Conference 7.286::dcu

297.0. "A view from the top" by CSC32::B_SHAW () Thu Oct 03 1991 15:25

    The following information was extracted from an article in the
    Colorado Springs Business Journal Volume 3, number 13 October 1, 1991.
    Copied without permission.  The article was an interview with
    Janet Miller, Chairman (their term) Credit Union National Assoc.
    She is also the president of the Air Academy Federal Credit Union
    since 1974, held may positions in the state and nation credit union
    movement, board member of the United States Central Credit Union.

    I thought some of the comments were interesting in light of the present
    discussion around the DCU.  The format was a question / answer format.
    I have deleted information that did not add value to the answer in our
    situation and made sure that the deleted data did not change the
    meaning of the answer.  Deletions are indicated by ....

    For the record, no attempt was made to proofread for spelling/fatfinger
    errors.

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Q: What exactly is a credit union?

A: A credit union is a cooperative; a group of people who get together to
save and borrow as one entity.  Credit unions generally have an area of
membership, say the employees of a specific company....(talks about her
particular credit union)

Q: How does a credit union operate?

A: Credit unions offer an alternative to the for-profit institutions.  They
are nonprofit, cooperative financial institutions that put the consumers'
needs formost in their plans.  We try very hard not to charge fees that
other financial entities charge.  Our focus is on membership.  By opening
a savings account for as little as $5, you can be a voting member who owns
a portion of that credit union.

We operate with a volunteer, non-salaried board of directors from within
our membership, who set lending and operational policies.  They are aided
by credit committees and supervisory committees who provide an auditing
function....(a little history of credit union movement).

Q: How do you differ from banks and do you compete with banks?

A: We do not constitute a threat to the banking industry because we do not
perform the same services.  Once the basic operating expenses are paid from
interest charged on its consumer loans, a credit union will then distribute
the remainder as dividends to its members.  However, in the past few years,
federal examiners asked credit unions to retain more capital reserves.  We
are more sound than other financial institutions because we captialize our
share insurance fund better....(funding data of NCUSIF)...

Q: Would you ever finance home mortgages? Other loans?

A; That is one area in which our National Credit Union Administration is
very cautious.  We, at this particular credit union, go through the
national association for this type of mortgage lending.  We probably, at
this point, only have four to five mortgages on our books.  We are not into
heavy mortgage loans.  However if it's a good loan, drawn properly, it can
be profitable and healthy.  If you are wise with your portfolio, with
keeping your home loan percentages healthy and balanced with other consumer
short-term loads, you can do well.

Traditionaly our most popular load was car loans.  However, car dealerships
came out with the GMAC loan which is very competative with us.  But credit
unions offer members some things which GMAC doesn't have.  For instance, we
offer life insurance on the life of our members for the duration of the
loan...(student loan info)...

Our credit card business has been going great.  This year we have a
promotion with our card.  So far as I can tell, our credit card rate is the
best around at 12.95 annual percentage with a 25-day grace period and no
annual fee.  We grew from $3.1 million in February to $7.9 million by July.
However, we're increasing concerned about the expansion of credit cards
into the consumer food market.  We do try to educate our members about
credit/debit ratios...(some discussion about debit cards $9 annual fee).

Q: What items will be on the national agenda for credit unions?

A: Because of the gridlock on the car loan market, we are now looking for
new niches for credit unions.  We just need to be alert for them.

Financial institutions, such as credit unions, are in very awkward
situations right now because we have all of this money in savings, but we
are not drawing much interest on our investments.  If we have money which
we cannot lend to our members, then we must invest it.  But we are strictly
controlled by our governing bodies and there are only certain areas in
which we can make investments, certainly not the high end of the interest
spectrum.  We can inverst in anything guaranteed by the government but no
large interest dollars can be earned there.

So we have all this money which is not making us much money.  Therefore,
our best investment recourse is in our member. When he or she borrows from
us -- and our rates are very reasonable -- it makes us  more money than an
investment in the marketplace does. So we are trying to get money out of
loans.  But then, on the other hand, we don't want to unduly encourage debt
formation in our membership.  It's a dilemma.

>Financial institutions, such as credit unions, are in very awkward
>situations right now because we have all of this money in savings, but we
>are not drawing much interest on our investments.  If we have money which
>we cannot lend to our members, then we must invest it.  But we are strictly
>controlled by our governing bodies and there are only certain areas in
>which we can make investments, certainly not the high end of the interest
>spectrum.  We can inverst in anything guaranteed by the government but no
>large interest dollars can be earned there.

    Whose been running and regulating this credit union?  They obviously
    need a new president. ;-)
    
    NCUA supposedly gave DCU the nod for real estate speculation.  Maybe
    this credit union knew better.
    
>So we have all this money which is not making us much money.  Therefore,
>our best investment recourse is in our member. When he or she borrows from
>us -- and our rates are very reasonable -- it makes us  more money than an
>investment in the marketplace does. So we are trying to get money out of
>loans.  But then, on the other hand, we don't want to unduly encourage debt
>formation in our membership.  It's a dilemma.

    What a novel idea.  "Invest" in the membership.  DCU members have been 
    borrowing money right along but NOT from DCU.  Their rates were not 
    only bad, they were very bad in some cases.
    
    Bottom line is DCU needs a refresher course in Credit Union 101. 
    Basics.  Back to basics.  They are the reason credit unions have been
    so successful in the past.  They are NOT outdated principles.
    

    Along the same lines as the article I posted in .0, the Denver Post had
    an insert in the Sunday paper on Credit Unions.  It was an advertising
    supplement to promote Denver Area credit unions with about 8 pages of
    information on what a credit union is.  The main thrust is that October
    13 thru October 17 is International Credit Union Week.

    In reading about fees and services, it would appear that the DCU is not
    unique in its fee structure but it is in the minority.

    I have to agree with .1 that DCU needs to go back to CU101 and relearn
    what a credit union is and who owns it.

    Happy Credit Union Week DCU if you still consider yourself one!