Should Credit Union Members Have “Jury Duty”?

A friend recently commented on his initial wait for possible jury duty:

As I write this, I am sitting at the D.C. Courthouse waiting to find out if I’ll be selected for jury duty. Many of you have been where I am, and likewise many of you remember the video that is played to prepare potential jurists for voir dire and a case: Jury Duty: Call to Serve!

It’s dramatic (over-dramatic?), and a bit of a strange juxtaposition. While we’re being told that the fate of democracy rests in our hands (!)—I’m really just sitting in a large room with people scattered around doing their work or reading, but mostly just waiting around. And it’s easy to dismiss the video—getting called up for jury duty feels like a distraction and not all that important, if waiting around seems to be our main job. . .

So, for the next few hours at least, I will try to bring a different perspective to jury duty. I will attempt to wait patiently and attentively, hoping for my time to serve, all while knowing that the work is critical, and much bigger than one person. Perhaps as I wait, I’ll learn something about duty as well.

The Duty of a Credit Union Member

Is there an analogy for the member-owner of a credit union? Could it be to “serve” by attending and voting for their leaders at the Annual Meeting? If we only ask and expect our members to use products, have we really helped members understand the cooperative principle that the “fate of democracy rests in our hands”? Is your Notice of the Members’ Annual Meeting a call to duty?

Ending Autopilot Decision Making in Credit Union Mergers

No credit union merger proposal has ever been turned down by a vote of the members. In over 5,000 voluntary mergers over the last two decades, most were by credit unions that were financially sound.

So why has the voting process been so perfunctory, to the point of meaninglessness?

Why has this fundamental member-owner responsibility become so routine?

This is especially critical when much evidence exists in for-profit sector and financial services, that many mergers destroy value.

One reason why this exercise in cooperative democracy appears pointless is that the voting decisions is presented in such a way that members believe there is no real choice in the matter.

Members are given no economic facts or alternatives, and often given a nudge in the form of a special dividend to follow the course recommend by the Board and management to give up their charter.

In an article exploring why consumers may act contrary to their economic self-interest,  the authors provide the following observation from behavioral economics:

“While it may not sound like a lot of fun to think about the opportunity costs of every financial decision, we need to be careful and not get too caught up in an “autopilot” mode of decision making. Thinking about everything we could do with our money is hard. At the time you make a purchase, remember that you can spend the money only once. More costs exist, so you may miss future opportunities such as a more significant purchase, interest earned on savings, bill payments, or other possibilities. The difficulty of considering several options leads us to revert to mental shortcuts during our decision making.”

Surrendering control over an organization and legacy assets produced by the efforts of generations is hardly a routine decision. Might it be time to ask whether the so called voting process be re-evaluated based on cooperative values and fiduciary responsivity?

People Helping People: The Closing of the Restaurant Industry

One of the most threatened industries from the stay-in-place requirements will be the restaurant business. Every eatery, from the oldest locally-owned café to the largest national franchises, is financially at risk. These local businesses’ futures are in doubt; more importantly millions of full and part time workers may be laid off-indefinitely.

Almost ten years ago, Chef Jose Andres and his wife Patricia started the World Central Kitchen. They envisioned a non-profit organization that would create innovative approaches to combating hunger and poverty. Initially this was through providing clean cook stoves and culinary training programs along with social enterprise ventures that empowered local communities and economies. The focus was on country’s suffering from natural disasters or chronic hunger in the population.

Now this decade long world-wide charitable effort is focusing on the US: “We have shown that there is no place too far or disaster too great for our chefs to be there with a hot plate of food when it’s needed most.”

A week ago Chef Andres announced the closing of all his DC area restaurants. He explains why in this 4 minute video. He is paying all his staff for the next two weeks and converting several restaurants to Community Kitchens. Below is the conversion of his Bethesda restaurant’s location. While undoubtedly concerned about the future of his own enterprise, Chef Andres is putting community outreach as his first priority.

  1. Chef Andres’ Bethesda location
  2. The conversion to a Community Kitchen
  3. Get in Line
  4. Stand here signs in walk to pick up food:

  5. Serving those most in need

So You Want Government Crisis Money

The subject line of a CEO’s email to staff: “Ensuring that our business records reflect due diligence, policy follow up, and the right balance of CYA”. Excerpts follow:

Team, think backwards – after this is all over, we may be AUDITED to see how we did during the crisis by official third parties. Not just our internal operations but those organizations we rely on to serve members. I want the board record and business documentation to show our attention to our processes related to these times and normal times. Assume a future proctology exam is coming and be ready.

