Author: Chip Filson

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What Can Be Done about the Drought of New Credit Union Charters?

There are financial deserts in towns and cities across America; there is also an absence of new credit union charters.

Since December of 2016, the number of federally insured credit unions has fallen from 5,785 to 4.780, at yearend 2022.  This is a decline of over 165 charters per year.  In this same six years, 14 new charters were granted.

Expanding FOM’s to “underserved areas” or opening an out of area credit union branch, is not the same solution as a locally inspired and managed charter.

Obtaining a new charter has never been more difficult for interested groups. Through its insurance approval, NCUA has final say on all new applications whether for a federal or state charter.

Today, credit union startups are as rare as __________ (you fill in the blank).

At this week’s GAC convention an NCUA board member announced the agency’s latest new chartering enhancement: the provisional charter phase.  This approach does not address the fundamental charter barriers.

Could an example from the movement’s history suggest a solution?

The Chartering Record of the First Federal Regulator

Looking at the record of Claude Orchard  demonstrates what is possible for an individual government leader.   He was the first federal administrator/regulator managing a new bureau within the Farm Credit Administration to create a federal credit union system.  He was recruited for this startup role by Roy Bergengren, who along with Edward Filene, founded the credit union movement.

The story of how and why he was chosen is told here.   Bergengren nominated Orchard because he had “the proper credit union spirit.” This had been demonstrated by his efforts to charter over 70 de novo state credit unions for his employer Amour.

Orchard accepted this government role in the middle of the depression using borrowed FCA staff.  The state chartered system was the only model of how to create a federal option.  That experience and belief in the mission is what  Orchard brought to this new role.

Unlike the banking and S&L industry there was no insurance fund for credit union shares/savings.   The coop model was based on self-help, self-financing and self-governance.  Self-starters provided the human and social (trust) capital; no minimum financial capital was needed.  Credit unions tapped into the quintessential American entrepreneurial spirit to help others.

Orchard’s critical tenure as the first federal regulator is described  in a special NCUA 50th Anniversary Report published in 1984:

“He emphasized organizing as much as supervision. ‘I think in general we tried in the beginning to avoid paperwork because it seemed to me like that was a waster of effort.  After all what we were out for was to get some charters and get some organizational work done.’

When Mr. Orchard stepped down in in 1953, federal credit unions numbered over 6,500.   During his 19 year he espoused a passionate belief in the ideals of creditunionism.  ‘It seems to me that we have here a tool. If it can be made to really be responsive and to really be, in the end, under the control of the members, it can teach people in this country something about democracy which could be taught in no other way.‘

Deane Gannon, his successor at the Bureau of Federal Credit Unions said to Mr. Orchard on the 30th anniversary of the Federal Credit Union Act, ‘If it hadn’t been for you none of us would be here to celebrate anything.‘”

That last observation echoes today.   How many charters will be left to celebrate the 100th anniversary of the FCU Act in 2034?

Alternatives  Are  Springing Up

For the credit union movement to remain relevant it will require modern day Claude Orchards. These are leaders who believe in creditunionism.  And possess the passion to encourage new entrants to join the movement.

Regulatory process or policy improvements may help.  But the real shortfall is leadership committed to expanding credit union options.

To address the continuing financial inequities throughout American communities, alternative solutions are being created.  Many of these startups are outside the purview of banking regulators.

These community focused lenders are listed in  Inclusiv’s 2022 CDFI Program Aware Book.  The firm introduces its role with these words:

Access to affordable financial products and services is a staple of economically sound communities. Yet at least one quarter of American households do not have bank accounts or rely on costly payday lenders and check-cashing outlets.

In recent years, the lack of access to capital investments for small businesses and other critical community development projects has also led to increased need for alternative and reliable sources of financing.

Mission-driven organizations called Community Development Financial Institutions–or CDFIs–fill these gaps by offering affordable financial products and services that meet the unique needs of economically underserved communities.

Through awards and trainings, the Community Development Financial Institutions Program (CDFI Program) invests in and builds the capacity of CDFIs, empowering them to grow, achieve organizational sustainability, and contribute to the revitalization of their communities.

Of the total $199.4 million awarded to 435 organizations, only 176 or 40% were to credit unions.  The rest of the field included 213 local loan funds, 43  banks and 3 venture capital firms.

Without credit union charters, alternative organizations will be created to serve individuals and their communities.   These lenders may not put credit unions out of business, but will  attract the entrepreneurs that would have  added critical momentum to the cooperative system.

Credit unions can qualify for CDFI status and grants.   But Inclusiv has a much broader vision for implementing Claude Orchard’s  playbook.

In their listing of 2022 total awards and grants, every amount of over $1.0 million went to an organization that was not a credit union.  A few were banks, but most were de novo local community lenders or venture capital firms.

Without credit union options, civic motivated entrepreneurs will seek other solutions, and slowly replace credit union’s role.

Today it is Inclusiv carrying out Orchard’s vision.

Should NCUA delegate its chartering function to those who have “the proper spirit” to secure credit unions’ future?

It will also result in “teaching people in this country something about democracy which could be taught in no other way.”

