SECU: Why Credit Union Members No Longer Pay Close Attention, Why You Should...

  .... Who owns SECU?

Ever thought about that question? Sure you haven't! Well, do think about it... who does own that little $50 billion North Carolina enterprise?

When credit unions were first organized, every member could readily answer that question. Joining a credit union meant you were part of a small, select group at work, on a military base, in a church, or within your local community, which was banding together to help each other. Your fellow members were your co-workers, fellow worshipers, friends, and neighbors - you knew each other.

You and your fellow members had a common need, a common purpose - access to affordable credit. The credit union wasn't about making a profit, it was about working together to help each other. It was a cooperative effort to improve the financial prospects of each member, of each family.  Separately you couldn't do it, together perhaps you could. 

Why did credit union members pay close attention? Because the loans being made by the credit union were being made with the savings dollars of other members. [Still works that way today!] Some members put their savings into the credit union, which used those deposits to make loans to fellow members. Savings deposits had a special name at credit unions; they were called "shares". Why shares? 

Because each member's savings deposits were at risk of loss based on the performance of the credit union. Each member was an owner, an investor, a stakeholder in the success or failure of the credit union. Each member owned and shared an equal part of that risk.  

If the loans were not repaid, each saving member shared in the loss! At the beginning of the year, you might have $500 on deposit in savings; but if major loan losses occurred, you might end up with only $400 at the end of the year. Your share of losses was deducted from your share account! Members kept close track of their credit union - and helped assure loans were prudent and got repaid. 

SECU members knew their life savings were at stake. They knew they "shared the risk". They knew they owned SECU - and why that shared ownership was important!

Why aren't SECU members paying attention anymore? What has changed?

... as a member are you still "at risk"? If you don't know, shouldn't you ask?

 

SECU: From Employee Benefit To Statewide Organization

   ... how did that happen?

How did SECU become such a large credit union?

With over 2.7 million members and @$50 billion in assets, SECU is the second largest credit union in the U.S. How did that happen? The answer is a focus on families.

While most credit unions started out as employee-benefit, borrowing and savings clubs, some adjustments were quickly adopted in terms of membership. Instead of being required to close their accounts when they left employment, members such as retirees or workers who became disabled sought to retain their accounts. Sounded reasonable and credit unions nationwide moved to a "once a member, always a member" format. Even if you left employment with the "sponsoring company", you were permitted to retain your accounts and equal membership rights. 

The second significant change was permission for family members to join with equal membership rights. Supporting the families of employees also seemed to make great sense.

You will note from past comments, there were several questions asking what percentage of SECU members are currently state and public school employees? That could be anybody's guess. There are currently @ 60,000 active state employees and perhaps @125,000 active public school employees, with @335,000 retirees. Hard to get to 2.7 million members from that base! 

You might be surprised to learn that only @25% of SECU members are active or retired state and public school employees. It has been that way for decades. The math on that guess is easy. The "typical North Carolina household" used to be husband, wife, two kids. When all became full-fledged SECU members, three out of four (75%) were not and never were employees of the state. 

Serving members and their families well in North Carolina has been the winning "formula" for SECU in the past.

The SECU Board has declared a need to move away from that formula. As an SECU member-owner, do you understand what is in store with that new direction, new culture (the "new/new")? 

... don't you think you should?

SECU: Credit Unions As An Employee Benefit

  

    ...  access to credit as an employee benefit?

No one questions that credit unions were created in the U.S. to provide access to credit for working men and women - particularly those of "modest means". Why? Because "back then" many payroll offices were confronted with regular, recurring employee requests for "a short term advance" prior to payday. Money is always in short supply for most folks - both "back then" and now.

Not helping an excellent employee in a time of need was "bad for business" and employee relations. Sending them to a loan shark was worse. "Payday lending" at rates usually exceeding 100+% - both "back then" and now - creates a death spiral of financial dependency for a consumer. Shackles not made of iron, but shackles just the same.

. ..." I owe my soul"... that can be a problem, ... beware.

