Category: Co-ops in Capitalism

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Leadership: Woven from a Different Fabric

(from Jim Blaine)

It’s a bit difficult to explain to folks who never met him, what “a force of nature” Ed Callahan was as a person. 

 He had an unusual instinct for listening to difficult issues, considering alternatives and options, and then “cutting to the chase”- clearly, decisively, on-point.


When leaving his position as NCUA Chair in 1984, he wrote a “Farewell Address” to President Regan about his view of the credit union movement. 

For those looking for a defense against unnecessary taxation, a rebuke against inept and intrusive regulation, or a simple, concise statement of the hope and promise of “the credit union alternative”, Ed Callahan’s message still rings true:

“The only threat to credit unions is the bureaucratic tendency to treat them, for convenience sake, the same as banks and savings and loans.  This is a mistake, for they are made of a different fabric.  It is a fabric woven tightly by thousands of volunteers, sponsoring companies, credit union organizations and NCUA – all working together.”

“Credit union boards of directors have made, and will continue to make, individual and collective decisions from their vantage point on the front lines of the marketplace.”

“When left alone, they return to what they do best; providing basic financial services to their members on the most convenient and cost-effective terms possible.”

Credit Unions: Woven From A Different Fabric.

(Originally published July 2013)

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Abraham Lincoln and the Challenge Facing the Credit Union Cooperative Movement

In the Gettysburg Address Lincoln summarized the ever-present challenge of keeping alive the spirit of a  revolution’s  original intent.

Dr. Eva Braun’s essay describes Lincoln’s grasp of the declining motivation of later followers in his Gettysburg speech:

From Dr. Braun’s  analysis: Lincoln begins, “Four score and seven years ago.” “Four score,” With its long oh’s, sounds a more mournful, solemn note than could the words “eighty-seven years,” but the choice of the phrase is not only a matter of sound; it also carries a special meaning. It is the language of the Bible, as in Psalm 90:10:

The days of our years are threescore years and ten; and if by reason of strength they be fourscore years, yet is their strength labour and sorrow; for it is soon cut off, and we fly away.

With the psalm in mind the phrase implies: just beyond the memory of anyone now alive, too long ago for living memory.

Now, we know that from youth on Lincoln was concerned with a peculiarly American danger: the death of sound political passion. In his speech on “The Perpetuation of our Political Institutions,” of 1838, Lincoln drew a clear parallel with the early community of Christians, whose danger lay in the fact that the generation of disciples and eye-witnesses had been followed by a second generation which had only heard by word of mouth, by a third which had only read of Christ, and by a fourth which had begun to forget.

So in the American community; the scenes of the revolution, he said, “cannot be so universally known, nor so vividly felt, as they were by the generation just gone to rest.”  The men who had seen the Revolution, who were its “living history” are now gone.

“Beginning to Forget”  A Peculiarly American Habit

Remembering the contributions of earlier credit union founders is vital. Last week Jim Blaine described the legacy of Ralph Swoboda. As CUNA General Counsel and then President, he helped transform the movement through two system-wide challenges: business modernization and deregulation.

While leading NCUA in the early 1980’s, Ed Callahan and Bucky Sebastian in their presentations promoting deregulation would cite the original practice of common bond going back to the early years of state chartering.   They pointed out that some of the first fields of membership were often city-wide.  The intent was to be inclusive, not limiting,  for those who sought a cooperative financial choice.

But this reference to the spirit of the cooperative founders, where purpose surmounted existential challenges, can  dissipate as the “living history” passes on.

We cannot resurrect those who have left the playing field. But we can certainly rekindle passion for member advocacy in all its cooperative possibilities.   And in the process keep the “movement” alive.

The Current Challenge

When a motivated popular movement aligns itself with another cause to promote its  agenda, the hybrid effort can pervert its primary purpose.

An example is the tying of Christian nationalism with white nationalism.  Christianity becomes less about faith and more about political power.

A parallel confluence of activity is occurring in credit unions.  Since the imposition of PCA in 1998 through the Credit Union Membership Access Act, NCUA has increasingly equated credit union oversight  with banking practice.

The latest effort is the imposition of RBC/CCULR completely incorporating the full bank regulation in its rule. This embrace of banking models, a frequent standard cited by Chairman Harper, also includes the promotion of external capital.  It neglects the unique capabilities of cooperative design.

Collaborative institutions include the CLF and NCUSIF, both under NCUA management. CLF’s role is moribund.  As for the NCUSIF, NCUA has converted the insurer into an open-ended funding draw for the agency’s daily operations.

Another example of cooperative diminution is NCUA’s lockdown of the corporate network, especially its services for smaller credit unions.