For example: We are assuming the process to get GOV’T funds for extended PTO and employee benefits will be a FIGHT or a HASSLE at the very least. We are starting a process to make sure we keep the records to make our case very specifically as we learn the rules. Our management team must keep a CENSUS – have the numbers, know where people were, what they were doing , what work we accomplished in strained times, etc.

We want to never lose on process – so we have to anticipate process reviews and be ready. Make our business records tight and shining – especially through the upcoming months.

US Economic Growth by 50 Largest Metropolitan Statistical Areas

Economic conditions across the US are very uneven. The Bureau of Economic Analysis of the Commerce department has released the growth rate of the country’s top 50 metropolitan statistical areas (MSA) through September 2019.

At the high end are Las Vegas-Henderson at 8.6% and San Jose-Sunnyvale at 7.44%. At the other end of the range are Allentown-Bethlehem at -1.2% and New Orleans-Metairie at -2.52%

Knowing your area’s economic circumstances should help you understand members’ expectations about their economic outlook.

Heroes In a Time of Crisis: Investing in Staff and Members’ Well Being

The following is a coronavirus action plan from Doug Fecher, CEO of Wright-Patt Credit Union in Beavercreek, Ohio. He opens by honoring all those serving on the front lines, outlines changes in operations (details omitted) and summarizes the waiving of many member fees. The member actions below could reduce income by $50 million or more depending on the length of the crisis. This, he says, is why we have capital. “I’m sure there’s more we can do, and will do, but this is where we’re starting.”


What is a hero?

No matter what the dictionary says, for me it is someone who simply answers the call. Often we think of saving a life, but actually most heroic acts are things we don’t usually think about at all. More often than not, heroes are those who take care of their neighbors when nobody else will.

Some people put themselves in position to perform heroic acts. Others find themselves thrust into the role– finding themselves at a crossroads of time, place, and opportunity where a decision must be made. Do I step up or not?

Being a hero doesn’t mean we don’t have fear – it means we do what we need to do despite being afraid.

Imagine life without our everyday heroes.

First responders, members of the military, nurses, and doctors are clearly heroes. But they aren’t the only ones. So understand me when I say, with all due respect to those obvious heroes, that I consider people like us – people who work in grocery stores, pharmacies, and other typical businesses who never thought that what they do is provide essential community services – those people can be heroes too.

And make no mistake – this includes all of you! You and your colleagues at WPCU who work in a business that provides one of the most essential services of all – peace of mind. At a time when you are worrying about your own families you are also being asked by the credit union to step up for others – to make sure members don’t run out of the cash they need to manage their own way through this terrible and unprecedented event.

None of this is easy. Everybody wants passionately to get it right. I want to assure you that we are doing everything we can to balance the interests of all our stakeholders to make the best decisions we can. Things are changing daily, even hourly, and so as they change so will the decisions we make to navigate our way through each day.

Heroes. That’s what I think you are, and I don’t think I’m overstating it. I cannot thank you enough.

Now let me update you on where we are today: [internal operations omitted]

Member Temporary Emergency Relief Services

We are putting in place a set of emergency relief services to help members cope with the economic hardship of job loss or reduced income. These services will be available as soon as practical (some require programming, etc. that may take a few days).

Emergency relief services include:

  • Temporary unemployment loans are available at 4% interest
  • Early withdrawal penalties on share certificates of deposit are waived (daily cash withdrawal limits apply).
  • Late fees on loans are waived.
  • Consumer credit card limits for creditworthy borrowers are automatically increased by $1,000.00; higher limits may be available by request.
  • Commercial credit card limits may be increased upon request.
  • Members are permitted to skip up to three consumer loan payments without penalty (Skip a pay may not be available on certain loans). Additional skip-payments may be granted upon request.
  • We are temporarily suspending new foreclosures and automobile repossessions. If you are having trouble paying your bills we urge you to contact us so that we can help.

We are also implementing a temporary change to member fees in order to provide further relief:

  • Share transfer fees for NSF/overdrafts are suspended.
  • NSF/overdrafts fees are suspended.
  • Member choice transaction fees are suspended.
  • Foreign ATM fees are suspended.

Thank you …

These are difficult times, but they are temporary. We will get through this even if we don’t know just how long it will last. Our community will become more used to a new normal way of doing things including accessing cash, and this will happen even before the crisis ends. Every day that passes brings us one day closer to this being over.

