Conference 7.286::dcu

    I disagree with just about everything you say in .0, (but you knew I
    would), but I do thank you for making an effort to communicate in the
    conference, something that many other BoD members refuse to do.
    
    Bob

Paul, 

Nice  to see your note ... but, and I think you'll see this kind of reaction
from a lot of people in here ...

>    I've recently read some notes which, in my opinion, confuse the issues
>    of "relationship banking", "abuse" and "free checking."  I would like
>    to provide you with my perspectives on these issues.  First of all,
>    "relationship banking" (not a term I particularly like) is a way of
>    rewarding those members who choose to do a large portion of their
>    business with their own cooperative credit union.  I think of it as a
>    volume discount, and almost all credit unions have some way of doing
>    the same thing.  The goals are to reward and to incent, not to punish.

There are undoubtedly abusers and there are ways of dealing with them ...
like your multiple temporary cheques example ...  You call relationship banking
a reward or an incentive ... but it really is a disincentive.  It is a
disincentive to keep less money in a little used account at the moment.
It is a disincentive to let balances fall below certain values for fear of
fees.  It is a disincentive to pay off your loans for fear of fees.

Disincentive programs often have the habit of backfiring ... many of the
people who you'd prefer to keep as customers end up going elsewhere because
of the hassles of ensuring that they stay in relationship.

Incentive programs are more like ... the tiered interest rates based on
balance.  Canadian banks a few years ago developed accounts that paid
nominal interest on low balances, savings interest on medium balances
and investment rates on high balances (typically over $1500)  The result
being that customers opened fewer savings accounts to use as escrow
accounts, and persuaded them to do their own "subaccount" balancing in
the one account.  It was worth it for the extra interest for many.

>    charged checking account fees.  I did not support checking account fees
>    as a way for DCU to make more profit.

So, does this mean you supported them to get rid of the so called abusers ?
ie you supported their use to create membership classes and create this
disincentive program.

>    With regard to abuse, there is a fine line between taking fair
>    advantage of an opportunity versus exploiting one.  Sure, DCU had some
>    people who went over the line like those members who had multiple free
>    checking accounts and who went to the branch every two weeks for a new
>    supply of free "temporary" checks.  However, my support of checking
>    account fees was because I thought it was fairer and that it would 
>    encourage peple to become more active members of the cooperative.  I
>    did not and do not view this as a "stick" approach. 

Answer this plese .... Is it more profitable (in a fairness approach) for DCU 
to have a customer write say 30+ cheques a month and just barely keep above
the minimum balance requirement, or keep just below the minimum balance and
write maybe 1 or 2 cheques a month ?

Is it fair that a customer who regularly gets his pay in a paper cheque and
routinely deposits it like clockwork should be stuck with fees where someone
with direct deposit doesn't ?

Is it fair that Someone whose loan / deposit balances has just fallen below
the magic number, who has paid oodles of interest over many years should
suddenly not be worthy of the advantages of relatinship banking ?  He's been
a good customer ... and probably will in the future ?

The bottom line is that in allowing relationship banking, you've replaced one
set of "not fair" conditions with another set.  That's not fair!

Many of the so-called abuses could have been dealt with by other problem
targeted means  ... for example, in the case of the temporary cheques ...
charging for all but 1 set of temp cheques a year ... Accounts could be
reviewed and their use discussed with the member.  Many of the apparently
"abuse" accounts didn't meet membership requirements anyway and didn't
require relationship banking to be rid of them.

>    By the way, the quotes in the first paragraph are both from the Spring
>    edition of the publication "The Credit Union Director".  The first is
>    by Dale Pickering, board member and treasurer of Peoples First Federal
>    Credit Union.  The second quote is by Bob Richards, 17-year board member
>    and treasurer of Spokane Teachers' Credit Union.   

Out of curiosity, do you know what these people's day jobs are ?

Sorry Paul, but our philosophies are too far apart for me to put my trust in
you with a vote ...

Regards,

Stuart

    
    Paul,
    
    First, let me express my absolute delight at your presence in this
    conference. Also, let me voice my admiration at the courage you
    exhibit, to count yourself among the minority of directors who are
    willing to discuss their views in writing. Thank you.
    