Credit unions have read the regulatory signals.  “Treat us like banks, and we will follow that industry’s lead.”  Mergers, not collaboration, become a priority growth strategy.  Bank purchases, paying premiums to bank owners with credit union member capital, is promoted as an immediate expansion opportunity. In other words, “If we can’t beat ‘em, let’s just buy ‘em.”

The regulators are silent. As long as credit unions’ financials mirror bank’s, everything is OK.  Mergers, bank purchases and novel (SPAC) growth tactics are just the free market at work. Even when a CEO and Chair transfer $10 million of members’ funds to their control following a merger.

Let me be clear that these are not the actions of the majority of credit unions, but they  dominate the headlines.

Losing Faith

The credit union system’s unique capacities are simplified to  safety and soundness, defined by ROA and net worth with a dollop of growth thrown in.  Purpose becomes dressed as creative public relations campaigns and promotional branding efforts.

An example of this waywardness is VyStar Credit Union.  A member forwarded their most recent assessment of its recent flawed digital channel conversion:

In regards to VyStar, we have decided to move our account to another credit union.

Facebook posts (https://www.facebook.com/VyStarCU) have certainly slowed down.  I do not know if it is due to apathy or is X number of people who have just gone to other financial  institutions.

Login online has greatly improved.  There is little to no wait time.

They updated the mobile app on June 26th.  Many people had difficulty getting on the app, especially the android version.  

Getting a hold of someone in customer service is very difficult at best.  Very long wait times on the phone (in excess of two hours).  You can log into chat, I had almost an hour wait the other day.  While they have now added internal transfers, you still cannot do member to member (linked account) transfers (like to other family members).  You can only transfer funds internally within your savings, checking, MMA, etc.  

You still cannot see any account history prior to 05/13/2020 which was the day they shut down the system they used prior to the current one.  

You no longer get copies of your checks written online as before.  

I see no “Improvements” or new features in the new system whatsoever.  The new bill pay is cumbersome and not user friendly.  I filled in the bill payees into our new credit union with ease, it is almost exactly what  we used to have at VyStar before this poor unsatisfactory installation.  

Lastly, and most disappointingly, is the fact that the CEO has still not addressed the members directly.  I know of no statement to the press since about May 23rd.

I have no idea how many members have left and I am not sure we will ever know.  I hate leaving but, I have lost faith in them.

A Two-Way Street

The fundamental flaw in VyStar’s strategy is not a bungled conversion.  Many conversions have temporary problems.   Rather it is VyStar’s strategy that credit union membership is a one-way street.   Members just transact and are viewed as customers, not owners.  There is no respect for members’ “faith” which is the primary foundation for any credit union’s long-term success.

A two-way street means the owner’s role is understood, honored and continually enhanced.  The primary means  is seeking to expand the multiple ways value is created for members, especially those who have the least or know the least.

A Member Advocate

The credit union model is foremost an advocate for members’ well-being.   That was the original intent.

The vibe at VyStar is all about the institution and its size. This is a sentence from an April 2022 merger announcement before the digital debacle:  VyStar, which has more than 800,000 members and over $12 billion in assets, will remain the 14th-largest credit union in the country by asset size.

When the member relationship is always front and center, the owners return much more than transactions.  They give their loyalty, patience when necessary, and word of mouth endorsements with friends and family.

That was how the credit union movement achieved their current $2.3 trillion position while serving the fourth or fifth generation of members.   Members’ contributions are paid forward to benefit future members.

For the founding members’ spirit of purpose to prevail, it must  be constantly renewed in the words and actions of those leading cooperative charters now.

 

 

 

 

 

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Credit Unions and Small Town America

(This is an observation based on three previous write-ups about my 60th high school reunion.)

My reunion visit to Rensselaer, IN (pop.6,000) had some surprises beyond the high school alumni gathering.

Ten years before (2012), the town’s main street seemed in decline.  New school buildings, a strip mall with a Walmart and several assembly/distribution  plants were located on the outskirts, not in town.

In 2017  St. Joseph College closed due to financial shortfalls.  The college served as the creative ying to the farming yang of the community.  What could replace this intellectual and institutional resource?

The Changed Environment-Ten years Later

At the Rensselaer City Council’s June 21st meeting a presentation was made from a firm which specializes in attracting  new residents to smaller communities to support economic development.  This is  from  the Rensselaer blogspot report of that proposal:

A company called MakeMyMove gave a lengthy presentation to the Council. The company, based in Indianapolis, is a marketplace that connects communities with workers who work remotely. So far this year they have helped 14 Indiana communities with 52 relocations with 59 others being processed. The idea is that a community pays MakeMyMove about $35,000 to prepare a marketing package and a listing on their site. The community also prepares an incentive package that usually includes funds for relocation.

The State of Indiana has funds that might be used to help a community with these costs. Some members of the Council were intrigued with the idea but others had reservations about the cost and whether Rensselaer would compare well with the other communities using the service, all of which were bigger than Rensselaer.