Employers embraced "company credit unions" as an added benefit which could be used to assist and retain employees. Employers liked having an independent, employee-owned and led lender making the decisions on which employees qualified for loans - choices the employer did not want to make. Employers didn't want to be in the lending business, nor have to "advance" company funds. To help out, employers frequently provided back office support, payroll deduction, office space and assisted employee-member volunteer leadership of the credit union.

SECU, although a separate, independent organization, was "the company credit union" for North Carolina state government and the North Carolina school systems. The idea of a credit union as an important employee benefit caught on! 

Other N.C. companies also formed credit unions - R.J. Reynolds, AT&T, IBM, Champion Paper for their employees - as did many municipalities, local post offices, our military, and churches. At its peak, there were 360+ different credit unions in North Carolina, today just 60 remain. 

Is SECU still "the company credit union" for North Carolina state workers? What has changed?

  In order to know where you're going, it often helps to know where you have been.

Why Was SECU Created?

   As you read in the last post, in 1915 North Carolina was among the early leaders in promoting the creation of credit unions - a new idea in the U.S., a new form of financial institution. Federal legislation permitting the formation of credit unions in every state was not enacted until 1934. SECU was formed on June 4, 1937.

Why was SECU created? For the same basic reason that all credit unions were formed - to give working men and women access to credit at a fair and reasonable rate. Consumer credit was not available through the regular banking system for most working people. "Alternative lenders" (often referred to as "loan sharks") charged exorbitant rates and often resorted to some "less than cordial" collection practices! Borrowing money could be a risky business in more ways than one!

  Why 1937 for SECU? Can you spell "Great Depression"? If you are not a student of history, you might want to brush up on that era. How bad can things get? Desperate was the status quo for many Americans. Given the times, even those with stable jobs in state government and the public schools often "came up short" before the end of the month - still do!

SECU was created so that North Carolina state workers could pool their savings and lend to one another.  As with every credit union, SECU membership was limited to a well-defined group - employees of the schools and state government. The credit union was basically a lending and savings club solely for its members. Each member of SECU was an equal owner, regardless of their job title, their wealth or lack thereof. You will be pleased to know that Black state employees were admitted as equal members, too - not all that common in the 1930's South. And, there was a female member on the first SECU Board of Directors - "DEI" is not a novel idea at SECU. The cooperative was controlled and operated by the member-owners. The main function of SECU was to make small, short term loans to the membership.

SECU members held steady jobs and had the ability to repay over time. Since members were your co-workers who knew you well, sound lending decisions were made. And, since you were borrowing your co-workers savings, there wasn't any doubt you were going to repay...

 ... if you didn't, going to work might - shall we say - "get a little intense".  

  SECU still operates the same way, did you know that?

 

SECU: What Is A Credit Union?

In 1915, North Carolina adopted one of the very first state statutes governing the formation and operation of credit unions. Why was North Carolina one of the first states to see the need for credit unions? What was the problem?  

The principal problem was that working men and women in North Carolina lacked access to a source of credit at fair and reasonable rates. In that era, commercial banks did not lend to most consumers... just something that was not done at the time. 

Everybody needs to borrow from time to time for important purposes. What would you do if you did not have access to credit?

  The 1915 credit union statute was authored and shepherded through the North Carolina Legislature by John Sprunt Hill, the patriarch of one of the wealthiest and most prominent banking families in North Carolina. Not exactly your barefoot-in-overalls type of guy to be sure! In fact, the credit union law was the direct result of Mr. Hill's then recent travels in Europe studying credit unions and other forms of cooperatives. Mr. Hill happened to be in Europe leading a United States delegation of national financial leaders appointed by President Woodrow Wilson. They learned well; they liked what they saw! 

John Sprunt Hill was one of  North Carolina's most successful and distinguished bankers, he said...

❖ "Credit Unions are not banks. Banks are aggregations of money; credit unions are aggregations of men [and women]."

❖ "Credit Unions capitalize the character of the membership."

❖ "A Credit Union organized within a group, the members of which have no credit problems, obviously fills no need and organizations of this type should not be encouraged."

❖ "Credit Unions increase the general prosperity, and thereby improve the community and its other businesses, helping others to attain a better economic status." 

 

SECU members do not understand that SECU is not a bank. Does that matter any longer?