Learn Marketing & Strategy Insights, You Will.

Category: Articles (Page 3 of 66)

It’s not Digital Transformation. It’s Transformation.

Originally published on CUInsight.com

Would this intro keep you reading?

This article will help your credit union advance their progress on digital transformation.

Yeah, probably not. In fact, I bet I lost some of you just with the implication. Doesn’t say much for my last post on digital transformation, eh? Oh well, perhaps you can share with them what they missed.

5 Years in 8 Months

We talk a lot about digital transformation. I get it. It’s something I’ve tried to keep top of mind for over a decade. And the need continues. Especially now.

You already recognize that 2020 moved us 5 years forward in digital expectations. Or 3. Or 10. The number doesn’t really matter. What’s important is that if you were lagging in December, you’re way behind today.

Transformation Loading Window

Are you stepping up to the challenge? Every credit union I speak to or work with is with a passion. They’re taking new member expectations seriously. The transition from branch-focused to ITM, app, and touchless tech is rapid.

So why does the title say it’s not about digital transformation?

Because it isn’t. Digital adaptation is just the most visible component. The rest is harder, but more important to your survival long-term. And yet, it’s what credit unions, at their core, should be best at achieving.

It’s the Mission, Everywhere

You already know all this. I’m just here to assemble it into a single section. To make it easy for reference…and inspiration (I hope!).

Consider this one geek’s manifesto to what he hopes our industry can become. Scratch that, what he knows our industry can become.

Credit unions claim to be a unique form of financial cooperative. Not-for-profit, member-owned, community-focused…you know the rest. So why do most people see it as just another bank?

To be clear, I’m not looking for a new “Open Your Eyes” campaign. I’m challenging you to be what that promotion says you are.

Over two years ago, I wrote a series of articles about the Credit Union Which Could Be. Immediately followed by Member Relationships Which Could Be, it challenged you to imagine, then make real, the best version of you.

So let’s take it to the next level, together.

The Credit Union That Should Be

Astronaut with American Flag on Moon
Think of this like your “moonshot”. And you already have the rocket.

We spent a lot of energy on what could be. After what we’ve seen economically and socially, it’s time to focus on what we should be. For everyone.

  • Making the credit union a place someone wants to work (props to a forgotten post on LinkedIn calling for CUs to become the “cool” new workplace opportunities). To build a career. To help others.
  • Standing up for the oppressed in society, both socially and financially.
  • Living the mission, whether in daily operation, hiring practices, or lobbying.
  • Lobbying. Yes, really. By supporting candidates who are good for members (ie. people), even if they still have more to learn about your regulatory goals.
    • That means not endorsing everyone who pledges to vote “no on CU taxation”.
  • Standing up against predatory lenders, and supporting policies to improve financial wellness, even if those affected aren’t your members. Because 1) they could be and 2) your mission doesn’t exclude people.
  • Providing innovative and traditional services through digital channels, while making your priority be authentic connections. Human to human. Whether it’s through Zoom, a plexiglass divider, or back in the world of “normality”.
  • Understand you are more than a place for people’s money. More than the “cheaper bank”. To be the institution for which people are proud to display their card. And on that point, give them awesome card options!
  • To do all this because they’re the right things to do, not because they may make the institution bigger or more powerful. Because when your shareholders are also members, your decisions must always benefit them.
  • Bring that obsession with societal benefit and inclusion into your core operation.
  • To expand financial access to those who thought they never had a choice…or the option. Because you know financial security raises communities.
  • Taking advantage of digital schooling to contribute your own financial literacy efforts straight into their “classroom”. By getting staff involved, because the human connection is essential.
    • Because when young people understand money, they can make better decisions that help them and others for a lifetime.

Normal Is Anything But

Butterflies Emerging from Crysalis
Change can be a good thing.

If 2020 has taught us anything, it’s that you can’t take normal for granted. And sometimes, normal for you is awful for someone else. So we listen, learn, and change.

Because change is inevitable…and sometimes rapid.

The Community That Should Be

The great thing about being part of the credit union industry is that so much of what’s being asked of companies, governments, and people is already part of your mission.

