Credit Union Business Model Striking A Chord With Fee-Weary Consumers

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There is an interesting little theme to be found in Credit Union Journal’s ongoing coverage of the one-year anniversary of Bank Transfer Day. And perhaps it’s not so little after all.

It wasn’t all that long ago that there was a slowly growing fungus among some that ye ol’ CU business model had run its course. Nice in its time, the critics said, but the days of the lifelong career in the factory town are over, as are the days of the little CUs they created. They took their spades to blogs and op-eds and conference speaking slots to throw dirt on the coffin that was the deceased corpse of mutually owned, democratically run financial co-ops.

Unions of people extending credit to one another was supposed to become the stuff of cultural anthropology; the future, they predicted confidently, was in sophisticated, bank-like enterprises that delivered services from the “cloud” in the 21st century. Where was this cloud? Above us in the mist, apparently, but they argued that consumers no longer care.

The Great Recession has proven to be the Great Reset. Tough times have shown people like a little tenderness–and you can’t really hug a cloud. Bigger may mean economies of scale, but it doesn’t necessarily mean “better.” If you read the Journal’s BTD report you would notice even the largest CUs have come to the same conclusion.  “Over the past four years the credit union model is resonating with more and more people, at least in our market,” said Tom Berquist, SVP-member strategies with Washington’s largest CU, BECU. “There is a higher understanding of and appreciation for the cooperative model, which was not there before the financial crisis. Previously, people didn’t think much about the values of banks.”

A similar observation has been made by California’s largest CU. “The meaning of 'credit union’ is really starting to resonate with people,” said Donna Bland, CEO of The Golden 1. “More and more often they realize we have their best interests in mind.”

CU Journal recently reported on a study from the Filene Research Institute examining consumer feelings around the issue of borrowing. “What was surprising was the researchers’ finding about how emotional and financial considerations link inextricably in the borrowing process,” the authors said. “Members are caught up not only in financial factors but in emotional factors, as well.”

I think those emotional factors are bigger than just borrowing. Finances are personal to begin with, and get real personal the tighter they get. That same Filene study would seem to agree, observing, “Members (and couples) have a golden mean in which their emotional and financial lives are at equilibrium.”

The authors of the study added, “Many members perceive credit unions as social institutions first and financial institutions second.”

You can bet many people in the path of Hurricane Sandy are feeling exactly those emotions right now as they try to rebuild their lives. Too bad it takes hurricanes and recessions to remind credit union folks of what they’ve got.


■ From shredding some assumptions about the credit union business model to the business of shredding itself: America’s credit unions have become quite the shred heads.

Not a week passes that CU Journal doesn’t receive a press release announcing a credit union has sponsored a “Shred-A-Thon,” usually at its facilities, in which consumers are invited to bring by important papers and computer disks, all in the name of being green and guarding against ID theft. The most recent was Arizona State CU in Phoenix, which said its eight shred events had led to the recycling of 47,884 pounds of paper, which it said equates to saving 239 trees. Members were permitted to bring up to five boxes of material for shredding.

At the same time, Local Government FCU in North Carolina said its two recent events led to the shredding of 42,000 pounds of pre-approved credit card offers, old bills, out-of-date account statements and more.

It shouldn’t surprise anyone that the Big Shredowski among CUs is the biggest of them all, Navy Federal. Indeed, it deserves kudos for billing itself as “Navy Shrederal” for a recent day of document destruction at 52 of its locations. It offered shredding, in conjunction with Cintas Document Management, in 12 states.


■ A couple of notes from recent travels. Getting off a flight at LAX recently, a Delta flight attendant announced that a hearing aid had been found. Am guessing the one person who needed to hear that message, didn’t…Getting off a plane at Miami International, I noticed the airport’s slogan is “I Fly MIA.” Not sure that abbreviation was thought all the way through…Flying back home from Portland, Maine recently we got out just a day ahead of the arrival of Hurricane Sandy, perhaps the first time someone has exited Maine to get to Florida to avoid a hurricane.


■ We opened with the good news to come out of Bank Transfer Day, we close with what some see as the “dark side” to the same. recently sent out a press release saying that it had “Unmasked the Dark Side of Credit Unions and How to Avoid Rising Credit Union Fees.”

“Last year, the rising popularity of credit unions after Bank Transfer Day led millions of Americans to jump ship from national banks and their big-bank fees,” it said. “But credit unions are now being accused of mirroring their commercial bank rivals with a slew of rigorous account requirements, more credit union fees and a declining level of service.”

The company said its research showed a 3% drop in free checking accounts and an increase in overdraft fees at CUs, and urged folks to be “on alert.”

Frank J. Diekmann can be reached at

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