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  Whose Voices Should Shape SECU’s Future (Part III)

The author of a lengthy Business Journal article on SECU’s competing future visions wrote a brief follow up to his original story that began:

The North Carolina State Employees’ Credit Union is such an integral part of our state that it’s often taken for granted.

There’s nothing like it across the nation, I learned, while studying the $53 billion dollar enterprise for a story in the February Business North Carolina. In the ninth-most populous state, SECU dwarfs peers nationally other than the national Navy Federal Credit Union. . .SECU is a maverick.

When viewed in a broader context, this local controversy is more than competing approaches to a business model.

In many large credit unions today there is a growing distance between member priorities and institutional ambitions.  A number of credit union leaders aspire to an ever-expanding role in the financial services marketplace.  Organic growth is insufficient, too slow.  Executive strategies such as whole bank purchase and aggressive courting of merger partners everywhere are embraced, two initiatives often enabled by external sources of capital.

Members become merely the means to further institutional prominence.   The rhetoric continues about serving members, but often these expansion efforts  offer little or no member benefit.

There is a parallel example in current religious practice.  Some well-known and successful preachers promote faith with a vision of what is called the “prosperity gospel.”  It is little more than capitalism in ecclesiastical garments.   The equivalent happening in credit unions is full out banking strategies dressed in cooperative clothing.

There is a spreading “cooperative anemia” circulating in the credit union system.  Its basic symptom is the separation of institutional priorities from members well-being.

A Model that Transcends

The SECU which Jim Hayes joined as a leader in 2021 had been able to transcend these constant temptations to alter cooperative design into a proto-banking model.   Instead it became increasingly viewed as a “maverick” by credit unions.

The persons who invested most of their professional lives building this contrarian approach developed a certain stubbornness.  They both authored the effort and produced unprecedented results.  They continue to have a sense of stewardship, even as they become “just a member. “ As one writer has observed  “some of the best founders are difficult people.”

When institutional leadership is transferred to managers in today’s selfie world, there is an understandable perception that “me” is being put in front of membership.

A Path Forward: Investing in Members’ Ownership Responsibilities

Leadership of any institution is first and foremost a political task, not a business model problem. The concerns about changes in business direction, labelled “rumbles” by SECU staffer, have now morphed into public and opposing camps.

One side is represented by a person who self describes as “often wrong, but never in doubt.”  The other camp has retreated to their bunkers of incumbency, and adopted a tactic I call “brute legalism.”  This means “we’re in charge (with member approval), so we don’t have to accommodate contrary points of view.”

The coop process for resolving this debate is supposed to be democratic. An autocratic rejection of member concerns, may lead to increasing displays of public opposition.  It certainly makes CEO Jim Hayes’ leadership much harder.

If the separation of credit unions and member priorities is the core of the problem, then embracing the owners’ democratic engagement may be the solution.

Cooperative democracy is more than electing directors at the annual meeting.  Often this voting function has been reduced to an administrative formality as nominations by the incumbents just match the number of open seats.

Democracy depends on choice.  Real choice is more than putting more names on the ballot.  It requires continuous transparency, open communication, and ongoing dialogue with every internal and external level of the organization. This habit is more than press releases or marketing messages.

Cooperative democratic design is more than good governance, that is accountability to the owners. It is how trust and confidence in the leaders’ decisions are created.

The motions at the 85th Annual meeting were unusual but a proper exercise of member-owner rights. It has opened up conversations about decisions that have major member impact but little visibility.

Blaine’s motions were an act of courage and member duty.  He took the step of “walking to the front of the line” to find out who might be with him.  There is no more democratic act than members speaking out.

A Democratic Ampersand

Cooperative design is at its strongest when an ampersand is added to the member & owner role.  Otherwise the owners end up as being viewed as just customers.  Keep them satisfied, find more like them, and allow the “elected” leaders to shape the credit union’s future.

Many credit union managers believe they choose their members, especially encouraged by the regulatory concept of the common bond.  Nothing could be further from the truth.  It is the members who choose to join, support, or leave the coop.

In the American economy, it is called “consumer sovereignty.”

Member loyalty cannot be acquired in a merger or bank purchase.  That just cheapens any relationship.  Rather it is hard earned over generations.  When well done, the result creates the most important business and political advantage a movement could want.

A Public Purpose

Coop democracy is more than a process for accountability and acknowledging the owners’ roles.   It is core to credit union’s purpose.   That purpose is extending economic opportunity for all Americans, especially those at the mercy of for-profit providers.

Economic equality is vital to the continuation of the capitalist system. It is critical that all striving for financial security ( especially those living paycheck to paycheck) can have an institutional option that is fair and just, not discriminatory, in their transactions.

SECU’s board and leadership are in a unique moment for affirming the credit union’s continued commitment to furthering America’s promise of economic justice. This credit union will be fair to all who join SECU as members-owners.

Achieving that outcome will require more conversations and crafting additional business  options.  Without this effort member uncertainty and market forces will slowly erode the credit union’s position in its key markets and nationally.

A lesson from events to date is that sometimes it takes heading in the wrong direction in order to find the right one. Now is the time for SECU to make real the promises of coop democracy–in multiple ways.