I hope you understand that the actions we are taking are to protect our partners and members as best we can. Truth be told I personally hate that we can’t just close shop and have everyone go home to wait this out. But if a home catches fire the firefighters will show up. If you go to a hospital there will be doctors and nurses waiting to care for you. If you need food or medicine there will be grocery and a pharmacy open to help you. And if you need cash or can’t pay your bills, buy basic supplies, or take care of your family, we are your credit union. We will be there for you too. Closing our business is just not an option.

And that’s why I think you all are heroes. It’s not something I say lightly, and so when I say thanks for all you’re doing, I hope understand the emotion and force of those words. I simply can’t thank you enough.

Doug Fecher, CEO

“In the beginning. . .“

From the St. Anne’s Credit Union website

Founded in 1936 and headquartered in Fall River, MA, St. Anne’s Credit Union has been providing financial products and services to SouthCoast communities for over 80 years.

St. Anne’s Credit Union was established in the midst of a depression, by a young man named William J. Cyr who saw the possibilities – people helping each other regain their financial health. With the assistance of a group of friends, Cyr began collecting 25 cents from several people after church each Sunday to accumulate enough funds to qualify for a federal charter. With assets totaling $1016, St. Anne’s became a fully sanctioned federal credit union in 1936. Realizing the positive impact this had on the community, Cyr went on to found 36 more credit unions throughout New England. [emphasis added]

 The further you look back, the longer you can look ahead.

Learning at the Speed of the Crisis: A Cooperative Advantage

Everything Cancelled! That is the economic and social reality today from the coronavirus crisis. Except for one critical capacity-to learn at the speed of change.

Credit unions have three distinct strengths in the current crisis:

  1. They focus locally. Regardless of national guidelines or initiatives, all execution is local. Schools, businesses, health care and all services are led and delivered specifically for each community The community is the “home field” advantage of every credit union.
  2. Members come first, not a stock price or buybacks, or jousting for a corporate takeover as competitors weaken. Members are why we exist. Their financial health is each institutions’ “social capital” of trust.
  3. Collaboration, based on the principle of self-help, is our competitive advantage. Working together even with “social distancing” is integral to our system’s design.

Turning to Action

When asked about knowing the peak of the curve tracking the virus spread, NIH infectious disease expert Dr Fauci stated: “We don’t know about it until after the fact.”

In contrast to this post-event knowledge (hindsight is always 20:20) the cooperative advantage is the ability to share and learn from each other to proceed with confidence through each phase of a crisis. Real time sharing brings insight and foresight.

Every crisis, externally imposed or internally caused, goes through a similar, predictable cycle: Discovery/incident, growing realization of impact, uncertainty creating fear and doomsday predictions; responses-local and national; slow recovery, and step by step return to normalcy.

The greatest danger is to get stuck in judgments in one part of the cycle and assume that will be the situation forever. The best example is NCUA’s actions to the corporate investment portfolios in2008/09.

Learning occurs from first-hand intra-industry sharing about credit unions plans and actions. Often in real time webinars.

“Uninterrupted Service” and “There’s a lot we can do”

One CEO’s focus in his staff communications is to ”deliver uninterrupted service to members.” He further observed:

We are offering members a variety of ways to help them. We have a temporary income replacement loan with an interest rate of 2 or 3 percent. Also a few extra free skip-a-pays (we offer one free skip-a-pay per year as a matter of routine). Our Governor closed our schools for three weeks which is creating a childcare nightmare for our mostly parent-age employees so we are considering an interest-free loan for any extra childcare expenses they incur during the crisis (we need them to come to work if they can). 

So far not much of an issue for members – we’re getting some requests for assistance but only a handful so far. I expect this could increase significantly in coming months.

Our crisis team is meeting every day to re-assess and make new decisions. I’ve been around a long time and have never seen anything like this – this is worse than the great recession because of the panic around health. We will be fine – this is what we have capital for, right? We have a lot of it so there’s a lot we can do.

Keeping Credit Flowing-Lowest Borrowing Rates Ever

The Federal Reserve’s actions lowering short term rates to zero creates a potent borrowing and member lending opportunity for credit unions This morning’s fixed rate term loan advances from a FHLB ranged from .81% for one year to 1.02 for five years.

With this historically low cost of funds, credit unions can leverage their balance sheets to assist members to refinance outstanding loans. Refinanced loans have a payment history and can be secured. Lowering rates puts more cash in members’ hands or enables faster loan spay offs. Refi’s of home mortgages can benefit members years beyond the crisis.

