Monday, April 29, 2024

SECU Risk-Based Lending: Reality Check ... it can't be me!

So today, lets start to look at those new risk-based lending enhancements "approved by the SECU Board" - emphasis added by the "SECU Executive Leadership Team" to assure members know who to blame for all this, as the SECU lending yacht continues to list. 

Might be well to note that the announcement doesn't indicate that these "enhancements" were unanimously approved by the SECU Board. Given the ouster of all incumbent directors last year, not hard to imagine that these changes were a split decision. If you'd like to check behind me, ask your branch to email you a copy of the "All Staff - Board Lending Policy Changes" memo dated 4/15/2024. 

You do have a right to know what is being done to you, regardless of what the "Executive Leadership Team" might think.

Where to start? The memo covers a lot of territory - a deep and dense wheelbarrow load!

  1. The "Executive Leadership Team" likes to call their overall lending strategy "tier-based pricing" (TBP) - "race-based lending" (RBL) seems more accurate. But, lets not argue! What is undeniable is the "Executive Leadership Team's" lending strategy  - whatever you call it - has increased loan losses by $125 million annually and resulted in delinquency 3x the industry standard since 2021. TBP - their strategy - is not working! 
  2. The Consumer Financial Protection Bureau (CFPB), a federal financial institution regulator, maintains a national, consumer complaint data base for each financial institution. SECU, with 2.5 million members, had a remarkable record of less than 1,000 total complaints up until September, 2021. The rate of complaints by SECU members over the last 18 months is 100% higher than over all prior 10 years -  the majority of complaints are over lending.
  3. According to the 4/15/2024 "enhancement" memo: "The Board spent over a year reviewing information, requesting data and debating how to meet the needs of all members [their emphasis]."  But, then announced that members with credit scores less than 600 are: "No longer eligible for Open-End lines of Credit, Visa Credit Cards, Unsecured Term Notes, and Home Equity Lines of Credit." The "Executive Leadership Team" must have their own, unique definition of "all members"!
  4. The "Executive Leadership Team" also assures us that: "... the Board was lowering the rate on loans to members with credit scores below 600 and aligning their rate to what historically would have been the one rate model for all members." Folks, if you can make sense out of that statement, please explain it in the comments. Seems to acknowledge that the fair, one rate model for all members is better. But, the "Executive Leadership Team" believes the best way to achieve that fairness is to stop lending to those members all together?!? Incredible lending logic, don't you think?
  5.  And then there is this statement: "... the Board explored various pricing scenarios, looking to provide a very competitive, if not the best, rate for all members..." Hard to believe "the Board" is really the culprit here, but that's what the "Executive Leadership Team" is telling all the staff!


... hang tight there is more!