No one has a monopoly on insight.  Being a maverick is tougher than jumping into the financial mainstream. Old and new members sitting down together offers a better chance of SECU sustaining its transcendent credit union performance.

As Robert Frost might counsel in the final verse of The Road Not Taken:

I shall be telling this with a sigh

Somewhere ages and ages hence:

Two roads diverged in a wood, and I—

I took the one less traveled by,

And that has made all the difference

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Differing Outlooks for SECU’s Future (Part II)

At the October 11, 2022 members’ Annual Meeting, SECU CEO Jim Hayes had been in his role since  August 2021. He arrived with 25 years of  senior credit union  and NCUA leadership experience.  He succeeded Mike Lord who in turn took over from  Jim Blaine in 2016.

All the persons involved were obviously  aware of Hayes’ “outsider” status. The hiring decision must have reflected a desire for a fresh look, and/or strategic change.

Here’s how SECU’s chief culture officer, Emma Hayes, explained the board’s choice in a talk to the AACUC conference in September 2022 in a CUToday report:

“We hired someone not only from outside the organization—there had never been for 85 years an external hire for CEO—but also someone who came from the wrong coast (the former Wescorp in San Dimas, Calif.) by way of somewhere up north (Andrews FCU in Maryland) to come down to North Carolina to lead the second-largest credit union,” explained Hayes, drawing laughs from the audience.  “The strategy for SECU for 85 years had been to grow talent from within. They had done that and done it well. Now they decided to open the organization and take a peek and see if there is someone out there.

‘Never Been Heard of Before’

“SECU runs like a well-oiled machine,” she continued. “But (Hayes) had new ideas for how to do things. One of the first things he did was send an email to all staff. In 85 years, no one who sat in that seat ever sent an all-staff email. In that email he says, ‘Let’s get rid of our ties.’ Imagine the shock and awe! Nobody believed this was real, like someone had hacked into his email address. We don’t take off our ties. We sleep in them. We go to the gym in them. It was unheard of! But Jim was like, ‘Let’s do something a little different.’ He then said, ‘I’d love to hear from you. Send me an email.’ People stared emailing him and he responded back. With his own hands he typed out messages! This also had never been heard of before!”

Shaking Things Up

The result, said Hayes, was word began to spread in the state of North Carolina where SECU is a highly visible and well-known brand that the new CEO was “shaking things up.”. . She said the changes created a “little rumble” within the organization and community.”

Those little rumbles culminated in the two resolutions , described yesterday, that members approved in the October 2022 Annual meeting

The 20 Credit Union Paladins (not a video game)

As of December 2022, twenty credit unions reported assets over $10 billion.  This threshold  subjects them to the scrutiny of the CFPB, reduces their debit card interchange, and includes special oversight by NCUA.

These twenty manage 23% of the industry’s assets, 24% of its loans and serve 23% of credit unions’ total reported 137 million members.  But they are just .4%  of all 4,495 credit union charters.

Their roles in the movement make them objects of emulation.  They are also, at times, examples of unveiled ambition.  Overseeing billions can sometimes lead to feelings of “cooperative triumphalism” and unlimited  growth aspirations.

Their business models vary widely.  Several have bought banks, sometimes more than one. Others have programs to acquired other credit unions across the country. Some have defined FOM’s; others say anyone can join.

Operating expense ratios vary widely:  Star One reported a 1.11% and Alaska USA 3.67% for 2022.  SECU’s was 2.16%.

SECU’s Rare Accomplishment

There are as many models in this group. However another factor distinguishes SECU’s performance.

There are state employee field of membership credit unions in almost every state.  These  charters share the same member economic profile of stable employment and a range of member demographics.  The motivations of state and local employees closely align with the not-for-profit service culture of credit unions.

But only SECU, the second largest credit union, achieved the market dominance serving this common employment group.

How Did SECU Become So Consequential?

SECU combined a unique strategy and culture which for some observers claim  is grounded in the 20th century.  It developed over decades.  The elements were highly  integrated and carefully chosen. Among the factors were these:

  • A limited North Carolina operational FOM with a branch in every county, and a statewide ATM network.
  • Branches were assigned local responsibility and accountability: for example, loan originations and collection, advisory boards for visibility in the community, local employment and personal service including routing member calls to their local branch;
  • A product and service profile that serves each member equally: same loan rate for all members (no tiered savings, no risk based pricing or indirect auto loans);
  • Staff receives only salaries, with no commissions or incentives for performance. Promote as much as possible from within.
  • Be low cost with a simple financial model: 3% net interest margin, 2% operating expense ratio and 1% ROA.  Minimize member fees.  No paid advertising.  Rely on word of mouth and the earned publicity from SECU’s Foundation grants.
  • Mortgage loans are the primary means for members to build financial security. 80% of SECU loans are first mortgages or real estate secured.
  • Provide a complete menu of low cost financial services beyond traditional consumer banking products. These include life insurance, a broker dealer for access to no load mutual funds at Vanguard, a 529 program open to all state residents, tax preparation,  trust services and even a CUSO for housing rehabilitation.
  • Avoid mergers; instead provide help to smaller or struggling credit unions.