To drive for inclusivity isn’t changing what you believe. It’s just being specific in achieving that goal.

To expand financial literacy, assistance, and long-term policies are all core to the cooperative principles.

As you look at the challenges in society, and the challenges within your own institution, it becomes apparent that the credit union which should be is also the community we want to become.

So get loud. Get active. Share your mission. Make it clear that your goals are society’s goals. Heck, for over two decades, this industry has taken real action to recognize that Black Lives Matter and address inequities in financial access.

The credit union movement was built by women. Yes, all the way back to that special day in Estes Park!

And credit unions work to ensure that who you are and who you love has no impact on your ability to enjoy all possible financial opportunities.

So Is Transformation Just Being True?

Handshake with Cooperation Words

We began this discussion thinking about how transformation was more than just digital. Yet now, it appears we came full circle. What makes credit unions special is that they’ve already made so much of this transformation.

Now it’s time to be authentic to your roots. Spread the word. Listen. And learn.

You know credit unions really are special. From MSR to collections agent to CFO, the mission needs to be top of mind and actionable at every level.

People love working for Apple, Patagonia, or REI (the largest cooperative) because of the culture and how they feel a part of contributing special things to the world. Your credit union is no different.

Be true to your mission and you’ll always be on the right side of history. Plus, you may just become known as the “cool bank” who treats people right.

Product Refund Liability: Is Your Institution Exposed? [Guest Post]

Guest post from my business partner and dad, Keith Winn. Written by him, edited by me. It’s a big enough deal I think it’s necessary to share.

Something else to be worried about? Why not? It’s 2020.

In truth, the emerging risk shouldn’t surprise the banking industry. You’re already used to addressing NSF and OD fee class-action suits, ADA legal action, and, oh yeah, the effects of COVID-19. What’s one more thing?

It could be a lot. From a legal and compliance standpoint, this latest challenge could have severe implications for credit unions. Especially large institutions which embrace indirect in their auto loan portfolios.

As a great author once said, Don’t Panic. Let’s start at the beginning.

The Consumer Financial Protection Bureau

In March of 2019, the CFPB issued their Supervisory Highlights. The findings covered “examinations in the areas of automobile loan servicing, deposits, mortgage servicing”. Since we’re talking auto lending, let’s look deeper at why that topic was important to the CFPB.

According to the report, they wanted to review “auto loan servicing activities, primarily to assess whether servicers have engaged in unfair, deceptive, or abusive acts or practices (UDAAPs) prohibited by the Consumer Financial Protection Act of 2010 (CFPA).”

You’re not doing anything unfairly, deceptive, or abusive, right? So why is this even relevant? Digging further, we discover their real reason:

Reviewing “[u]nfair and deceptive practices regarding refunds for certain ancillary products.”

Ancillary Product refunds

Accounting Chart and Calculator
See your charts? That’s why this all needs a system.

Your borrowers do sometimes purchase ancillary products. It’s a great way to build non-interest income while protecting people from the financial effects of unexpected breakdowns, totaled vehicle insurance claim gaps, and more.

These products are financed within the loan. If the borrower later experiences an event such as trading or selling their covered vehicle, or has a total loss or repossession, the servicer (that’s you, the lender) or borrower may cancel these ancillary products.

Following cancellation, the borrower or lienholder would receive prorated refunds of the premium amounts for the unused portion of each product.

In these cases, the loan servicer initiates the cancellation refund with the provider. However, that process wasn’t always completing. The CFPB examiners identified several examples wherein borrowers did not receive the correct refunds on their extended warranties (VSC).

This finding addressed actions after a total loss or repossession.

Refund Issues

In one case, the examiners found the mileage was calculated on the vehicle’s total mileage instead of the actual miles driven by the borrower. Other cases showed that the servicer never requested a refund after the vehicle was reported as a total loss.

The average unclaimed refund was about $1,700.

These missed refunds caused the borrower to have a larger-than-expected deficiency. The CFPB deemed it unfair, calling them instances of UDAAP.

