... was SECU formed to leave money in members' pockets? Or take it out?
Going to try to move in a slightly different direction today. Analyzing loan losses/chargeoffs will take some effort and a look back; and, of course, "where the rubber hits the road" - or "the stuff hits the fan" - on risk-based lending is the critical issue of fairness. Fairness, as we glimpsed in #3, "A-Paper for Everyone?", can quickly become a twisted issue.
Is risk-based lending more profitable than "same rate for everyone" lending? (Y/N?) Of course it is; that's why banks have adopted it! Not too hard to figure out how that works. Interest charges to members under the "same, A-rate for all" standard of the past are going to be less than RBL where you charge "B" members a little more, "C" members a good bit more, "D" members a lot more, and take "E" members to the cleaners. Add them up and the total interest taken out of members' pockets will always be more - hope no one argues with that one!
How much more is SECU charging its members under RBL? Good question! SECU knows the answer, but hasn't told us yet. Again, not too hard to compare the loans under each lending strategy. You can be assured that the extra interest charged to members under RBL will be in the hundreds of millions of dollars - very big bucks, out of small pockets.
Does SECU need to take this money from members to be "more profitable"? (Y/N?) No, as CEO Leigh Brady proudly proclaimed at the Annual Meeting: SECU has just finished its 5 "most profitable" years in history (See #2). - all BTW before the introduction of RBL! So, this will just be "piling on" in terms of "profitability" - at the members' expense.
If making more money is not the issue with risk-based lending at SECU, then charging some members higher loan rates must have to do with the cost of those extra loan losses which may arise with lending to members with lower credit scores. (Y/N?) Certainly could be, because SECU is currently experiencing a higher % of losses on loans to folks with lower scores .
Surprised I would say that? (Y/N?) Why?
If you could "resolve" the loan loss issue, would you be okay with the same fair rate for all members? (Y/N?)
... this may get interesting!
#RemoveLeighBrady #ArrestThe8
ReplyDeleteDrain the swamp. Remove the remaining 8 on the board, Brady and Bomba.
DeleteAll the SECU board members who hired Gym Haze need to resign. All SECUboard members who signed letter supporting Gym Haze a week before he walked out on them, need to resign. That would leave the membership with a three person board who has the best interest of the membership in place. Which is also the best interest of the state of North Carolina
DeleteJim, I do appreciate your efforts to bring things to light. With all the hype around the RBL rates, I decided to look for myself at SECU's rates. Personal loan rates angers me. The spread between the best and the worst rate is 7.00%. The credit card rate maximum is 18%. Well google what the maximum rate a credit union can charge - its 18%. If RBL is such an abrupt change, why wouldn't you wade into the pool instead of jump into the deep end. Let's think of those folks that have a credit card and they woke this morning to an 18% rate. The minimum payment didn't change, it now just takes longer to pay it off.
ReplyDeleteI don't trust their judgement any longer.
Could be examiners are clamouring for a more balanced lending strategy. This could be solely driven by examiners who want to make sure the lending portfolio is not highly focused on risky credit score members. RBL makes it easier for examiners to control CU management relating to concentrations. I would caution against assuming it’s management & the board. It could be regulatory pressure.
ReplyDeleteinteresting ..... the things you don't know that go on behind the scenes... they probably discussed this at their yacht party.
DeleteMaybe. Could be. Could also be because it will make the loans easier to sell. We have no way of knowing, which is kind of the point. If there are good reasons for what they're doing, then it is deeply irresponsible of them not to educate the membership. (Unless they are legally prohibited from doing so, which seems unlikely.) The lack of communication and explanation is what is really unforgivable at this point--and I mean actual numbers, analysis, and reports, not the dog and pony show.
Delete"If there are good reasons for what they're doing, then it is deeply irresponsible of them not to educate the membership."
DeleteRight, and what I've learned over many years is that if someone or something behaves this way it's because they're not being truthful!
#RemoveLeighBrady
ReplyDeleteStarting to see these hashtags more. A couple of months ago I would’ve disagreed. I really wanted to support Leigh. I do not personally know her, but I remember her vividly during orientation years ago. I liked her. Today, I do not feel the same way. #RemoveLeighBrady
DeleteRight there with you @10:38 PM.
