Cranky Credit Union Commentary
Updated: Mar 23
Members of credit unions do not give a damn about the fact that they own their financial institutions and have the right to democratic control of them. I have that on good authority.
Yes, credit unions are cooperatives. Yes, “democratic member control” is the second of the seven Cooperative Principles. But what credit union members really care about is convenience: Can they access their account on their smart phone and execute transactions? Can they apply for a loan remotely, without a big hassle?
Swallowing that is awfully hard for a committed cooperator like me – someone, by the way, who belongs to no fewer than five credit unions and refuses to do business with banks. But an executive with a credit union has put that proposition to me in convincing fashion and I have no evidence to rebut such a claim.
However, I emphatically contend that member apathy about cooperative democracy, or indifference to anything else that distinguishes a cooperative from an investor-owned business, is no excuse for credit unions to give up idealism and simply behave like profit-maximizing banks and other investor-owned financial institutions.
Look. I am all about convenience too. I have three credit union apps on my phone; it really galls me that the app I like best – because it’s the easiest and most flexible – belongs to the credit union I like the least. But if all consumers of financial services need is a convenient and flexible app so they can move money around with little or no hassle – well, banks are always going to be at least as good at that as credit unions are.
In other words, there really ought to be a point – some purpose, beyond convenience – to being a credit union member.
Here’s why I belong to credit unions. I want to help my neighbors – other people in my community – by loaning them money when I have extra. I want them to help me, by lending me money when they have extra.
It’s not a radical proposition. I have it, in black and white, from CUNA – the Credit Union National Association – via my copy of their Credit Union Supervisory Committee Handbook. On page 6, it has this to say about conditions in the 1800s that gave rise to credit unions, first in Europe:
Lack of credit was a big constraint, especially for individuals. Banks served large commercial interests. The average person had to rely on money lenders who often took devastating advantage of borrowers. In keeping with the times, the idea of people organizing their own source of credit took hold.
Eventually, the idea landed here in the USA – first in New Hampshire, no less! In 1909, the New Hampshire Legislature approved a charter for St. Mary’s Cooperative Credit Union Association. Would that what we now know as St. Mary’s Bank still went by its original name! It is, after all, still a credit union.
More than a century later, it’s somewhat understandable that credit unions have for the most part become indistinguishable from banks. The third Cooperative Principle is “member economic participation,” which means member-owners put their capital at risk, in quest of the common good. The fourth Cooperative Principle is “autonomy and independence,” meaning that cooperatives are not part of the government. But because credit union deposits are insured by government agencies like the National Credit Union Administration (NCUA), members no longer have capital at risk and credit union managers have to make pleasing the regulators, rather than the members, their top priority.
But I still think to obsess singly about convenience and conclude that credit union members don’t care about their ownership rights and their voting rights begs a huge question: Why don’t they care?
They don’t care because credit unions don’t give them a reason to care. Unmet financial needs are everywhere around us; if people perceived credit unions as a source of solutions that banks cannot provide, they would flock to join credit unions and be very keen on participating in their governance. Because such participation would make a difference.
My favorite example – somewhat of a niche obsession – has to do with energy efficiency. Negawatts are cheaper than megawatts – that’s all there is too it. And the most energy efficient buildings in northern New England are typically those in which poor people live. But are credit unions out there begging people to borrow money for deep energy efficiency retrofits, on attractive terms? Generally not, because it’s easier to pander to people’s interest in cars, snowmobiles, jet skis, and other shiny collateral.
One credit union that has always stood out to me – and, yes, I am a member – is the Vermont State Employees Credit Union. VSECU has an active program of energy-related lending, calculated to help its members turn toward energy efficiency and distributed generation. It is surely no coincidence that VSECU is the only one of my five credit unions that actively promotes its identity as a democratically controlled cooperative, by fielding competitive slates for its annual Board election and then advertising the voting opportunity to members.
Alas, it appears that’s too good to be true. Though VSECU is a billion-dollar credit union – and therefore more than big enough to continue to thrive on its own as a distinctive financial institution – its days are numbered. VSECU recently inked a deal to merge itself into the bigger (but less overtly cooperative) New England Federal Credit Union.
Not only is that a frustrating development – it’s deeply disappointing to see that, at least so far, VSECU is offering nothing beyond bland generalities about why members should vote in favor of the merger. Here’s why VSECU wants its members to vote “yes:”
This merger will create a stronger credit union that will be better able to serve you. With over $3 billion in assets, we will have more resources to support your financial needs and goals and deliver greater value to you as a member.
You will enjoy the convenience of more branches around the state and investments in technology and digital banking services. You’ll get the best of both organizations and a larger array of products and services to help you achieve your financial goals. This will include VSECU’s focus on green lending and environmentally conscious banking, NEFCU’s leading mortgage products that support affordable housing, and the capacity to expand current services and develop new ones. As a member-owner of our not-for-profit credit union, you’ll benefit from our ability to return more equity to you in the form of favorable loan and deposit rates.
We also share a commitment to strengthening our communities and are excited about the work we’ll be able to do supporting Vermonters’ essential needs.
No specifics. Just a vaguely stated prospect for “mortgage products that support affordable housing” (already available from NEFCU) and, maybe, more favorable loan and deposit rates. But there are no promises and certainly nothing concrete.
All of this reminds me of how I used to drag my kids along with me, when they were much younger, on shopping trips to the Co-op Food Store in Lebanon, New Hampshire. I was, and am, a huge fan – indeed, I spent eleven years on the board of the Hanover Consumer Cooperative Society, owner of the Co-op Food Stores. I guess I had a tendency to get a bit rapturous about the whole thing because I can still hear my daughter saying, with a bit of a smart-alecky-kid tone in her voice: “Yeah, Dad. I get it. It’s a co-op.”
Nevertheless, the kids were always eager to chow down on the chicken parmigiana in the co-op café, and maybe an item or two from the bakery aisle. Those kids are the future. What will induce them to hang out at their local credit union?
[The first picture above is of my daughter as a little kid, poking her face through an alluring hole in the wall they used to have at the Lebanon Co-op Food Store. The last picture shows my crystal ball -- the possession that gives me the right to prognosticate about the future.]