The result was a no frills, plain vanilla product selection (no rewards cards) and long term member loyalty.  The focus was intentional—serve those demographic segments that have limited  financial choices. More simply, those that know the least or have the least.   Well to do members might find better loan or savings terms elsewhere.

By design SECU avoided imitating other financial providers.  Its purpose was to create a unique cooperative alternative for middle and low income Americans.  They wanted to avoid a strategy of becoming the competition to beat the competition.

The Issues Raised in the Annual Meeting

The six topics or business questions presented as the basis for the resolutions.

  1. SECU’s efforts to achieve an open field of membership.
  2. Merger discussions with Local Government Employees FCU, that would end a 40 year business partnership.
  3. Introducing risk-based lending for loans.
  4. Expanding business/ commercial lending.
  5. Elimination of the $75 per member tax preparation service.
  6. Regional expansion beyond North Carolina.

The full description of each topic is in the presentation. Blaine subsequently set up a web site blog which continues to expound on these points in almost daily posts.

Since the meeting, SECU has continued the ongoing implementation of the topics mentioned.

The tax preparation service has been discontinued.  Changes in loan administration are on going shifting responsibilities from branch to more centralized oversight. The volunteer, non-employee credit review committee is no more.

Recently Local Government FCU announced its decision to go on its own and dissolve their partnership with SECU.

The credit union continues its technology overhaul with a priority on digital services.

The issue dominating subsequent Blaine communications to the board is risk based lending. These multiple messages cite a number of studies showing the disparate impact of FICO score based loan pricing.

The credit union conducted a series of dialogues with staff and advisory board members.

 SECU’s December 2022 VisionPlan

Early in 2023 the credit union posted its  Strategic Plan, “Leading with Care” fulfilling the second resolution’s request.  It is 15 pages with four goal areas and key success factors.  The goals are generic, like many plans, and primarily descriptive.

It is well written.  Almost academic in structure. There is nothing controversial.  Many current public themes are included such as environmental awareness, DEIB, affordable housing and investing in staff.

If it had been available at the 2022 Annual Meeting, the presentations of the Chair and CEO would have been much enhanced.

The plan could be a prototype for almost any billion dollar credit union. There is no market analysis or history of prior trends.  No future financial projections were included.

The document has one statement referencing current events: Our commitment to embracing different perspectives creates the positive tension required to weigh business decisions and their potential outcomes.

It omits SECU’s traditional vision statement:  Send Us Your Moma.  And its former mission: Do the Right Thing.  It largely ignores  the policy issues raised in the Annual meeting such as a broader FOM and relationships with fellow credit unions.

The Plan presents settled decisions, such as  the ongoing implementation of RBL, without any explanation of how this benefits members.

An Earnestness of Views

How do these different judgments about business strategy get resolved– Blaine’s dominating logical critiques versus incumbents’ asserting the power of position.

Continued public debate will cause cleavages in the 7,800 employees, and among  advisory board volunteers,  directors, and ultimately members. The credit union’s financial and market momentum could falter.

The internal dynamics of SECU’s decisions are unknown. Had the board a plan ready and then tell Hayes to move quickly? Or did he understand his remit as move fast and address priorities as he assessed them?  Whatever the circumstances, did it consider the “wisdom of elders” as the plan was developed?

Or, is the fundamental difference in approach elsewhere? The new Plan states: “As a financial cooperative, we take to heart that prudent stewardship of our member’s money is of utmost priority.”   Is that all a financial cooperative is about?

Can a solution or process accommodate both points of view?   That’s the subject of tomorrow’s post.

 

 

 

 

 

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Democratic Disruption at SECU’s 85th Annual Meeting

SECU’s October 11, 2022 annual meeting was a rare example of democratic cooperative governance.

Following the traditional annual meeting agenda, approval of minutes, the Chair’s report, election of directors, audit summary and President/CEO Jim Hayes’ update,  the Chair asked if there was any new business.

There was.

A member-owner presentation proposed two resolutions for the members to discuss and vote upon.

The first asked the Board to consult with staff and advisory board members to learn how six  changes he described would benefit the member-owners.  The dialogues should  be published for all members.

The second requested the board provide members SECU’s Strategic Plan at least 90 days prior to the 2023 Annual Meeting.

The chair asked  for comments.  One volunteer advisory board member said he had heard nothing about the topics raised.   A second member commented that he didn’t want the credit union “to become a Piedmont Airline.”  (merged out of business).  A current director spoke up supporting the second motion.

Both resolutions were approved by the approximately 1,000 members, with virtually no opposition.

The meeting was broadcast live on YouTube.  Here are the timing of key events: 29:50 Chair report; 54: Foundation update; 1:05 CEO Hayes report; 1:21 Call for new business with two resolutions at 1:48 with open discussion and member vote.

Should Credit Unions Care about SECU’s Debate of its future?

SECU at $51 billion is America’s second largest credit union. Its membership covers an estimated 25% of North Carolina’s population.

This event was covered in  a lengthy NC Business article and  in the North Carolina’s Banking Association’s weekly update.

