SECU Risk-based Lending # 6

To: SECU Board of Directors 

 

Dear Chairman Ayers,

Won't hold you long today, because I suspect you and the SECU Board are eager to get on into the weekend and watch the Super Bowl ! By the way, you and the Board aren't really going to run SECU commercial ads during the game, are you? Those ads cost millions don't they? Bet that was just someone doing a little pot stirring, wasn't it? But y'know, these days members are never quite sure what y'all are really doing - if you know what I mean.

RBL # 5 gave you a "Common Sense" plan for increasing the loan portfolio while offering all members the best borrowing rates around - without discriminating against any members based on their credit score. With $14 billion stacked up in investments yielding 1.13%, why wouldn't you offer lower loan rates to your members? Whose money do you think it is anyway?

Wanted to show you one more example of how all members are put at substantial financial risk when Chairman Ayers and the SECU Board sets loan rates based upon punitive, discriminatory, and often inaccurate credit scores, Risk-based lending does not decrease lending risk to SECU, but it does put every member at greater financial risk. And,  the SECU Board has told the SECU lending staff that they can not remove the extra, higher rate surcharges imposed by RBL even when the SECU staff knows those penalty rates are not justified by the true creditworthiness of the SECU borrower.

In other words, Mr. Ayers and the entire SECU Board have told the SECU staff that the Board no longer cares what the staff knows about the individual, local member.  The SECU Board - sitting a bit too smugly in Raleigh? - wants the staff to do what the Board has now done  - stop listening to the members!

Here's a real life example of how a credit score can inaccurately reflect the credit risk to SECU of a borrower and why charging those penalty, surcharge rates doesn't appear to be justified, regardless of what that credit score number is! Guess it would help to tell you that the examples shown below are from my actual, personal American Express card account (which I only opened this year after some shenanigans commenced at my previous card issuer). Would note that my AMEX profile says I have a 42-year credit history, no delinquency/past due, and have only two existing accounts - AMEX and that "previous issuer" card.

SECU Risk-based Lending # 5

 To: SECU Board of Directors

 

Dear Chairman Ayers,

Good Morning! Well, here we go again! Know you're eager to hear more about why risk-based lending (RBL) is financially detrimental to the entire SECU membership - and to the hard won reputation for fairness which SECU enjoys.

Recognize that it's hard to "eat crow" when you are in error. Personally, I have had extensive past experience in dining on that cuisine! Yep, we all make mistakes - admit them, correct them, and then move on - that's "just life". But, if after being given notice of a potential, seriously significant strategic mistake - which may adversely impact 2.7 million North Carolinians - you and the SECU Board continue to refuse to pause and review the RBL issue, that's not "just life", that has a not so subtle whiff of hubris.

RBL #1 pointed out that errors do occur (with the resulting doubling of delinquency and a 175% increase in loan losses last year). RBL # 2 demonstrated the assertion that RBL is "a must" because SECU doesn't serve "A" paper borrowers is "wildly fictitious". And that, most any internet savvy 8-year old can easily beat your new, super 5.75% "A"- paper rate, with just one or two clicks. Basically, the SECU Board's proposed "tiered-rate strategy" achieves just two things: 1) it insults the intelligence of your "A" paper members and 2) it insults the integrity of all the other members - including the SECU staff.  But hey, don't believe me, just find yourself an 8-year old and check it out!

RBL # 3 quantified the extra interest cost to SECU members of the Board's proposed RBL strategy - compared against the existing used auto portfolio. The unnecessary extra cost was estimated to exceed $121 million - that's not a "rounding error" for SECU members. RBL #4 showed that RBL tiers - and interest rate surcharges are arbitrarily assigned by the SECU Board - nothing mathematically precise nor Biblical about those tiers and extra interest costs. "Whimsical" would probably be an unfair description of SECU's tiers, "artificial" would be entirely accurate. But, it is clear that a mere 1-point difference in a credit score could cost a state employee or teacher a paycheck over the life of the used auto loan. That's not fair.

But, need to stop this rambling and cut to the chase, because word has it that Chairman Ayers and the SECU Board are going to impose RBL upon the SECU membership - without further examination - as early as next month (March, 2023). Time grows short.

Why exactly Chairman Ayers are you and the entire SECU Board so hellbent on jumping off a cliff?

Any harm in reviewing your due diligence on the risk-based lending issue and sharing your analysis with the member-owners of the cooperative you represent? Go an extra step or two to assure everyone - including yourselves - that you have met your fiduciary responsibility to 2.7 million North Carolinians?

What if someone gave you a suggestion which would give you "an easy-out" of this dilemma? One of those "win-win-win face savers" which calms the waters, unruffles some feathers - would you and the SECU Board not be wise enough to "jump on it'?

Why not try this?