Research & Delivery

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If not from the basement of a Boston department store, then certainly in spirit from an undisclosed location, Edward A. Filene is smiling.

The Boston businessman/department-store-owner who battled for employee rights and championed their fair financial treatment must be pleased. The father of the credit union movement in America, Filene's name lives on in the Filene Institute, the Madison, Wis.-based research and think tank that certifies and grounds credit union philosophy and structure with practical, economic reality.

The institute has played an integral part in the history of credit unions despite its relatively young age, by questioning the broad financial services concepts that underlie the basic premise of credit union membership and value. What once was mere anecdotal belief is now measurable fact. Why? Because the Filene Institute did the research analyzed and categorized it and reached dispassionate results and academic conclusions.

The institute will mark a milestone this week as it collects the Herb Wegner Award for Outstanding Organization from the National Credit Union Foundation during CUNA's Governmental Affairs Conference in Washington. (The Wegner Award is named in honor of the late Herb Wegner, former CUNA CEO.)

It is a crowning achievement for the Institute, said Bob Hoel, its executive director since 1991. "I think it comes as recognition for an accumulation of important studies done over a number of years," said Hoel.

Just as Filene encouraged sound credit union development, the Institute outlines and examines initiatives that put forward the principles of CU growth and expansion in today's searing competitive banking environment.

Founded by credit union supporters in 1990, the institute has published some 90 major research reports. They run the range of topics from check cashing and field-of-membership to taxation and technology. A study on credit union service to low-income populations (Strategic Opportunities in Serving Low to Moderate Income Individuals, Albert E. Burger, and Mary Zellmer 1995) had a memorable impact for its sensible, businesslike approach to offering financial services to low-income members. But for sheer clout, Hoel said that no research undertaking was as important as 1997's An Analysis of Public Policy on Credit Union Select Employee Groups, written by Stephen A. Woodbury and David M. Smith of Michigan State University, and William A. Kelly, Jr. from the University of Wisconsin.

What One Pivotal Study Showed

That study considered the effect of the Supreme Court's ruling in the AT&T Family Federal Credit Union (now Truliant FCU) case that denied select employee groups outside of the CU's major sponsor, AT&T. It showed that 62% of Americans worked for small companies that were too small to sustain their own credit unions and were thus effectively disadvantaged by the ruling. What the Court had done, in fact, beside overlook the legislative history in favor of its constructionist approach, was invalidate one of the core purposes of the Federal Credit Union Act of 1939.

"We delivered 14,000 copies of that study across the country, and it had a big effect," said Hoel. "So many members of Congress who were afraid to offend the banking interests now had something they could point to as proof of damage to their constituents."

The passage of HR 1151 raised credit union visibility in the nation's capital and raised the stature of the Institute in the CU sphere as well. But if credit unionists thought the Filene Institute would go back to being an esoteric little gem, well, they had another thing coming. The institute kept the interesting stuff coming with such titles as 1999's Member Acceptance of Electronic Access Systems: Innovators versus Laggards, by Nicolette Lemmon of Lemmon-Aid Marketing and David Gourley and James Ward of Arizona State University, and a series on Life Cycle Marketing for Credit Unions each devoted to an important demographic: Young Households (2001), Mid Age Households (2002) and Senior Households (2002).

While many studies undertaken prior to the AT&T Family case were concentrated on intra-industry subjects such as board and CEO relationships and building high loan-to-share ratios, a greater emphasis was later placed on better competitive strategies and using new systems to attract and manage effective SEG growth.

Filene doesn't have to stray from basic CU principals to develop these thought-provoking studies, either. Many, in fact, are a bit of a throwback to their very foundation. In 2003, Filene sponsored a colloquium held at the University of California at San Diego called Serving New Americans: A Strategic Opportunity for Credit Unions that brought together immigration experts and CU CEOs to discuss the challenges and benefits of serving America's new immigrant populations.

Topic Is Never Closed

Key to Filene's knowledge base is the fact that they never study a topic and consider it closed: they revisit subjects over time as they are applied by the system, and follow up with expanded information. Check cashing services is one important case in point.

Check Cashing and Savings Programs for Low Income Households: An Action Plan for Credit Unions, written in 2001 by John P. Caskey of Swarthmore College, showed how credit unions and CUSOs could collaborate to provide low-fee transaction services to people who customarily used high-fee check cashing operations and pawn shops. Offering such means also provided a segue for this usually "unbanked" group into mainstream financial operations. And these operations needn't be loss leaders forever, but can lead to more profitable loans as the relationships mature.

The partnership with state leagues pushed a pilot program in 2003 that now has 23 check-cashing operations in seven states with as many as six more set to open this year. Interested credit unions can get a check-cashing tool kit and access to a check cashing website. "This experience clearly shows that the needs of those unbanked people can be met for less than they pay at other venues and they then have the opportunity to become credit union members," the study stated. "The lesson learned here is that taking small steps can lead to big changes in peoples' lives."

Restrictions on interest rates for small loans is holding many CUs back from making further inroads there, said Hoel. "Credit unions are limited to charging 18% for a $200, two-week loan and the typical payday lender can charge as high as 900% depending on the state. The paperwork involved and the administrative costs of doing it makes it prohibitive. I believe a credit union should be allowed to get a more reasonable return, and we sure could use a lot more competition in that area."

Declaring Independence

To assure independence and avoid the charge of undue influence the Institute established a special research management relationship with the Graduate School of Business at the University of Wisconsin-Madison. The Center for Credit Union Research designs and supervises all institute projects and finds the best researchers for chosen topics and assigns them as appropriate. "We outsource the majority of our research," said Hoel. Keeping the administrative support for the Institute separate from research funding is also critical.

The cost of research is borne by credit unions and other benefactors, while administrative support comes from CUNA & Affiliates and the CUNA Mutual Group. Filene currently has 1,473 members with 52 CU league charter members.

Hoel, came to the Institute in 1991 as a tenured professor of marketing at Colorado State University. "Working in the national credit union movement wasn't my designated path, but I like doing different things when given the opportunity, so I did. It was a good move, too."

On the road for 125 days a year, Hoel gets a thrill working on breaking CU topics and spreading the word about Filene's work. "It's stimulating, fun, and very important work, and I'm happy and honored to do it," he said.

2004 will be another banner year, predicted Hoel, who serves on CUNA Credit Union's board, with a major gift to be announced shortly.

The Institute's I-3 initiative, which stands for Ideas, Innovation and Implementation is designed to identify and promote the next generation of CU leaders.

"So many of the good ideas in credit unions come from below, from the workers themselves who deal with members each day. We need the means to get those ideas a wider distribution." Filene is accepting applications for the I-3 program now. (For more information, visit

Knowing what Filene's role is and what it isn't is equally important, stressed Hoel. "Our role isn't that of a lobbyist. We don't do that at all. We simply provide the data and do the research reports," Hoel said.

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