The community that was given as a comparison was Greensburg, which is about twice our size. The proposal was taken under advisement, and what happens next is unclear.

The National Movement to Smaller Communities

At the same moment the Wall Street Journal published a story with a similar theme: Rural Counties are Booming, But Can it Last?

The article pointed out that pre-pandemic, rural areas were growing slower and losing population compared to larger towns and  cities.  Those trends have now reversed for a number of small towns as related in the article:

  • Rural counties saw a net gain in population in the twelve months ending June 2021;
  • Remote work possibilities were an important driver of these relocations;
  • Job postings in rural areas increased 52% in the three years ending 2021;
  • Wages were growing faster in rural (6.3%) versus urban (5.7%) areas  in the same three years;
  • Housing is much more affordable in smaller towns;
  • Persons appreciate being part of a tight knit community and still live within commuting distance of bigger cities.

My brief visit to Rensselaer supported many of these advantages.   As shown in my earlier posts, wages are high and workers in short supply.   There are new businesses opening and investment in older ones.

Here are two examples: a new brewery begun in 2017 and since expanded, and continued local ownership of the Ritz Theater first opened in 1925.

The local owner even works the snack and ticket line before the show starts.

The economy is becoming more diversified with new services opening including health care, retirement living, Walmart and new restaurants.    Rensselaer also has three radio stations, two country and one classic rock.

Even though St. Joe college is closed, there are continuous efforts to use the buildings and campus for further education.

The public mural project is an example of a town going through a unique transformation that brings visibility and fresh thinking to visitors and residents.

Rensselaer is driving distant from three major cities, Lafayette (with Purdue University), Indianapolis and Chicago.   The town continues to invest in public infrastructure and new government funded buildings such as the National Guard base, fire station and a government business office.

Credit Unions and Community Transitions: A Home Court Advantage

The origins of credit unions were common bonds, that is people who had pre-exiting relationships  that could  be the basis for pooling  funds to help fellow members.

This  “community” feeling is generally stronger in smaller towns and in rural areas which should make these a natural fit for a credit union, what might be called a home court advantage.

To succeed in these markets will require the same commitment, patience and creativity to support their transformation that  local leaders are providing.  Smaller size is an advantage in smaller markets.

Action Steps

Find out if there are Rensselaer kinds of opportunity in the areas you serve.   To grow larger, most people believe that an organization should seek out bigger markets.  In fact the opposite may be true.

Rensselaer’s five bank branches have an asset base of almost $400 million.  A 6-8% market share of the town’s deposits would be a healthy branch or in some cases support a standalone operation.   Once established, growing that share from out of area bank branches should be possible.

Almost  every state has many more Rensselaers needing credit unions than there will be big city options such as Indianapolis, Gary, South Bends and Evansvilles.

For a number of these smaller markets the quality of life, the cost of living and the opportunity to make a difference will make them an ideal fit for lasting impact with a cooperative charter.

As the sign in the jewelry store said:  Shop local, Buy local. 

 

 

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A VyStar’s Member’s Voice: Loyalty or Naïve?

A reader found my post on VyStar while searching the Internet for information.  Greg gave me permission to publish his experience.

Mr. Filson,

I just thought I’s share a few things with you concerning VyStar Credit Union (VSCU). As you are aware, they have been having trouble getting their “new improved” online banking system and mobile app back up and running. There are four things in this process that are very frustrating:

1. The CEO stated that this system was two years in the making and when they brought it up, the system was overwhelmed. What!? Two years of work have brought VSCU to it knees in a weekend. Didn’t they learn anything from the “new system” they employed in 2016? Did they not think that people would ‘Log On’ in the new system, even if they had no immediate banking need just to ‘see’ what the new features would be?

2. The mobile app (prior to the current debacle) was actually two apps. You had your normal banking app and a card control app. The card control app was a great feature. You could limit the amount to be charged or withdrawn but the greatest feature was you could turn your card on and off. With the card off, no transaction could occur at all. Well, my debit card is turned off. I can’t get cash withdrawals.

3. Transfers and linked accounts. For a while, after the new system was running, I thought it quite strange that you transfer funds to financial institutions outside of VSCU. Internal transfers were not possible (such as from savings to checking). They have since got that restored but there are still no linked accounts. In other words, I can no longer transfer funds to my wife’s checking account, and she can no longer transfer funds to our money market account.

4. Bill pay. I have had two utility bills scheduled to be paid this week. Neither have been paid when I check their websites. When I got a hold of VSCU via chat, I was told that yes, they went out and to not worry about it. Since it is recorded and I have a confirmation number, all is okay. Well, tell that to the utility companies who have not been paid. I paid both with a credit card to avoid late fees and disconnects.

Thank you.