    That said, let's get down and dirty:
    
    1) Your quotes are interesting. especially the one that indluded the
    term "abuse". I have never accepted that term with ragard to the manner
    in which some DCU owners choose to participate in their credit union,
    and I am even less inclined to do so now that it shows signs of
    becoming an industry-standard viewpoint. One  "abuses" a road vehicle
    by driving it down a cliff; one "abuses" a public office by getting
    parking tickets fixed; one "abuses" a checking account by writing checks
    that are not covered by the balance -- *NOT* by writing many or few
    legal checks or keeping a large or small sufficient balance. You say you
    dislike the term "relationship banking"; I find the term "abuse", when
    applied to a significant percentage of rule-abiding owners, even more
    abhorrent.
    
    2) You talk of checking account fees in light of "the cost of maintaining
    certain accounts". This has been a bone of contention for some time.
    I believe that Phil (who, as you know, is not in favor of checking
    account fees and "relationship banking") maintains that the actual cost
    of maintaining these "abusive" accounts has never been accurately
    calculated, and furthermore that it cannot be accurately calculated because
    of the current cost tracking practices within DCU. I believe that Chuck
    Cockburn's assertion that the "abusive" accounts cost DCU $2.5 million
    annually [note 2.19] was based not on the actual costs to service those
    accounts but on the difference in income to DCU between those accounts
    as they wer actually used and those accounts if substantially larger
    balances had been maintained. Can you point to information that shows
    exactly (or even approximately) what it costs to maintain those
    accounts? *NOT* lost potential income, but actual money spent?
    

	The current fee structure can never be viewed as an incentive in my
book.  I never had to worry about fees previously.  I now have to be concerned
that some action will incur a fee.  That's not making my banking eaiser for
me - thus it's not an incentive.  Taking away my fee-free banking and giving it
back to me if I behave is *not* an incentive -- it's punishment avoidance.
Plus, as my old boss used to say, "Never give anything away for free -- even if
you just charge a $1.  You can always raise the price.  It's much harder to
charge for something you used to give away."  I see the fees as the camel's
nose, and I'm trying desperatly to keep it out of the tent.

	Let's contrast that with my Discover card.  It has no fee, plus I get
a rebate.  For the first $1k, its a measly .25% and raises a quarter percent
for every $1k I pass through the card until I hit the 1% maximum.  Naturally,
I use my Discover card anywhere they'll take it, especially for large purchases.
I've hit the 1% rebate for the two years I've owned the cards.

	(They also issued me a card despite my refusal to disclose my SSN which
was another plus on their side. Discover also offers a "gold" card with a higher
credit limit [$10k max], a higher rebate [1.5%] and a $40 annual fee.  I tossed
the pre-approved application they sent me.  Fee-free or no card.)

	On the opposite side, the more you spend, the lower your interest rate
is.  The current steps for that are $500, $750 & $1k.  You must also not have
two late payments in the last year.  This particular incentive doesn't help
me since I don't carry a balance, and the interest rates are high even after
the discount (lowest rate is 14.9%) but it's still incentive to use the card.
This is not a case of tiered rate by balance incidently, it's tiered rate based
on yearly use and payment history.

	I'd like to join the others in saying thanks for sticking your neck out
in here.  I'll respect you for that even if I disagree with you on the fee
thing. Maybe if all the board participated and we had a reasonable discussion
about things, we'd have less polarization on some of the issues.


							--Doug

Paul,
Nice that you showed up here....to bad you waited so long though.
Well, better late than never huh? Id really appreciate it if youd
answer my questions...very much I would.
				JimG

>>The greatest abuse is when members use our free checking and 
>>then keep their other accounts at other financial institutions."
So you (DCU) say that in order to waive checking fines I must direct deposit
atleast $x/month. Why? I am currently using (and have for a while now)
DCU as my primary financial institution by depositing my paper
check (which I prefer) every week w/o fail. Now, in order not to be classed
as an abuser I have to direct deposit (which I dont prefer). Whats the
difference between what I was doing and what youre now compelling me to do?
Why do I have to jump thru your hoops in order not to be penalized?