DeleteThis was shared at a TBP meeting
ReplyDeleteThe simulated interest revenue over the term of originated auto and
closed-loans originated in 2022 was 709,931,890 under the new TBP strategy.
If all members were charged “A” tier rates it would be 593,884,213. B rates
would be 649,484,903. During the meeting it was said this would be the
interest SECU would lose out on instead of the money back in our members
pockets. That comment I feel reflects SECUs new mentality pretty accurately
now
Did that simulation... simulate how much it will harm those of modest means?
DeleteMoney in member’s pockets spent in local communities in North Carolina.
DeleteSend us your mama has become send us your money.
DeleteLeigh Brady has a long history of talking out of both sides of her mouth. On one hand, she/board of 8/Bomba tout that we just finished the 5 "most profitable" years in SECU history. At the same time they say that if we don't introduce RBL and change ALL of our technology we're going to become irrelevant and be run out of business. Brady wants to eat her cake and have it too. She and the board and Bomba want to take credit for the recent profitable years. At the same time, they are lecturing us on what needs to be done in order to prevent the imminent entire collapse of SECU. How does this logic work???
ReplyDeleteSECU doesn't need to take money out of the pockets of members to be "more profitable". SECU should lower the interest rates for "ALL" and pass along surplus to our member/owners. Board/Brady/Bomba are leaving out the fact that they're WASTING the member's/owner's money on extravagant and frivoulous things that the majority of the membership doesn't want. Bomba is outsourcing IT functions to the tune of millions instead of employing some of the fine people in our state. Didn't we used to take care of the citizens of our beloved state? Instead, he wants to get rid of all of the former IT employees who put blood, sweat and tears into helping our members and replace us with his former First Citizens Bank followers all so we can become more and more like a bank. I sure do loathe that 4 -letter word.
Don't even get me started on the wasted spending on ever-occurring "team building exercises" with the same group of folks over and over, the lunches to celebrate RBL, the expensive trips/locales for meetings. Are they not fully aware that this is the members'/owners' money that they're wasting. The reasons for them insisting on RBL are becoming evermore clear. It's not because we need it to survive. It's because they need to have a war chest. War chests are sometimes used the reserves of cash set aside or built up by a company to take advantage of an unexpected opportunity. Their unexpected opportunity to us members is their extravagant and wasteful spending.
RBL isn't the answer to the loan loss issue. Logical and critical thinking doesn't exist with the 8 remaining members of the board, Brady or Bomba. Instead they plunge their heads further and further into the sand and insist on moving forward faster and faster with their bad ideas.
We've had enough! We need for our credit union to return to it's roots of people helping people where we look out for all of our members, particularly those who are struggling, and not catering to the elite and privileged.
#RemoveLeighBrady
ReplyDeleteIf I read this right then a couple of points (btw - "TBP" evidently means "tier-based pricing"):
ReplyDelete1) Yes, SECU has the ability to easily compare the impact on members of RBL vs. same rate. So no one can claim "we don't know"!
2) Under TBP interest charged to members would be $709,931,891.
3) If "same rate" pricing were used ( "A-rate for everyone") interest charged to members would be $593, 884, 213.
4) If you subtract #3 from #2 ($709,931,891 - $593,884,213 = $116,047,678) you have the extra amount of interest being charged to members under TBP.
5) So yes risk-based pricing is going to cost SECU members hundreds of millions of dollars in excess interest charges each year. Why "hundreds of millions"? Because that extra $116+ million in interest charges is only for autos and closed end loans...credit cards, mortgages, etc are still to come!
6) One last point, if you add That $116 million in extra interest charged under TBP to that record "profit" of $564 million Ms. Brady is so proud of...it would become the largest record profit in the history of $680 million.
7) Why are we proud of that?
Sorry! Off a $1 there.. should be $709, 931,890!