SECU’s success and size extends far beyond its members or its home state.  It’s a model others study. It has an outsized influence in both state and national credit union organizations.

SECU’s leaders’ duties are more than managing a business.  The credit union has a position of influence and power beyond its balance sheet.  Its actions will be viewed by outsiders, the public and competitors, as an example of what a credit union is capable of becoming.

SECU’s reputation and widespread operating network means its choices are followed  by many in the cooperative movement as an example of credit union competence.

Blaming the Messenger

As events unfold, many observers will have opinions. Some, I believe,  will reflect  a capacity for missing the point. It will be framed as a conflict between a current and a former CEO as in the following LinkedIn comment:

As I read this article, I was saddened that a CEO who has retired and handed off the reins goes public when the new leadership makes strategic moves, and the retired CEO disagrees. This willingness to fight the new leadership’s right to make strategic decisions is wrong on too many levels.

This happened recently at SECU when Jim Blaine disrupted the annual meeting with a lengthy letter he read in totality because he was against the strategic direction the new leadership was taking the credit union. CEOs need to realize that when they step away, it is now someone else’s turn to lead forward. #ceo #leadership #retired

This is a position with which many CEO’s would sympathize. It absolves commenters from examining the issues raised.   But I believe this position is far too shallow.  Here’s why.

Very few member-owners would be capable of preparing the in-depth analysis of this presentation. But this was not a solo effort. In his opening Blaine comments there had been widespread concern from both employees and members about SECU’s apparent changes of direction and culture.

When individuals working in or interacting with an organization believe it to be going “off course” counsel will be sought from former leaders.   In the corporate world  this approach is shown by examples such as Disney, Starbucks and Apple where there were call outs to prior leaders.

When credit union members and employees are deeply concerned about  an event such as the mergers of Cornerstone FCU in Carlisle PA or Vermont State Employees, they reach out to former leaders. What do you think?  Will you help?

Former leaders are not one-person shows.  They understand the politics of leadership.  Any public role is carefully considered.

They become the messenger and therefore the face for larger issues.  Their previous roles give credibility to the concerns whereas an individual employee, member, director, vendor or credit union collaborator would not have the standing to raise.

Raising questions about  a strategic pivot in a “courteous and respectful manner” at the owners’ annual meeting is a vital process for cooperative governance.

An Example of Coop Democracy

This required annual meeting is a critical process for democratic cooperative governance.  It is the opportunity for the board (chair) and CEO to inform members where the credit union is heading, the reasons for change, and how it will affect them.

After outlining six new policy or business initiatives, Blaine closed with two summary questions: Who are we? Where are you leading us? 

Those are questions every CEO and board should be willing to answer for their member-owners.

Tomorrow I will summarize the issues raised, the credit union’s responses, and how SECU aligns with the nineteen other credit unions over $10 billion in assets.

 

 

 

 

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A Prayer, Photos and The Kiev Independent

The day of the Allied landings in France, June 6, 1944 FDR gave a prayer via radio for the country.

This six minute “devotion” is especially pertinent  on the anniversary of Russia’s invasion of Ukraine, as when it was first spoken in 1944.

Roosevelt talks of sacrifices and “pain, sorrow, faith and unity.”  He expresses everyone’s  longings and hopes for victory and peace. It is a prayer proper in any war and especially this day.

(https://www.youtube.com/watch?v=a2IRcc-5RgA)

Why Ukraine Will Succeed

Love endures: Valentine’s Day 2023 Ukraine

The Next Generation Arrives: A Mother and Newborn in a Basement Maternity Room-Kiev

War’s Playground Today & for Tomorrow’s Peace

The Story of a New Journal: The Kiev Independent

This 29 minute video presents  the critical role this online English language startup has played in telling about events in Ukraine.  It includes reporters’ personal stories and presents videos of their on site coverage.  This is one of many new Ukrainian enterprises to support the country in this time of trial.

(https://www.youtube.com/watchv=MxQ3JxJwdX0)

 

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A Return of $250 for Each $1 Invested

I recently received the best return ever on an investment: $250 in value for each $1 sent.

Late last year I read about a 501 C3 nonprofit (RPI Medical Debt) that bought unpayable medical debt using  donations and then retiring all the acquired debt for consumers.  Several news articles gave details about churches and local governments using this method to help members of their communities.

A December 20, 2022 New York Times’ article Erasing Medical Debt described how the program had extended to major cities such as Chicago and Pittsburgh.  The story stated that 18% of Americans have medical debt turned over to a collection agency.

I decided to test the RPI Medical Debt’s concept.   Was the payoff “leverage” as great as claimed? The 100 to 1 debt abolishment standard sounded too good to be true.

I also wanted to learn how targeted the program could be as a potential initiative for credit unions. Credit unions are significant originators of consumer debt.  They know how past due delinquencies on a credit report can undermine anyone’s financial options.

Contacting RPI Medical Debt, I asked to purchase and cancel all debt from Jasper County IN, whose county seat is Rensselaer.   Our family lived there for over five years while I was in high school.  The town is primarily a farming community, neither wealthy nor poor, but one where the population today is the same as when we were there 60 years earlier.