Just becuase I direct deposit though doesnt make me a realtionship member.
As far as I can tell I exist somewhere between abuser and relationship member.
The reason being that I dont make enough income to met your saving balance
requirements nor do I have a loan with DCU that meets the proper debt
limit. I really dont have much control over the income part...Im not sure
what I can do here. As far as debt goes I like to minimize it as much as
possible. It appears to me that relationship stuff is more of a stick than
anything else a 'you better or else'. Frankly, as I understand it there
really isnt a benefit to being a relationship member. It also concerns
me that a  potential exists of having the rules changed at some point in
the future so that I have to jump thru new hoops in order to waive fines.
Can you give me any assurance that this wont happen?
    
>>First of all, "relationship banking" ...
Call it what you will but you voted for the concept.

>>The goals are to reward and to incent, not to punish.
Really? It appears as though you want me (a small customer) to take my
business somewhere else. Do you?
    
>>At the same time, we made it easy enough for members to avoid checking account
>>fees..
But why...I was already doing the 'right thing' as far as the intent of your
decision goes. However, you seem not to trust me to continue depositing my paper
check. Instead you said direct despoit or else...has the look and feel of a stick
to me. 

>>However, my support of checking...and that it would 
>>encourage peple to become more active members of the cooperative.  
Youre right about that! I was very keen to vote this time round!

>>I did not and do not view this as a "stick" approach. 
Maybe you should try being on the business end of the 'stick' for a change.

    Here in Colorado Springs, Central Bank offers a real Deal to Digital
    Equipment Corp Employees.  I think that I am going to check this out
    and will vote for the current board with my feet, it they are elected.
    If the 3G's are in, I will stay for a while longer to see what changes
    happen, especially if MR. CC is ousted and we get some real management.
    
    Dave

    It would not have occured to me to say so, but since everyone else has,
    I agree....  Thanks for posting your note.
    
    If you can, as .3 said, actually define the *REAL* cost of these
    "abusers" and not some funny lost revinue number, then, and only then,
    I would be interesting in reading the rest of your argument. 
    
    Without a real definition of this cost in real dollars spent (rather
    than dollars un-earned), it seems to me like you are saying that we
    need to do something about these people who are abusing the credit
    union because Chuck says so.  Since Chuck works for those people, I
    think there is a problem here.

Delighted to see your note!

And interesting to learn of your viewpoint.

I'm in disagreement with "The greatest abuse is when members use our free
checking and then keep their other accounts at other financial institutions."

I don't classify this as "abuse".  In my mind, this is potential business
that just hasn't happened yet.  There are reasons why this group of
member/owners are not doing more business with DCU.  I'm disappointed that DCU
chose to encourage these potential relationship members to leave.  I suspect
another area where we might disagree is that you view the new rules as an
incentive for these people to do more business with DCU whereas I saw it as
encouragement to do business elsewhere.

At any rate, it's nice to have you writing in the conference -- Welcome!
Hope you continue to participate.

- Deb

    
    Re: .0
    
    First, again, thank you for taking the time to put your views
    here.  Although I don't agree with much of what you say, I
    respect the fact that you took the time to state and stand
    behind them.
    
    There is only one point I want to make:
    
    >I've recently read some notes which, in my opinion, confuse the issues
    >of "relationship banking", "abuse" and "free checking."  I would like
    >to provide you with my perspectives on these issues.  First of all,
    >"relationship banking" (not a term I particularly like) is a way of
    >rewarding those members who choose to do a large portion of their
    >business with their own cooperative credit union.  I think of it as a
    >volume discount, and almost all credit unions have some way of doing
    >the same thing.  The goals are to reward and to incent, not to punish.
    
    Except for our mortgage (didn't qualify with DCU), a joint checking
    account with my wife in a bank where it is convenient for us both not
    just for me, and a VISA card with AAA, ALL of my business has been with
    the DCU including a motorcycle loan, three car loans, a checking
    account, and several savings accounts.  This IS most of my business.
    Except for the VISA, you have it all and were it not for the car loan
    I currently have, I would not be considered a relationship member and
    would be vulnerable to fees.  What it comes down to, Paul, is
    relationship status as currently defined essentially depends on how
    much money the DCU can make on you and not on how much of your business
    you bring to it.  I find that reprehensible in "my own cooperative
    credit union."
    
