Socially-Distanced Marketing, Strategy, and The Force

Tag: payday lending

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.

It’s About The Members, Remember? (Payday Lending)

Update 8/31/18: A reader graciously made me aware of an NCUA program empowering credit unions to provide payday lending alternatives. It is used by a bit over 500 credit unions and discussion is invited from institutions on how to evolve it in the future.

See more direct from NCUA. Looks like a great opportunity to keep your members out of the payday lending debt cycle.

Originally published on CUInsight.com

This post is a continuation of “Your Mission Demands It“.  We’re focusing on payday lending and how its very existence should sadden all credit union supporters.

Credit. And. Union.

Your credit union members are everything to the institution.  Literally.  Without them, you’re not a credit union.  You’re a credit.  With no credit.  So I think it is important to bring to light the topics which are affecting members that others might have missed.  And then, how you can help fulfill your mission…you know, serving your members (even those who may not yet have a credit union relationship)!

Today, let’s have a little talk about payday lenders.  For many people in this country, they’re the closest thing they have to a bank.  Of course, you know the cost of such an arrangement. Or maybe not.  Spoiler: It’s substantial.

Some users understand this, unfortunately, they don’t have much of a choice, or they prefer the instant exchange of check for cash. It’s a big industry, with $38.5 billion in volume in 2009 (yeah, I know, I couldn’t find a newer figure…assistance?).

As of 2017, the industry collects $9 Billion (that’s billion with a B) in fees each year.  What does your credit union charge for depositing a check? And for cashing it? Not a gazillion dollars?  That’s what I thought.

Financial Insecurity Costs

Needless to say, payday lenders are commonplace for people without financial security. You read studies which mention them as living paycheck-to-paycheck. This means all their necessities are paid in the moment, and they hardly ever get ahead of debts.

Remember how I’ve said it’s expensive to be poor? Payday lenders provide the service of speed. When rent, electric, water, and car payments are all due, while the refrigerator and pantry are both empty, money from one check buys another week/month of security.

Getting that money as quickly as possible is essential. At that point, giving up some in the form of interest rates or fees is a small price to pay to keep the water running.

Not surprisingly, usage of payday lenders is rare for those with more financial security. If you have disposable income and savings, and a place your money can reside, why pay someone else massive interest rates to get only some of it in cash?

Piling the Expense. Over and Over.

A person who goes to payday lenders is likely to use them repeatedly. The average is 8-10 transactions per year, where 80% of them are re-borrowed within a month, with 25% building fees greater than what they received in credit. These can be at over 900% APR.

What’s your ceiling unsecured loan rate? Anyway, this isn’t illegal. Well, it is for members of the military, as Congress banned them (for being too financially dangerous) during the George W. Bush years.

But for everyone else, all’s good here. And these companies aren’t considered predatory lenders. But not for the reasons you may think.

Pre-2017 CFPB: The Actions

Remember the CFPB? While under the leadership of Richard Cordray (pre-2017), they looked at payday lenders to better understand if this rapidly growing industry was harming its customers. In October of 2017, they released a rule to help people avoid falling into payday lender debt traps.

It required lenders to determine upfront whether people could afford to repay their loans. Along with a number of other consumer-safety focused policies, it took 5 years to develop, using insights from more than 1 million public comments.

For the unbanked, it was good policy. In the case of consumers who truly needed this service, it presented an enormous opportunity for credit unions to step in and offer fair services for these people.

Post-2017 CFPB: The Inactions

But 2017 came around and Cordray was out and Mick Mulvaney was in. This rule was immediately scrapped. Entirely unrelated, Mulvaney took over $60,000 in campaign contributions from payday lenders.

He also dropped an investigation into one of the largest payday lenders that had been ongoing within CFPB for years before his entry. They also were Mulvaney campaign contributors.

Insulated from investigation or regulation, the payday lending industry is booming. Which means more people who can’t afford to pay are now paying outrageous fees to access their money. They’re just like the credit union movement, except without all of the core principles.

Credit Unions Speak Out…Right?

So, in pursuit of their missions, credit unions have been quick to speak out in support of the unbanked and the prior efforts of the CFPB, right?

Oh, you don’t hear anything, either?

I have heard a lot of grumbling over CFPB regulatory compliance challenges. And you’re right, most credit unions should not be subjected to the same regulatory burden as JP Morgan Chase.

But where is the speaking out for people whose lives are dictated by the debt they accumulate with these payday lenders?

Credit unions can be an enormous voice for “the little guy”. Besides it being the right thing, people who use payday lending are probably enormously profitable potential members of your credit union. And you’ll never hit them with 900% APR.

Your Mission Demands It

Originally published on CUInsight.com

Why does your credit union exist?

Go ahead and think about it for a moment. I’ll wait.

Is it to provide safe storage and management of your members’ money? To help those in troubled financial situations? Maybe it’s to create a community of similarly-employed citizens.

Whatever your reason, it should matter. If your purpose for existence is just another version of Wells Fargo’s mission, then why even bother? (For reference, this is their vision statement: We want to satisfy our customers’ financial needs and help them succeed financially.)

So what makes your credit union different? This seems to get lost in the day-to-day of marketing pushes, car sales, core conversions, and more. It’s a question only you can answer.

Here’s an idea:
We exist to provide top-of-class financial services, education, while offering a unified voice in support of our members’ best interests. 

You probably aim to achieve the first two parts today. Ask yourself: How are your financial services? Would you bank there? Even better, would you encourage friends and family to do so? (Then why aren’t you referring them?!) Financial education is crucial to every member, yet few have the knowledge needed to maximize their savings potential. I’m sure you do what you can to help educate them, right?

And then there’s the last part: “Offering a unified voice in support of our members’ best interests”. This is where it gets fun.

Ask a credit union or industry trade group to support the tax exemption and you get cheers all around. They’ll “hike the hill” 5000 strong to demand “common-sense regulation” that reduces the time and financial burdens on credit unions large and small (but primarily the latter). If you are fighting for survival, then you’re automatically fighting for your members, right?

Not. Even. Close.

I support the tax exemption for credit unions. I also agree treating the vast majority legislatively the same as a national bank is unnecessary. Theresa in compliance cannot possibly provide the same level of, well, anything, that the 200-person team at Bank of America can (and should) offer. Of course, we’re getting sidetracked. I said, “members’ best interests”, not credit unions’. And it’s where we are doing a disservice to 1/3 of Americans.

The next few posts will dive into, issue by issue, areas where credit unions have a responsibility to speak out in support of their members. You’ve already seen my take on Net Neutrality (and my interview in CUtoday; many thanks to them for the focus!). Next up: The allure of Free. Then payday lending. And taxes. With a dash of de-regulation for extra flavor. Because what you don’t have to do can still hurt your members.

Credit unions and their lobbyists love to talk about how they are representing a large portion of America. It’s about time they use their voice to improve peoples’ lives.

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