At the NCUA’s May board meeting, one trend jumped out at me. Not new, but accelerating and read without comment.
In the first 90 days of 2023 there were 59 NCUSIF charter cancellations. That is a rate of almost 5 per week, one every business day. Without exception these charters are decades old, some surviving and most thriving. Why?
These charters are the handiwork of generations of volunteers, whose current leadership have decided to give up. It is a morale and ethical problem. For it undercuts the coop premise that pays forward the members’ collective legacy for which the present leaders are now the steward.
Many will suggest that the credit unions members are in better hands. However these hands are not the leaders they know or elected, nor the organization that created their collective reserves. Every charter cancellation eliminates an example of economic self help, self finance and self governance.
In most cases these are locally focused institutions which created unique relationships with their communities. Financial services may continue, but not from the same roots. Another civic organization so essential to a vibrant democratic political economy is no more.
What Can Be Done
Regulators should put the same time and effort into requests to cancel charters that they extend to new charters. If a merger is the strategy, show us the plan. If the volunteer leadership is giving up, ask members for new volunteers. If the sponsor has moved away, then seek a new group for re-energizing the charter.
Today the regulators have endorsed an exit strategy that benefits only the senior leaders who leave the membership in the lurch. And retiring CEO’s especially, are taking advantage by transferring their legacy to another credit union, often for just a few more silver coins.
When quitting a business or long standing effort is easier than getting in, the movement will continue to close future growth options, create higher concentrations of risk, and remove financial services away from their local connections and knowledge.
No charter should be cancelled without an effort to find others who are willing to pick up the opportunity.
A Second Trend to Be Re-energized
No brand, business or opportunity can continue without the support of the next generation of consumers.
Student run and led credit unions have been part of the educational and financial services of cooperatives from the beginning.
Yesterday I learned about a scholarship program to identify young persons often from disadvantaged backgrounds (poverty, refugees, disabled) who are given the opportunity to become part of a special education effort.
The premise is that brilliance is equally distributed in persons, but opportunity is not. The focus is on 15-17 years old. This is an age when “ideation,” the willingness to consider new ideas and become doers is formed.
This educational support is for four years. The time frame for measuring success is in decades. It may take ten years or more to see if those chosen in the program will become leaders in their chosen professions.
The program called Rise recognizes that leadership will be manifested in many different ways but over time. But the investment in this generation must be made now.
The cooperative model is designed to attract this kind of self starter. But today again, the regulatory community discourages new charters. The application has become a compliance drill, not support for people with passion to serve a community. The next student chartered credit union will be the first since the 1980’s.
In the meantime these young change makers are engaging their start up fervor elsewhere sometimes in other innovative finance-related endeavors.
The Common Thread
Credit union leaders, regulators and professional staffs, have become captured by the short term focus that drives most performance reporting. What are the latest quarterly numbers? How will we expand the market reach of our FOM? What Fintech partner will give us short erm lead on innovation?
All these efforts while necessary overlook the longer term outcomes. Without this awareness, the movement will become just another increasingly concentrated, and limited, financial service option in ten years. The number of active charters will be halved.
Tomorrow’s innovative financial models will have been created by the high school and college generation outside the movement. Credit unions will be seen as old fashioned “banking” firms just tending to their own, stand alone, self interests.
Both of these trends today are shaping what the movement will be a decade from now. There will be other cooperative solutions designed to serve consumers’ financial needs; however they may not be called credit unions.
This is tragic news. One thing that is very frustrating to me is the lack of cooperation within the movement to find solutions. We have the CUSO model for a reason. It’s the sixth cooperative principle in action. The high cost of technology, lack of succession planning, and the need to expand services to compete are all reasons credit unions give up. We can FIX THAT! The leagues figured it out when they created the Plexcity CUSO. Share back office services to gain economies of scale to avoid merger. Now if we could only apply that model to save credit unions……..