DeleteSo next question? If A rated members are more important than all other members, why isn’t SECU working to keep those members’ savings? Why isn’t the board funneling some of these “profits” back to As through savings rates? +.001% is an insult
DeleteThe record profit of $680 million is the actual year earnings of $564 million + the simulated additional interest gained from TBP of $116 million ($564 = $116 = $680 million)
DeleteSince the board assumes people of modest means won’t move to another financial institution, even if SECU no longer treats them better than the local check cashing place, why is the board allowing wealthy folks assets to walk away? Brady and this board are obviously worried about the asset decline because of the borrowing inJuly to plump up the June year end financials! Is there anyone on this board with some analytical skills and regular logic? Or are Brady and The Destroyers all living in Oz? Can they not see that not going for the maximum enriches members communities North Carolina and yes, NCSECU over the long term?
DeleteThe math above would be correct. However, I must point out that the profit calculated above is the difference between the two simulations on the existing trends for loans originated at all getting A-Tier rates vs Tier Based Pricing Rates. What was not shared were the numbers based on the current/old rate structure which would be required to truly account for the difference in profit. The data provided also does not account for the intended increase in loans generated by “bringing back A-tier members.” This would also have increased the interest income. In the Tier Based Pricing presentations a small statement spoke to me profoundly. It was stated “E-Tier loans originated remained approximately the same.” This was not true, there was a drastic reduction in the actual number of E-Tier loans originated per the small numbers on the left of the graph. However, that data was overshadowed by the large increase in A-Tier loans originated. Data is perceived differently depending on how you frame it. By using graphs, the data could be manipulated to support the agenda. In the same token, not sharing the existing rate structure projected interest income further framed the data in a way that was intended to support the Tier Based Pricing agenda as necessary to the future of SECU.
DeleteThe Board should give this person all the actual unfiltered data on credit scores, lending, rates and losses... and they might actually get closer to the truth about RBL and why the info they are using to make decisions for 2.7 million North Caolinians is "incredible"!
DeleteThis person would love to see raw data and draw their own conclusions. A now retired, but extremely impactful, former SVP taught his Senior Loan Officers to read between the lines. He encouraged embracing the full picture for every member. To lead with a servant heart rooted in always doing what is best equally for the membership and the member in front of you. This same approach unequivocally applies to seeing beyond the manipulated data one hands you and using experience coupled with raw data to make the best possible decision. The current executive team and board could benefit from the same.
Delete"The current executive team and board could benefit from the same."
DeleteThey are lazy, they want someone else to do the dirty work and then throw up their hands and say so sorry, not my call!
SECU Board and Brady are impoverishing the poor while stiffing the wealthy. Anybody happy with this leadership?
ReplyDeleteI can only think of 10 people offhand who are happy with this leadership…..8 remaining board members + Leigh Brady + Josh Bomba. Most of the rest of us feel like it’s a complete train wreck.
DeleteHit the nail on the head. That is why compensation expense continues to increase at a ~10% clip meanwhile my paycheck is going to go DOWN since our benefits are going to go up. No your merit doesn't even come close to keeping up with even half the inflation rate #SECUStrike
DeleteI just looked at an open-end signature loan applied for online. The members both had mid 800s credit scores. They get an interest rate of 13%. I got nauseous. . . I would hate to see the rate for the lower scores. This RBL makes my skin crawl.
ReplyDeleteMaybe Brady missed this opportunity to gouge us members. It is a bit cheaper than using your credit card which now charges 18%.
Delete"They get an interest rate of 13%."
Deleteit'll be 15% before you know it ...
Only if you do a cash advance. We should not be incentivizing cash advances especially knowing what rates banks charge in the market.
DeleteGetting back on the article topic. "Certainly could be, because SECU is currently experiencing a higher % of losses on loans to folks with lower scores ." Seems this would be because SECU is now lending to anyone in that particular loan bracket. Anyone with X credit score is made the loan. All determined by some third party who SECU lends to. It is baked into the algorithm, 10 people with x score will default on the loan. Before, the loan officer who was an employee of the local branch did a face to face interview and was able to weed out a portion of those who would not pay back the loan. Voila, low loan losses. IF the loan was made, and the member did not pay, that local loan officer called them up. Hence, better collections. Now why will we need loan officers, when all loans will be determined by third party determined algorithms? just punch in your number and get your loan, or not. why branches? why not move the call center out of state? out of country. Third party doing everything seems to be the great idea of Brady and this board. Could it be that those folks are in over their head and have no idea how to manage a $48 billion dollar organization? That's why Brady and Board are outsourcing as fast and furiously as possible! And none of the outside vendors has any concept of cooperative! It is done for a cookie cutter BANK.
