While The SECU Board Plays, The SECU Member Pays...

... fooling around?

Everybody makes mistakes, but is the SECU Board getting too good at it?

Lets pause for a moment, as we work through Lending 101 at SECU from the member borrower's perspective. Tried yesterday [link] to point out that in the past, lending was viewed as a cooperative effort between the member and the SECU loan officer, both had the same goal and purpose - a prudent, productive loan. With soaring loan losses and delinquency, something has clearly gone wrong with lending at SECU in the last 3 years. 

Both sides are losing - no argument with that!

Why blame the SECU Board? Normally wouldn't, because a board - in any business - usually doesn't "make policy". A board generally serves mostly to review and approve professional staff policy recommendations. But the SECU "Executive Leadership Team" ('The ELT') made it very clear in recent memos that the SECU Board is "to blame"! 

But "blame" isn't the goal here, accountability is! 

In your new role as an SECU loan officer, lets consider a couple of recently adopted "SECU Board loan policies":

1. Members with credit scores below 600 are no longer eligible to apply for a home equity loan (HELOC), which is a "second mortgage". These members are eligible for limited new/used car loans. Question: If you were lending money to someone, why would you make a loan secured by a member's used car, but refuse to use their home as collateral?
2. SECU credit cards have two rates. If you use your SECU credit card to make a purchase the "preferred" rate is 13%. If you use the same card on the same day to make a cash advance (say at an ATM), you and all members are charged a rate of 18%. Same card, same member, same risk. Question: Why are you charged so much more for a cash advance?
3. Why are you - or any member! - charged 18% for any loan at SECU, when "the Board" is paying less than 3% on member savings deposits (the money "the Board" is lending to you at 18%)? Quite a "profit" for a non-profit credit union, isn't it? Question: Why are member savings rates so low?
4. Under the new 3-tier risk-based lending policy, members with "no credit score" receive the highest loan rate ("C"-tier). Borrowers with "no credit score" are usually folks just starting out in life - young people who haven't had access to credit. Young folks need a lot of stuff - a car, furniture, rental deposit, for example - and of course a credit card! Question: Why does "the Board" assume that all young people are not creditworthy and stick them with the worst SECU loan rates?  

Why is a newly minted N.C. teacher assumed to be "guilty until proved innocent" in terms of credit at SECU? 

Question: Do you as a member support that policy?

   

SECU RBL - Whose Side Are You On?

   ... whose point of view?

As with most things in life, there are two ways to look at a loan - from the borrower's point of view and from the lender's point of view. 

For borrowers, the hope is that a loan will help improve their lives - better house or car, educational opportunities and braces for the kids, pay taxes, dream cruise, fix the fridge, keep the lights on.  Borrowers come to lenders with a goal, with a purpose. They don't just drop by to enjoy "the experience"!  

In banking, the purpose of the lender is to make a profit; at a credit union the purpose should be to make a difference.  

Borrowing at a bank is an "adversarial transaction". The banker and the  borrower have different purposes. The goal of the banker is to make the most profit possible from the loan for the bank - nothing wrong with that. The bank borrower wants the best terms and lowest cost possible. In commercial banking, both banker and borrower are generally financially knowledgeable and skilled in negotiation. It's a "fair fight".

At a credit union, the goals of the borrower and the lender should be the same.  After all, the loan officer works for the members, who own the credit union. And, the credit union was created not to profit from the membership. In consumer lending, the credit union loan officer is generally more financially knowledgeable than the borrowing member. Members rely on the loan officer to represent their best interests, to craft the best solution for their loan requests - to "Do the Right Thing". The transaction should be one of trust, not adversarial. SECU no longer seems to understand the meaning of trust.   

The credit union loan officer should seek only to make a sound loan which is of benefit to the member - and which will be repaid without hardship by the member.     

So, from yesterday's post [link]: "If a loan defaults at SECU and a loss occurs, who made "the bad loan" - the member or SECU?"

😎 "The growing lending snafus - costing you as an SECU member over $100 million+++ per year - is not a minor fiduciary matter." 

"Somebody's" not doing their job - responsibly! Every member is losing...

... RBL $100 million+ losses is "Really Bad Lending" from every members' point of view!