Arturo Rodriguez doesn't know he symbolizes an approaching clash within an American credit union community that is far larger and older than he may ever know. He only knows he's got a truck loan that's such a wreck it should have come with an airbag.
Arturo Rodriguez doesn't really know why the place is called a credit union or why he was advised to go there for help. He just knows that when he did he was told he was now a full-fledged "member" of the place, but that they still couldn't help him out, and he drove home in a truck that shouldn't keep miles on its odometer, but instead its growing debt.
Arturo Rodriguez doesn't know it, but he's a workshirt and jeans personification of a couple of unique credit union phrases you likely had to have explained to you the first time you heard them, have since used a heap of times, and which are going to increasingly bump into one another, sometimes with a bang. You may not know it yet, either, but you will soon.
All Mr. Rodriguez knows is this: "The big mistake I made was not to check out all of the papers before I signed them."
"Not for profit. Not for charity. But for service." A half-trillion-dollar credit union industry serving 80-million Americans in just the United States alone owes its existence to those nine small words that were a mission statement and set of operating principles long before consultants started making big bucks peddling both. The words are old, but not antiquated or obsolete even if, sadly, fewer and fewer credit unions deem them worthy of inclusion in their newsletters and marketing materials. In fact, four small syllables, "Not for profit," are the very large pillar of the federal tax exemption for credit unions.
Three other words have entered Webster's Credit Union Dictionary in the past decade- "Serving the Underserved"- that have nowhere near the pedigree of the former phrase, even if credit unions were serving the underserved before they ever knew there was such a thing. Interestingly, thanks to perception and some diabolical attacks by the bank trade groups, defense of the credit union tax exemption in Congress in the coming years may lie more with "serving the underserved" than "not for profit."
Arturo Rodriguez's loan is stalled at the intersection of "serving the underserved" and "not for charity," where I expect we'll be seeing a fair share of accidents. Frederick Raiffeisen learned more than a century ago and after much experimentation that the charity model didn't work. A co-op must be self-sustaining and, setting aside that 80/20 rule for a moment, ideally one group of members shouldn't subsidize another.
Arturo Rodriguez hasn't heard of Frederick Raiffeisen. All he had heard was from his boss that if he went to a credit union they could help him refinance a 2000 Toyota Tacoma he bought for thirty-five-thousand bucks at a car dealer and financed through Americredit at 21% APR. One year of $480-a-month payments later, Rodriguez said he noticed his principal wasn't getting any smaller. It seems this truck had a front-end (interest) problem.
As you might guess, Arturo Rodriguez is an immigrant from Guatamala who came to the United States 10 years ago and now lives in LA as a resident-alien and hopes to become an American citizen. His English is good, but given that most native-born Americans can't decipher a loan contract, he was the kind of prospect dealer F&I men leap over demo models to greet. He also represents just the type of "underserved" community credit unions have been adding in record numbers and increasingly boasting about to media and Congress.
Not long after the 28-year-old Rodriguez walked into a branch of PremierAmerica Credit Union he had himself a share and share draft account and was now a "member." "But when I asked the lady if I could refinance my car, she said OK, she would check my credit, but then said, 'No, your credit is not good.' I told her I pay all my bills, and I did have some problems a couple of years ago with some stores, but I paid those off. But they still said no."
What Rodriguez didn't know was that he had just been sideswiped by "not for charity." Marti James, VP-lending with PremierAmerica, said she recognizes Mr. Rodriguez's predicament, but the credit union has been dealing with some problem loans. "We handle loans on a case-by-case basis," said James, "and we do see a lot of people with high- rate loans. If he's brand-new to credit and has a thin file," then he would be denied. "If he's a brand-new member, then he must go through the same steps as anyone else." James said that in a year if Rodriguez has built a credit profile, he would likely be approved for the refi.
"We've had some delinquency issues that have caused us to tighten up across the board," she added.
Rodriguez' employer at a building supply firm, Dennis Carlson, calls him one of the best employees he has; one who "comes in early and stays late. He wants to do better."
"I help the customers; I do everything," Rodriguez says proudly.
But doing everything is still not going to be enough in the coming years when "serving the underserved" finds itself on a one-lane bridge with the reality of "not for charity."
At least the "but for service" piece remains alive and well. Rodriguez noted with some chagrin that a week after being turned down for a loan the credit union sent him a MasterCard in the mail.
Frank J. Diekmann is editor of The Credit Union Journal. He can be reached at fdiekmann cujournal.com.