ReplyDelete@ 3:40 PM: "Could it be that those folks are in over their head and have no idea how to manage a $48 billion dollar organization?"
DeleteThe answer is yes, yes, yes, yes, yes, yes, yes, etc. You get the idea. Remaining 8 board members = clueless, Brady and her inability to now take credit for others' work now that she is in the CEO position = clueless and effectiveless, Bomba who was barely a seasoned IT Manager before he was promoted to CITO by Jim Hayes = clueless, in over his head, and has a superiority complex.
“Determined by some third party” - I wonder. I have felt all along the new lending tiers, rates, and underwriting was all done in house. Our own cooking.
DeleteThe tiers are determined in house. The credit scores are set by a third party. Three agencies all have different numbers and It is not a flawless conclusion. the decision is made by an outside agency. Everyone with x # gets A everyone with y gets a different rate. That credit rating is determined by third party. No appeal, no extenuating circumstance. One digit can increase your rate substantially. No changing it. Tough. If people just managed their finances better, they could all get A rates!
DeleteDon't forget we have an exciting new financial education section on the new website. Perfect timing with that higher rate. So patronizing.
DeleteTiming is everything in life and with interest rates at a 40 year high, the timing of RBL to the members will be devastating to some hard working state employees.
ReplyDeleteAnd this is just the beginning ...
Outsource the useless first, the Board and Brady.
ReplyDeleteOutsource the Useless:
DeleteWouldn't that be great?
Firstly, Brady, Bomba, and the board of 8
Secondly, who should it be?
How about all of the imposters from FCB?
Finally, other execs who neglect to uphold
The honorable & respectable SECU of old
Don't forget to include the Loan Administration Executive Team in this group - They All knew better - began their careers looking Members' in the eye - bet none of them could face a member in need now. Sold the Members and their Coworkers out for their own personal gain. RBL - Collections - Charge-Offs - Specialization - All are a disaster for SECU.
Deletebring all outsourcing back in house. Nobody understands SECU. singular, one off, wildly successful institution. should be held up as THE BUSINESS MODEL for creditunions. Once upon a time, there were a lot of creditunions that still operated like a cu and were run like SECU preHaze. Banking mentality has taken over the industry.
DeleteI completely agree about the Loan Administration Executive Team. They are complete sellouts who have thrown their co-workers and the members under the bus to help themselves. Are they auditioning for a position in a bank? That seems to be where they belong, taking advantage of the little guy and those who are struggling to cater to the elite and privileged. It’s really sad, and they should take a close look in the mirror and ask themselves if this behavior is true to our charter and the noble reasons that this credit union was formed in the first place.
DeleteYes, Loan Admin leaders own a huge part of this mess...sellouts is probably not the name they wanted, but it is the name they have earned.
DeleteMost of our paint points right now are owned by LA. Where is the accountability?
DeleteLoan Admin Exec Team is so full of themselves, they couldn't even introduce Mr. Applequist correctly during last WebEx meeting. And Yes, we were paying attention at least up to that point.
Delete#OutsourceOurCeo #RemoveLeighBrady
ReplyDeleteHow much did the delinquency rate change after SECU adopted early direct deposit
ReplyDeleteThat’s an interesting point, especially when it comes to the Salary Advance Loan, though not exactly something that is “wrong” with this administration per se.
DeletePer the terms of the SALO prom note, we can’t pull the money out (early) on the date it comes in, yet the members can’t utilize it a day early either, lest their account not having sufficient funds to repay the outstanding loan when the transfer is set to pull. Unfortunately, a lot of members don’t, or aren’t in a position to, let that money sit for an entire day in their account until we can legally pull it out automatically.
Early direct deposit is a great convenience for those without a SALO, but for those who do, both sides lose.
This is a great question. This seemed like a terrible idea from the beginning but Hayes kept pushing even after resistance from branches and internal departments.
DeleteAs someone without a SALO, and who has helped many members without one, I’ve heard nothing but rave reviews about early direct deposit. I even know some folks who brought their direct deposit back to SECU because we finally offer something that many other credit unions offer. Don’t think it would be fair to disqualify all members from it just because of the folks who are dependent on the SALO, but it doesn’t seem like there is a middle ground.