The Debt Fulfillment Report

Based on my pledge commitment, RPI retired all the available outstanding delinquent medical debt for 423 residents of Jasper Country totaling $264,878.  They had no more access to debt available in the country right then, although more debt certainly exists.

However, with the funds remaining the non-;profit acquired debt from at least one resident in every Indiana county.   The total consumers helped were 2,291 with over $2.532 millions of their debt erased.

RPI had acquired the debt for less than a penny on the dollar.  The total accounts closed (not individuals served) was 4,396.  Of these 9.3% (409) were bought directly from hospitals.  The balance was from the secondary debt market.

Much of the debt (86%) was 5 to 10 years old– specifically 1,812 accounts with balances of $1.9 million.  Only 1.8% of the debt was less than five years;  1.2% of the debt had originated over 20 or more years earlier.

The average debt extinguished had a face value of $846. For me, an overwhelming proof of concept!  A financial “loaves and fishes” story.

The Consumer ‘s Experience

Consumers cannot apply to RPI for relief.  Rather the non-profit seeks to buy debt in the open market on behalf of funders who donate or make pledges to support their goal of abolishing medical debt for individuals and families burdened by the payments.

To qualify a “soft credit report” is run to determine each individual’s eligibility for relief.  Potential  portfolios are  prescreened by holders to identify those who qualify for  abolishment of debt.    A person must earn less than four times the local poverty level  (nationally an amount of  $111,000 for a family of four) or have debt that exceeds 5% of annual income determined by pulling a soft credit report.

With these qualifications, the debt is excluded from income and not subject to IRS taxation.  The transaction is considered an act of charity by donors who support RIP’s mission.

Each consumer is sent a letter announcing the relief.  The total debt abolished, number of accounts and  creditor are identified.

The “good news” letter says there are no strings attached and  encloses a  page of FAQs  to answer  questions.   Recipients may, but are not required, to share their story about what this relief means to their circumstances.

The RIP Organization: People helping People

This nonprofit was founded in 2014 with a threefold mission:

  • Initiate a high volume of debt relief to reduce financial and mental stress for individuals;
  • Offer health care providers a way to strengthen their communities;
  • Highlight the problems of medical debt to seek a more affordable and transparent health care system.

Since inception the firm has provided $8.5 billion of debt relief helping 5,493,000 individuals and families.

The Credit Union Opportunity

The immediate possibility is straight forward: strengthen members of their primary communities by offering to retire consumers medical debt. When fulfillment data are known, celebrate the relief impact.  Invite  consumers to learn more about another people-helping-people organization, the credit union.

Such an effort is a “win” on many levels:  for the consumer, the credit union, the community and even medical providers with outstanding debt.

If interested  contact RIP Medical Debt and make a pledge for a test project.    I would be glad to share my contact and the reports and information I received.  My project was completed in under 45 days from initial contact  to finish.

Credit Unions Ringside

As vital consumer lenders credit unions are at ringside knowing the debt burdens members carry.

Three days ago a Washington Post article reported the story of a 72year old still struggling to pay off his $5,000 student debt from the 1970’s.  This is just one area where a similar approach for  relief may be prudent and desirable.  An example from the article reported:

Years of administrative failures and poorly designed programs have denied many borrowers an off-ramp from a perpetual cycle of debt.

There are nearly 47,000 people like Hamilton who have been in repayment on their federal student loans for at least 40 years, according to data obtained from the Education Department. . . About 82 percent of them are in default on their loans, meaning they haven’t made a voluntary payment in at least 270 days. . . 

The Supreme Court will shortly hear a challenge to the Biden administration’s efforts to forgive up to $20,000 per borrower in federal student loans. The Court many not allow the initiative to proceed.

Why not design a program similar to RIP Medical Debt and approach the Department of Education about purchasing the loans with the intent of  extinguishing them?

Credit unions would  be helping resolve the financial and mental stress of longstanding student debt for eligible borrowers (to be defined).   Even at a penny or two on the dollar, the government would be receiving more versus 100% forgiveness.

The program could be targeted where relief is most needed.   It could happen fast.  A  “scholarship-in-reverse” plan  where college debt continues to burden individual’s lives.

Can the cooperative movement demonstrate their collaborative entrepreneurial capacity and address a critical public need?

Two final data points from the Post article on student debt:

From the time student loan borrowers’ first loans enter repayment, the median length of time it takes to pay in full is 15½ years. .  . Federal student loans are discharged upon death.  

Must individuals wait till death for common sense relief?

 

 

 

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Ash Wednesday

Lent commences.

When placing the mark of the cross with ashes on the forehead, the minister states: You were formed from dust, and to dust you shall return.

A journey all life follows.

 

 

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Stories That Made Us

The stories we tell, define who we are.   They preserve those moments in life that we value.  For organizations they communicate the culture.  For a country, they express its collective national aspirations.

Two of the brief stories below are from CEO Tim Mislanky’s monthly staff update for Wright-Patt Credit Union.  They honor the credit union’s commitment to service, its foundational value.

The third is an account of a father’s efforts to respond to segregation  an ever present legacy in their community.