Creating low cost short-term financing for those members and businesses subject to uncertainty is vital to an economic rebound. Credit unions have the local knowledge to direct their lending priorities where it is most needed in the community.

“An Essential Service” and “Being Good Neighbors”

I received the following excerpt in an email from a credit union:

Financial institutions are considered an essential service, so our branches are open to serve you during the shelter-in-place order impacting six Bay Area counties.

In a crisis, recovery starts from the bottom up, not the top down. While national funding can counter market’s liquidity panics, recoveries in retail sales, business re-openings and restoring normal patterns of commerce must occur locally. Dependable financial services are the oil to keep the wheels of commerce turning.

On Sunday I participated in a Zoom church gathering. The order of service was the same as if we were in the sanctuary, some music and congregational interaction through Zoom’s “gallery view.” The technology provided all regular service practices. By doing so it renewed a sense of community even without physical presence.

Learning inspires innovation. Another congregation announced in the midst of city-wide church closures in DC: “The church is not closed, but the church is changing its practices for the time being.” 

When everything is postponed or shutdown in our daily lives, all routines are unsettled.

Crisis can breed fear, even panic. One credit union reported a member who withdrew his entire share balance: $500,000.

Learning new ways to be good neighbors for our members, community and the coop system could be the most important outcome of this crisis experience. That would be an “essential service” lasting much longer than facilitating daily financial transactions.

Does Common Bond Matter Anymore?

Until the economic upheaval of the 1970s, the field of membership (common bond) was not only a legal requirement for a credit union charter. It was a practical necessity.

Credit unions for the entire 20th century were started with no financial capital. Rather, the sponsor support and subsidies as well as volunteers’ “sweat equity” enabled credit unions to slowly build up their financial capacity.

The employer based FOM was the dominant chartering model. With it came members on steady payrolls, space in the plant and personnel who would donate time to manage the daily interactions.

The field of membership was a way for beginning coops to focus their efforts on a market niche that provided a stable economic environment. Lending, long before FICO scores, was based on character and capacity. Character was determined by co-workers on the credit committee and capacity by how long you had been on the job.

The Unraveling of the FOM

Most states, and the federal regulator after 1934, interpreted the common bond literally. So, if a plant closed, a hospital merged or a business was sold, the credit union was deemed to have lost its organizing rationale and was liquidated.

From the late 1970s into the early years of the deregulation era, this rigidity resulted in closing credit unions, still financially viable, when their members were most in need. Mergers were not allowed of unlike common bonds. The dependence on stable employers was eroded by the changes in the economy that saw the Midwest manufacturing base decline into a so called rust belt. New service industries emerged which did not match the employment model of large manufacturing companies.

The Opening of the Common Bond

The economic disruption of the 1980s, the parallel deregulation of financial services and never-ending technology revolution have changed the traditional understanding of field of membership.

Today most credit unions have the ability to define their common bond in a way that matches their business goals. A few still retain a narrow common definition such as State Farm FCU, $4.2 billion in Bloomington, IL. Others such as Pentagon FCU claim a potential field of membership of 329 million. Or in other words, every American.

So does the common bond matter? Some competitors think so. One startup fintech serving the student loan market named itself Common Bond. On its website the company promotes itself with a values and social purpose philosophy versus what one might expect as offering the “best loan rates.”

The Common Bond Today

Ed Callahan, the former NCUA chair was sometimes accused of destroying the common bond. He would reply, “I don’t believe in THE common bond. I believe in A common bond.”

The focus Ed referred to is interpreted many ways by credit unions. Some like Ironworkers USA FCU turned its whole fortunes around by doubling down by serving more union members across the country. Many credit unions have embraced community charters even if they retain a core, legacy focus on an original sponsor.

Some credit unions reinterpret the common bond by rebranding with aspirational names: Xplore, Aspire, Brotherhood, Team 1. Others build a commitment around purpose or serving a particular need in the community such as Credit Human. Some focus on the cooperative message of ownership: My Credit Union or Western Cooperative.

What Common Bond Means

Time and again this topic arises in every credit union’s strategic journey. It is a core element of cooperative design. There is no single, clear working definition. But examples and history help us understand the importance of thinking clearly about this self-description. For it is the foundation of a credit union, not merely a legal license. Without this definition, the cooperative design becomes aimless, prey to the fates of fortune and chance. That’s not what members hope to find when they join a credit union.