While the CFPB reached agreements and set up appropriate resolutions with the lenders and servicers involved, the wheels of future litigation were now in motion.

Which Protection Products?

Blue Umbrella
The issue is about as dizzying.

You offer auto loans. You and your dealers also offer ancillary products which can receive pro-rata refunds. The liability exists. Which protection products? As of publication, the following are worth your attention (keep in mind, others may also apply):

  • Credit Disability Insurance
  • Credit Life Insurance
  • GAP
  • Limited Auto Coverage (Tire & Wheel, Dent & Ding)
  • Vehicle Service Contract

The NADA Reacts

The National Association of Automobile Dealers (NADA) wasn’t sitting idly by. In April of 2019, they released their Voluntary Protection Products Policy (VPPP) (Requires login).

The focus of this new policy was to:

  • Affirm the dealer’s unequivocal commitment to a transparent and professional VPPP process
  • State how the dealership will implement and maintain the policy
  • Identify tasks the dealership will perform throughout the lifecycle of VPPPs. This starts with product selection and moves through a process for:
    • Product pricing, advertisement, presentation, sale, cancellation and, should the need arise, customer complaints

The VPPP is a comprehensive system with specific focus on this topic in Section VII: Product Cancellation. The new policy helps build a methodology to make the offering, sale, and cancellation processes simpler, and more consumer friendly.

However, use of the VPPP is optional. Unlike federally-chartered credit unions, there are no federally-mandated regulations.

Yes, in this case, life is easier for them. There’s no CFPB peeking under the hood. Nor is there any true Federal compliance expectation on the dealership. This, despite the fact they also work with product providers and administrators, as well as loan servicers/lenders.

Based upon previous and current CFPB opinions, agency actions, and overriding state laws, it appears the legal onus for timely and proper refunds on protection products may fall directly to the lender.

Which is why we are all here right now. Because that question is about to be tested.

Class Action: Breach of Contract

Scales with Coins and Clock
Time and money. Isn’t it always?

On July 1st, 2020, a class action lawsuit was filed in Denver, CO. The suit, on behalf of the plaintiff, is against 10 financial institutions, 7 of which are credit unions. Attorneys stated the defendant list may expand to 40, involving, “hundreds, if not thousands, of members.”

What’s at issue?

The allegation includes: “All persons who: (1) entered into finance agreements with GAP Waivers in Colorado that were assigned to (named institutions) (2) who paid off their finance agreements before the end of the original maturity date, and (3) who did not receive a refund of the unearned GAP fees.”

Sidenote: In the state of Colorado, regulations require all GAP waivers sold must be refundable.

They are seeking records going back 6 years. Are you prepared or equipped to pay out that many years of potentially missed refunds?

Going Beyond GAP?

Keep in mind: Refundable GAP may only be available in 14 states, so if your institution is not doing business in one of those states, you will likely not be named in this suit.

However, other products, such as VSC, are generally refundable in all states…so you may not be out of the woods.

Direct or Indirect Loans?

iPhone Calculator and Cash plus Notebook
Step 1: Add numbers. Step 2: Continue reading.

That’s the million-dollar question. Literally. Are the risks higher for one category? Should credit unions consider changing their lending policies?


Direct lending puts you in control, with lines of communication to the borrower and product administrator. When cancellations arise, that administrator knows the regulations for each of your servicing states, so the process occurs smoothly.

Once notified of an early cancellation by the borrower or financial institution, your administrator processes the refund and forwards it to the lienholder. It is then checked for accuracy, and applied to your borrower’s outstanding balance or as a direct refund.

That’s it. Uncomplicated. No lawyers necessary.


Indirect lending is…different. Combine the many dealers in your network with their own providers, which can vary with each protection product. You could end up with hundreds of variables and permutations. In other words, a lot to manage.

After that complexity, what information does your institution get? A buyer’s order. On which you learn the name of the product and the price they charged your borrower.

You’re in the dark and at the same time, potentially exposed to liability. Imagine how that problem can compound with 100, 500, or 1,000 indirect loans each month.

And that’s where a growing list of institutions now find themselves.