    Steve
    
    

    Paul, I'ld like echo the previous notes on your courage to
    state your views here.  They seem quite similar to Lisa's.
    I hope, unlike Lisa, your note is not a one shot entry, but
    that you continue to be active here after the election.

    I also have to admit that, like several of Lisa's previous
    postings, your views as written dont seem consistant.  I was
    applauding when I read

>    rewarding those members who choose to do a large portion of their
>    business with their own cooperative credit union.  I think of it as a
>    volume discount, and almost all credit unions have some way of doing
>    the same thing.  The goals are to reward and to incent, not to punish.

    But you followed that with

>    However, my support of checking
>    account fees was because I thought it was fairer and that it would 
>    encourage peple to become more active members of the cooperative.  I
>    did not and do not view this as a "stick" approach. 

    You just dont 'incent' people by telling them that their reward
    is that you wont beat them with your stick if they meet your
    criteria.  This is a 'stick approach'.

    The current 'relationship banking'/fee system seems to have as its goal
    to drive out the little guys.  Anything that encourages people
    to leave the DCU is bad (my opinion).

    The real question I hope you will answer....

>    I did not support checking account fees
>    as a way for DCU to make more profit.

    What data did you get from the DCU that allowed you to support
    checking account fees...given the above?  Are they making a
    profit from checking account fees?
    bob

    
    Thanks for jumping in and contributing to the discussion in here Paul. 
    I really do wish more Directors would do it on a more regular basis.
    
    The main problem I see in the "relationship banking" approach is that
    it inappropriately mixes morality (for a lack of a better word) with
    business decisions.  A formula has been arrived at which now defines
    what is "fair" and what is "not fair".  People translate this value
    judgement into "good" and "bad" (or "abuser" and "valued member").  A
    business should never classify any of its potential customers in such a
    fashion or they most certainly will never want to become a "valued
    customer".  You have essentially set up psychological barriers to doing
    business with many people.  These are very hard to overcome, once
    established.
    
    Then there is the subjective aspect of the entire approach.  If you ask
    100 people what is fair concerning fees, you'll get 100 different answers
    because each person has unique requirements, expectations and experiences.
    Add to this the constantly shifting nature of a persons financial picture
    where a person may be "good" today and "bad" tomorrow.  Given all of the
    above, I think it is totally unrealistic that you can base a business
    decision on "fairness".  Would Digital conduct its business this way?
    I don't think so.
    
    The reality of "relationship banking" is that many members are
    subjected to fees without justification.  These members simply don't
    use the right product mix in the right amounts to escape the fee
    structure.  This is the danger of developing a "fairness" formula to
    fit on over 73,000 people.  Yet these people are good and loyal customers,
    and profitable to DCU.  This plan simply alienates them into going
    elsewhere.  Who wins there?  Our competition, and not DCU.  And in our
    highly connected electronic world, these people talk to many people and
    pretty soon one lost customer turns into 5 or 10.
    
    A business needs to know and understand its customers if it is to
    survive.  If there are many DCU members that aren't doing business with
    DCU then I maintain that DCU doesn't know its customers needs and
    expectations as well as it should.  The problem is NOT the customer. 
    If DCU members felt it was in their own best interests to do business
    with DCU, then they would.  It is unrealistic to expect that they will
    do business with DCU solely to benefit DCU.
    
    DCU members want a credit union that meets their needs without
    needlessly complicating their life.  DCU members want credit union
    rates.  They want DCU to be easy to do business with and want to feel
    that DCU will work with them to fulfill their needs.  DCU members want
    to feel their business is valued and they aren't being squeezed for
    every dime.  DCU members want some of their investment in DCU returned
    to them, just as any other owner would expect.  I don't see
    "relationship banking" contributing in a positive way to any of these.
    
    Let's get back to doing business instead of making value judgements. 
    DCU has to WIN its business just like everybody else.

Paul, thanks for writing.

Much like DEC, I sense that the DCU approach is confused.  It's getting
too complicated.  I can't readily tell you if I am a relationship member
or not.  I don't actually care, but I know my other, non-credit union bank
doesn't confuse me like this.  It doesn't accuse any of its customers of
nasty behavior.

