Ayers and the SECU Board have decided, by implementing risk-based lending, to overcharge 50+% of all SECU borrowers (in the B, C, D, E risk tiers, according to the SECU SVP of Lending Integrity) without cause for that good loan they just made. This unjustified, profiling of over 50+ % of SECU members - without cause - for a good loan is purposeful, reckless discrimination.
4) To make it clear why overcharging over half of all SECU members borders on fraud, lets' look at an example. Loan losses at most financial institutions are highest on unsecured loans and credit cards. So, lets assume that 1 out of 10 SECU "E"- paper borrowers default on their unsecured loan. That's a very high 10% default rate! 1 out of 10 of those "E" borrowers did not repay - and yes, that's bad. But, what is far worse is that Mr. Ayers and the SECU Board fully support overcharging without justification the innocent 9 out of 10 SECU members who faithfully did repay those "E"- paper unsecured loans.
5) All the credit bureaus explicitly tell lenders - including Chris Ayers and the SECU Board - that credit scores can not and do not predict which individual borrowers will default on a loan.
6) If you and I - and potentially 2.7 million other North Carolinians - were being incorrectly overcharged 90% of the time at the grocery store, at the gas station, at Walmart, Target, Lowe's, Cracker Barrel or Bojangles, we would be screaming FRAUD!...and we would be right in our outrage!
Why do the same rules of fairness no longer apply at SECU?