These accounts are not mere history.  Rather they give meaning to life today. As you read, ask what story might you tell about your efforts?

A Greyhound Bus Trip to the Credit Union

A WPCU member, who is also ex-military, took a Greyhound bus from Cleveland to Columbus for a close reopen account. She is advanced in years so she could not do it online. She arrived at Graceland at 5pm and we had appointments till close at 5:00 PM.  Stacy Davison was the only financial coach for the remaining workday. Stacie gladly stayed to be sure that our member was taken care of.

Through the close reopen process,  Stacie found out that our member came all the way from Cleveland via the bus and hoped to get a bus back to Cleveland that same night. Stacie got online to try and help our member find a bus schedule to Cleveland, but there were no buses available until the next day.

Our member was then going to take a public transportation to a homeless shelter to stay the night. She had brought her dinner and breakfast with her to be prepared if she had to stay overnight.

It was dark and unsafe for our member, so Stacie told the member she would take her to the shelter. Stacie looked online to see if the Holiday Inn had a room, so she could pay for our member to stay the night in comfort, they did not, and the member would not let her do that. Stacie offered to drive her back to Cleveland, but the member declined.

On the way to the shelter Stacie tried to buy her a hot dinner, but the member said “I will eat what I brought from home.” The member said the shelter served dinner, so she could eat there also.

Manager’s comment: This is an example of going above and beyond for our member and, a great example of a servant’s heart.

One Hot Dog Per Day

Heidi recently worked with a member who shared personal details with her about how she was having financial difficulties and surviving on eating one hot dog per day. The member was having extreme difficulty being able to afford food in her home. Heidi went into action and found information about area food banks that she shared with the member.

A week or two later, the member returned to the member center. She told Heidi (while crying) that Heidi gathering those resources and sharing them with her was “life changing.” The member said that she was able to contact two food banks, and that both were able to provide food to her. She also shared with Heidi that she has now also secured a temporary part time job.

Manager’s Note: Because of Heidi’s work, we are developing a guide about food banks and area resources that can be shared with members.

Picking Up the Minister’s Food Tray

A family story prompted by yesterday’s post about Springfield, Illinois and integration in the 1960’s.

My father, editor of the afternoon daily in a small city in the mid-Ohio Valley (population about 40,000), was about the same time fighting an uphill battle to change the status quo there. He spoke out a lot in his editorials and made himself unpopular with a certain type of citizen.

Sometimes the telephone would ring during dinner and my father would slip away and answer. “Who was it this time?” my mother would ask. “Oh, just another one of my sidewalk editors,” he’d say. But actually, some of them were calling to threaten him—and us. He didn’t stop promoting integration in schools and businesses and elsewhere. 

As a ruling elder in the First Presbyterian Church he was hastily summoned to the church narthex one hot and un-air-conditioned summer morning where he weighed in successfully in an off-the-cuff decision to let a neatly hatted and gloved black woman stay for the church service.  

A visitor from Texas, she had just come in and sat down in a pew causing a flurry of concern especially with another ruling elder who came to my father and said: “What shall we do?”  No black person was thought to have darkened the church door before. There were supposedly only about 50 black families in the city and they had their own churches. Thankfully, nothing happened to the visitor and she worshipped unbothered along with the rest of us. But that kind of acceptance only went so far. 

I remember well my father’s repeated consternation about a popular downtown cafeteria where the local Brotherhood Committee met regularly to plan interfaith events designed to promote tolerance and understanding.  The Rev. Preston Smith, a loved and respected pastor of one of the local black churches was the only person of color on this committee that included a representative of the tiny Jewish community and Father O’Reilly of St. Xavier’s downtown catholic church.

Everyone except Rev. Smith went through the line and got his food, but someone else had to fill a tray for him and take it to the back room where the meeting was held. My father finally challenged the cafeteria’s owner: “Bill, why won’t you serve Preston just like the rest of us?” 

 “I’d like to. I really would, but I just can’t. It would ruin my business; people wouldn’t come. I’d lose everything.”  

Some years later, the cafeteria closed for other reasons. I still have a brass plaque of the Brotherhood Award from 1968  engraved to my father for “Distinguished Service in Human Relations” presented by the local chapter of the National Council of Christians and Jews.

 

 

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Abraham Lincoln,  Springfield, Illinois & Race

Most people familiar with Lincoln’s life, know that he left his home in Springfield,  Illinois, to become President.  To never return.

Springfield is proud to claim Lincoln’s heritage, his home, the Old Statehouse, and his final resting place at Oak Ridge Cemetery.

But there is another side to Springfield’s story; one that frankly I was not aware of when I graduated from Springfield High in 1962.

Here is how the historian Heather Cox Richardson describes this dark moment in her February 12, 2023,  blog which helped spur the founding of the NAACP:

“On February 12, 1809, Abraham Lincoln was born in Kentucky. Exactly 100 years later, journalists, reformers, and scholars meeting in New York City deliberately chose the anniversary of his birth as the starting point for the National Association for the Advancement of Colored People (NAACP). . .

“The spark for the organization of the NAACP was a race riot in Springfield, Illinois, on August 14 and 15, 1908. The violence broke out after the sheriff transferred two Black prisoners, one accused of murder and another of rape, to a different town out of concern for their safety. 