DeleteEarly direct deposit is such a gimmick. You get paid early once. Then it’s still on your same period. If you get paid weekly on Friday you now get paid on Thursday. It’s cost the membership millions of dollars in losses due to loans not get paid back on time.
DeleteNot a gimmick. You get access to your paycheck a day early each pay period. And if someone can’t handle a simple loan payment with this change then the SALO has failed.
DeleteWhat is so unfair about pricing loans in accordance with their risk of default?
ReplyDeleteWe are an equal, classless membership. No one is better than the other.
DeleteLet’s penalize people getting laid off from their job and couldn’t afford the unexpected medical debt!!!
DeleteExplain the OELOC? The open end previously we offered was always 10.75%. Today, A paper members are getting charged 13%. So even the A paper members are getting screwed in that specific product. Now for the new closed end fixed rate loan, you can get as low as a 9.25-9.75 potentially as an A paper member. Most members are qualifying for at least in the 12%-14%. We are really doing a disservice to the membership when we made the switch November 1st. It’s just a money grab. How is this not hard to see? The members that typically don’t need a loan will get the better rates and the membership that unfortunately relies on credit at times to get by will be charged more. If the member is too risky for the loan…there is a little option called DECLINE. Which is sometimes in the best interest for a member, but if the member shows he has paid secu well over the years and has had unforeseen circumstances that hurt his credit…let’s approve and give them a good rate just like an A paper member would receive. Everybody wins expect for the money hungry that want to extort every penny they can from the less fortunate.
DeleteNothing unfair about pricing a loan to its underlying risk.
Deletemost folks below A paper repay their loans. SECU staff was always great at indentiying those few who did/would not. When those few are eliminated, you have a group who always repays. Risk based lending is lazy lending and penalizes the members.
DeleteNothing, theoretically. You have two options: 1) price loans based on risk or 2) price all loans the same. Both are valid, and SECU went with 2 for most of its history. Now, I could point out that credit score doesn't correlate terribly well with an individual loan's default risk, and that I'm not at all convinced that the current pricing actually tracks aggregate risk of default. But that's really beside the main point, which is we have been told that RBL is necessary. Not that its fairer, but that it is necessary for the institution to survive. And that case simply hasn't been made. Given that there are quite a few member-owners who do not prefer a move to RBL, I think the leadership has an obligation to make the case to membership, and they haven't really attempted to do so in a meaningful way.
DeleteWhile we are discussing failures in decision making for the benefit of our members, I would like to personally thank you. Under your leadership, employees were granted opportunities to become experts in finance. Allowing us to earn and maintain licensures and designations. By choosing to remain a branch employee only two were allowed to be kept. The board decided a jack of all trades could be a master of none. The members and employees suffered because of this decision. The constant chatter about investing in our employees and being the best employer in the state target this board set is a farce. Forcing employees to forfeit at least 7 designations or licenses benefited who? Unfortunately, the investment made in employees during your tenure created a problem for the decisions of the execs and current board. The employees have the knowledge and expertise the board and execs lack. They are not easily persuaded without drawing their own conclusions. They were taught to think for themselves. This is another example of poor leadership decisions being made at the expense of employees and members alike in the last 2 years.
ReplyDelete7:11 PM, you are correct. That investment in staff made it possible to provide unparalleled service to our members. It was rewarding. Being unceremoniously stripped of what we worked so hard for, and used daily…that was a hard pill to swallow.
DeleteOur voices will be heard. #RemoveLeighBrady
ReplyDeleteQuestion for you Mr. Blaine…During your tenure as CEO, did you have issues with the board at all in your tenure? Any of this magnitude and you were able to buck them without it becoming known? Was the board always very cooperative? Did they under the meaning of a credit union?
ReplyDeleteCrickets. A lot of the board was here under his tenure as well!
DeleteQuestion for @10:41 PM & 6:19PM - maybe someone should have been asking questions of Mr Blaine two years ago at the beginning of the Haze/Board sabotage of our credit union? Or a text sent much earlier asking for guidance? Just maybe, some of this could have been prevented?
ReplyDelete