Rubiks Cube Solved
The easier solution?

Stop Indirect Lending

We realize this is an unlikely and undesirable solution. It doesn’t try to overcome the liability issue, rather, it sidesteps it altogether, reducing exposure moving forward. However, even if you stopped indirect lending today, you’d still have potential liability from previous years.

So even as a nuclear option, it’s still incomplete. Being ready to address the liability remains essential. Which leads us to…

Build a Process

Tracking these cancellations and earned refunds for all products in your loan portfolio (even when not your own) is a challenge. And it requires a process. Unfortunately, building this indirect “system” will not be quick, easy, nor cheap.

Your institution would need to invest in building a tracking platform with ongoing resources to ensure the timeliness and accuracy of refunds. Spell out dealer responsibilities in your agreements. Consider filtering out certain dealers (based on their product offering) to keep the workload lower.

That’s on top of maintaining your ongoing dealer relationships.

Of course, now your institution must account for these increased costs. Without any more income. Since these products are not your own, the only profit is from interest on the amount added to the loan. How are institutions handling this quandary?

One lender launched a “product return” fee, assessed against the dealer reserve at the loan origination. Is that strategy for you? We cannot say.

Subscribe to a 3rd Party Service

Unfortunately, even if your institution already subscribes to an indirect loan service, they may not currently have the technology to keep you out of this or similar class actions.

Since this is an emerging issue which will likely affect institutions across the country, we can make two “assumptions”:

  1. Indirect loan platforms are building solutions
  2. These solutions will be available at an unknown cost to your institution soon

Other “stand-alone” solutions may be available. We know of at least one company which claims to handle indirect-based product cancellation tracking and fulfillment. Contact your current vendor to see how their product lineup can help protect you.

Take Steps to Protect Your Institution Now

Knight Armor
Chivalry and swords stuck in stone. You know the drill.

The importance and impact of the CFPB actions, alongside the ongoing class-action cannot be over-emphasized. Auto loan protection products play an essential role in reducing risk for borrowers and lenders. Now, they can also become an unexpected cost to your institution.

All lenders need to take a close look at the CFPB actions as well as emerging class action suits. If you’re involved in indirect lending, attention today is even more crucial.

Begin researching the systems and process needed to address this new challenge. Then create a path for your financial institution to become (and remain) compliant, while ensuring fairness to borrowers.

To stay current on topics important to your position and the institution as a whole, be sure to Subscribe to the Learning Library. They dive deep into a wide range of protection services, highlighting risks and concerns you likely never considered.

Plus, find new ways to better serve borrowers while growing non-interest income. All that with just an email. So until next time, keep it honest!

Digital Transformation Challenges: For Your CU & Members

Originally published on CUInsight.

Did someone say “digital transformation”? Ok, that was everyone shouting it at the same time. Got it. I’m glad we made that transition. It’s all done by now, I presume? You’ve had, what, 4 months? How hard could it be?

According to a survey from Cornerstone Advisors, 70% of respondents claimed their existing systems were barriers to change. As Ron Shevlin, in his Forbes analysis, so appropriately quipped, “the other 30% must have misunderstood the question.”

Thanks, I truly LOLed. I hope you did, too.

“Search your feelings; you know it to be true!” Ok, that was Luke Skywalker. And he was talking about some Force stuff. It’s not important. Fate of the galaxy and all. But not our galaxy, probably.

If addressing your challenges to true digital transformation, right Skywalker was.

We’ll discuss two factors that make your work harder. One is internal. The other, like the truth, is out there.

The Truth is Out There - X-Files
Credit: X-Files (Fox)

Your Systems Can Be Better

It’s an important discussion to have with your team, core provider, technology partners, and product support companies. (Disclosure: That’s people like me.)

Case in point: One credit union’s lending person told me about a challenge with data matching. In arriving from two separate sources, they couldn’t compare easily. Their process was laborious and got, at best, 70% accuracy. Ok, but not good enough.

With a seemingly-small update to their core, they were now able to use another piece of data for matching. Now, it was easy, automated, and 100% accurate. I asked what they did to make it happen. “Nothing, just getting our system to let us filter by that variable was all.”