“Furious that they had been prevented from vengeance against the accused, a mob of white townspeople looted businesses and burned homes in Springfield’s Black neighborhood. They lynched two Black men and ran most of the Black population out of town. At least eight people died, more than 70 were injured, and at least $3 million of damage in today’s money was done before 3,700 state militia troops quelled the riot.

“When he and his wife visited Springfield days later, journalist William English Walling found white citizens outraged that their Black neighbors had forgotten ‘their place.’ Walling claimed he had heard a dozen times: ‘Why, [they] came to think they were as good as we are!’ ” 

A  fuller  historical account can be found here.

Springfield in the 1960’s

In 1965 a minister from Springfield answered the NAACP’s call to join Martin Luther King’s March from Selma, AL to  Montgomery after the bloody Sunday attack on marchers the prior week.

His oldest daughter recalls:  I remember mom was scared for dad to go to Selma. Dad said he could feel the hate coming from some of the houses along the route. 

By 1967, the minister’s family had grown to eight children, two by adoption.  In Springfield, there were few public swimming pools, so neighborhoods banded together to form private swim clubs.  The Surf Club, where the family had gone previous summers, asked that they not return because  their newest adopted daughter named Darlene was black.

After talks and prospects of legal action, the family was allowed back on “a trial basis.”  Here are excerpts from two letters he wrote to supporters after the club lifted their prohibition.

July 28, 1967 letter:

“We got to swim for the first-time last Tuesday.  The kids were so excited about getting to swim with their friends again.  Hardly anybody noticed that we were there—which is the way we said it would be.  About 85 members had signed a petition gotten up on their own requesting the management let the whole family swim.   I’m sure that helped in the negotiations.

“We feel that the manager is unhappy that his attorney urged him to give in- a ‘trial basis. This morning I had a half hour conversation with one of the members who wanted to know what we were trying to do.  She found it hard to rebut when we said, ‘for our family to swim there just like yours’—but she kept trying.”

To another supporter on August 3, 1967, he wrote:   “The good news, the happy news, the soul-satisfying news, the family all began swimming at the first club two weeks ago.  No one paid much attention which is the way we said it would be.  The kids were delighted to get to be swimming with all their friends.  Darlene thinks it is ‘real nice’ and doesn’t’ seem to quite understand all that had been going on. . .

“We now have some understanding how our Negro brethren feel when they are denied their full rights. It was quite encouraging to us to have so many people concerned about the outcome. . .”

Even in Springfield

The founders of the NAACP issued a call for support in a 1909 letter  which included these words:

“Added to this, the spread of lawless attacks upon the negro, North, South and West—even in the Springfield made famous by Lincoln. . .could not but shock the author of the sentiment that ‘government of the people, by the people, for the people shall not perish from the earth.’”

Springfield continues like the rest of America to learn how the past still carries over mistakes, injustice and attitudes into the present.

Sometimes change happens in small ways, just one person, one lifted ban in a summer of growing national turmoil.   But these seemingly small, discrete good acts can often inspire future generations.

The family later that year.  “They didn’t say anything when our Chinese daughter came to the pool.”

This example lives on because Darlene is my sister.  The minister was my dad.

Post script:  These are comments from Darlene and my brother after this blog was published.

Darlene:  It’s so nice to read the quotes from the Surf Club communications.  I actually understood what was happening.  I heard or overheard conversations regarding it. Whispering wasn’t a strong suit of the household back then.

I remember Mom being a member of the Urban League Guild and going to a potluck with her realizing I wasn’t the only black person but noticed she was the only white person. I thought it was neat for her to be a part of a black group!

Roy-younger brother:

I recall that we had to sue or threaten to sue, to get back into the Surf Club – the public pool was too far away on the north side of Springfield for us to ride our bikes there safely.  Mom was active in the NAACP but do not know if she was a member.

Dad was one of the pastors who answered Dr. King’s call for pastors, priests, and Rabbis to join the march on Selma. We were glued in front of the TV watching news reports at the bridge because Mom was very scared for his safety.

When he got back Dad said that stuff was thrown at them but that the march leaders kept the marchers singing hymns and other songs.  Dad said it was sheer genius.  You could not sing and get so angry or too scared all at the same time, which prevented marchers from being tempted to retaliate.

In the late 1930’s when Dad was a student at the U of IL Champaign-Urbana, he was involved in civil rights protests  with organizations that refused to serve black U of I students.

When the local Catholic Church (Rensselaer, IN) brought over a family from Holland after a dike broke, Dad wanted to do something similar but his church would not do anything.

Charen encouraged us to adopt 2 boys from Hong Kong, but boys were not abandoned unless disabled in some way. So instead we adopted an abandoned girl who arrived speaking with a British accent and  a British vocabulary.  She had lived for a few months with a British family as foster parents so she could learn English, but British English.

When Gay was adopted, she was front page news in the Rensselaer Republican newspaper which all four of us delivered.  For the last day of school – which was just two hours to get report cards, I took Gay to meet the kids. She went to other classrooms with other younger Filson siblings also.