I am clear on one thing however: within 1 business day after I am charged
a fee, my account will be closed and all my money will be in one financial
instituion rather than two.  My other bank is very eager for my business.

I am in DCU because it is convenient to me ( I walk past the ATM twice a
day), and because I feel a bit of pride in having some money in a place
where it can help other people out.  I'd have all my money in DCU, but I
need real cancelled checks.  I'd have my house mortgage with DCU but at the
times I've considered it, either DCU had way out of line rates or their
process was reported to be unresponsive and insulting.

Because the DCU is a cooperative, ALL OF ITS PROFIT (whatever the proper
finanical term is after expenses, and reserves, and similar stuff) comes
back to the depositor-owners.  NONE of it goes to a different group of
owners.  At least that's the theory.  Because of this I should be able to
get either (or both) a better return on my deposits or lower loan rates
than a normal non-depositor owned bank.  DCU is not delivering on either
of these.  The possible reasons have been discussed to death in other
notes.

Two weeks ago, I called to see about a loan for a new boat I am purchasing.
DCU wanted 150% more down payment ( 25% vs 10% ) and 1% APR more rate for a
50% shorter term than the financial institution the boat dealer found for
me.  I have no choice but to go elsewhere.  If DCU had simply been in the
same ball park, I'd most likely have chosen DCU.

To me the volume discount for the investor comes through the Certificate of
Deposit vehicle.  If I have a large sum of money that I can leave in for a
long enough time, I get a marginally better return.  I can accept similar
nominal variations in loan rates (which already exist for different types
of loans; so, no problem).

My totally wild ***ed guess is that DCU managment and portions of the
board are performing to the best of their abilities to meet the stated
needs of the largest investors.  I guess they do this in fear that if the
largest investors needs are not satisfied, those investors will move their
funds elsewhere thereby causeing the DCU to experience major trauma.

If my guess is right, then perhaps these large investors need to rethink
their motives or perhaps the DCU will need to experience some short term
trauma while the large investors move their funds.

Satisfying the special needs of a numerically small portion of the
investors is not the purpose of a cooperative credit union.

My vote goes to keep things simple, clean, and in the context of the
cooperative nature of the credit union.

I just read somewhere else there are two cardinal rules for dealing with
customers:

    1) don't piss off the customer
    2) see rule 1

Thanks for keeping this foremost in your mind.

regards to all
Rick

Yes, thats the same thing I was wondering. Well, give him the benefit
of the doubt....maybe he's ear deep in work or on a business trip. I
think Id give him a few more days.
				JimG

    
    Paul,
    
    Do you have any new information on the question I asked in .3,
    regarding information on the actual cost of maintaining non-relationship
    checking upon which you based you decision to support the current fee
    structure?
    

Heres an update...

I sent Paul mail asking when and if he plans to respond to the questions posed
in this topic. I got no reply. In the interum it dawned on me that this topic
could just as well been write locked from the beginning. I believe Paul was
simply using it as a means to air his point of view rather than as a forum to
discuss it.

    Not everyone has the time to carry on an active discussion (or debate)
    with multiple parties in a notes conference. Others just don't have
    the desire. Sometimes it's just not fun - to put it mildly.

    Personally, I believe that using these notes as a means to air ones
    points of view is an order of magnitude more helpful then ignoring
    it completely. Going the next step, to active discussion, is nice
    but not as big a step as the first.

    			Alfred

Alfred,
I belive the board minutes pretty well lay out what was said in the base note.
So why say it again? OK for the benefit of those who dont like reading
board minutes. I thought (silly me) that this was going to turn into a
discussion....as in Paul wanting some feed back from the membership.

>>Others just don't have the desire.
Which says to me, a member with legitamate concerns, that I (Paul) could care
less. If you dont like it go somewhere else.

>>Sometimes it's just not fun - to put it mildly.
Thats lame.

    
    >I belive the board minutes pretty well lay out what was said in the base note.
    
    I disagree. I think there is a lot more in .0.
    
>>>Sometimes it's just not fun - to put it mildly.
>Thats lame.
    
    How so?
    
    			Alfred