In their case, the credit union did not have to transition their core, change LOS providers, or undergo a multi-year planning phase. They just needed an update. Am I saying your challenges can be overcome that easily? Probably not. But some might.

Your Members Need Guidance

Compass Sitting on Map

A lot of your members embrace digital solutions. The moment they activated their new phone, your app got installed. Check deposit? Scan and go. Fund management? Easy.

This is what you want to see. Consider adding some nonintrusive and short surveys into the app experience to make sure you’re serving their needs. And never be afraid to glance at what other CUs and banks add to their mobile platforms.

Of course, I’m not suggesting to get into an app arms race. What works for Capital One customers may not be ideal (or feasible) for your credit union. But knowing is essential.

And, of course, building your credit union mission into your app/digital platforms. What’s that mean? Make sure all features encourage responsible saving, a deeper relationship, and educate where able. Above all, make it all easy. Burying options in menus is not the way.

Are Members Using Your Digital Functionality?

iPhone in Hand Black and White

Which brings us to ensuring your tech-savvy members know your app’s features. Look at usage metrics. Do all features see activity? I wouldn’t be surprised some members wish you had a certain capability, only to not know where it is (and thus assume it’s not there).

Trust me, as the go-to “tech fix it” person in my social circle (yes, even remotely, it’s still my role), this is way more common than you think. I get this kind of thing all the time:

“If only I could print straight from my phone! Emailing it to myself to open on the computer is such a pain.” “Um, you can print from your phone. Just hit the share icon, then Print.” “What? That’s amazing! How would I ever have found this?”

Yes, I’m a genius. I tapped the button.

That’s not your only member challenge.

Do Members Trust Your Digital?

Three Black Handsets
“There’s my high-tech!” – Someone you know

For some people, there’s a “digital trust gap”. Before even diving in, let me say, I get it. For my own devices and services, I take major steps to ensuring my security and privacy. It’s way more than the average person. So for someone to want to avoid it all to stay safe? Sensible.

What are some of the specific challenges? I’ll share a few I’ve heard:

  • A paper check is more secure (not to mention convenient and privacy-protecting) than an online bill payment
  • Mobile (contactless) payments are less secure than using a physical card
  • Online banking services just gather up your personal information to sell it to others (or get hacked); it’s safer to just stay “offline” to protect against bad actors and corporations

We could fact-check each of these points together, but why? You know much of it isn’t just false, it’s actually more risk in the opposite direction. Yet it’s also clear that providing facts doesn’t change minds; it can cause further “digging in” to incorrect beliefs.

So how can you work with people who fervently believe your digital solutions are a danger? You acknowledge their concerns (because though wrong in conclusion, they are right in principle), then explain how your approach addresses each.

Honesty & Transparency Always

Moon Jellyfish
Be transparent like these moon jellies.

Will you get everyone to jump onboard? Unlikely. But even for those who reluctantly use your online banking or manage to keep paper versions, they’ll recognize your commitment to honesty. And that’s how you build loyalty.

In our time of forced digital acceleration, I’ve seen some successes. Someone I know who aggressively rejected online banking now has to use it. And you know what? He’s fine with it. They managed to address his concerns well enough.

Systems Are Just Part of the Challenge

You’ll read and hear from a lot of people in our industry talking about digital transformation. I’ve been one of them for as long as I can remember. Everyone has good intentions; to shift credit unions into a digital future to remain effective and competitive.

We know your existing systems are a huge part of that challenge. Unfortunately, I can’t help you with that, only recommend speaking with the providers for their best guidance. Then, moving forward, work with partners who recognize your current and future needs.

As you aim to grow your membership, wiz-bang tech features are fine, but they must be rooted in achieving your mission. Show how what you provide highlights the “credit union difference”, even in what people thought was a basic banking concept.

What have you done to reach, assist, and empower members during your suddenly-rapid digital transition?

« Older posts Newer posts »

© 2021 Credit Union Geek

Theme by Anders NorenUp ↑