In response to my question of how long he had been a member and when he found the post, he replied:

I have been a member for 35 years.  I joined when I was stationed in Florida.  VSCU has been vitally important in my family’s lives.  We have lived in several states and kept them as our financial institution. From, checking, savings, money market accounts, loans, and credit cards, they have been “ours”.  We now live in Alabama and are retired.  I have now seriously considered leaving VSCU but have been hesitant.  Call it loyalty or naive!

IRT some members have voiced concerns about the BOD in Facebook and voiced opinions about cleaning house.

I have posted on FB about one of the utility bills I mentioned.

As for where I heard about your blog, I stumbled across it.  I did a search on my browser “VyStar Credit Union in the news”.  In the browser search results was “When the music stopped for VyStar…”.  I’m glad I saw it and read it.  That is why I subscribed.

An update on the utility bill:

I have an update on one of my bills.  It was finally paid on the 17th, albeit four days late.  

For credit unions, trust is re-earned every day, even for a member of 40 years.  This goodwill is the foundation of every cooperative’s sustainability.

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Friday Updates

The following are updates from posts this past week.

VyStar’s Challenges: Continuing to Expand in Georgia

Both CU Today and Credit Union Times report that VyStar has called off its $195.7  million purchase of Heritage Southeast Banking Corporation, a holding company for three local banks located outside Atlanta.

The local TV station NEWS4JAX covering the story included the following quote from CEO Brian Wolfburg :  “Following a thorough evaluation of the transaction between VyStar and HSBI, we have mutually agreed that moving forward separately is the prudent decision. VyStar will continue to expand our services in Georgia.”

This Georgia expansion seems tone deaf to the concerns of members in the credit union’s legacy Jacksonville market.  This recovery challenge appears greater than a botched conversion.

There are dozens of comments posted after every NEWS4Jax story:

Mark 2 HRS AGO

It seems that Vystar management made a poor decision with NYMBUS and are having to force it down members (co-owners) throats, regardless of the inconvenience and future inadequacies of software capabilities. The NYMBUS salesperson probably made bundle of commission off of this sales job to Vystar.

BigSwifty500 21 HRS AGO

This story is worthless and full of non-truths. The login page still says it is “temporarily unavailable”. Time to move my accounts elsewhere.

B coffey 2 DAYS AGO

N Y M B U S….this is the name of the company vystar is sharing “relations” with. They performed, designed this mess. Both companies share Board members. Nymbus  is even located in their (Vystars) building in Jax. Vystar is listed as a Nymbus investor. Starting to see a forming problem here?????

john marshall 2 DAYS AGO

This “upgrade” (that isn’t one) ought to be called Wolfburg’s Folly!

Racemedic

Translation: “We know a dumpster fire when we see one and we know to run the other way. Sincerely, HSBI”

Jthall76

Glad I switched to Community First CU

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Crypto Crash: The Selloff in Crypto Assets Resumes (CNBD Disrupter article, June 16)

Bitcoin fell again today as a sell-off in global risk assets resumed, with crypto investors reeling from a dramatic plunge over the last few days that saw the world’s largest cryptocurrency almost drop below $20,000. . .  

Bitcoin is sitting at levels not seen since late 2020. The digital currency is down more than 20% in the last week and has dropped more than 60% from its all-time high in November. . 

The current bear market is often dubbed a new “crypto winter”.  . .

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“Good Angel-Bad Angel”-The House Hearings on January 6th Insurrection

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Should Credit Unions Be Offering Bitcoin and Crypto Currency?

Crypto currencies were supposed to be a store of value that would protect owners from traditional market risks as well as inflation.  Based on  block chain technology, they were intended to avoid the historical problems of fiat currencies backed by governments.

Both roles have now been shown to be faulty.  Here are some recent assessments.

Bitcoin tumbled Wednesday to a new 18-month low, spurring a sharp fall in crypto markets sparked by crypto lender Celsius freezing customer withdrawals. The world’s largest cryptocurrency fell to under $21,000. Bitcoin has lost around 28% since Friday and around 70% from its all-time high in November. (Reuters) 6-15-22

Bill Gates is a  crypto and NFT sceptic.  His latest observation is that the whole enterprise is based on the greater fool theory:

On Tuesday, the billionaire Microsoft co-founder described the phenomenon as something that’s “100% based on greater fool theory,” referring to the idea that overvalued assets will go up in price when there are enough investors willing to pay more for them.

A former crypto believer has written an appraisal of his experience with the title Crypto is Dead-Get out Now.

On May 18, 2022 Washington Post financial writer Michelle Singletary posted an article Six Signs Crypto is a Classic Ponzi Scheme.

CU Today reported that consumers lost more than $1 billion in crypto fraud in 2021 according to the FTC in a June 7 article.

Celebrity Hype and a Trillion in Losses

A critique from Jared Brock identifies the issue for why credit unions should be concerned about their involvement with crypto purchases.  He starts with a question in his June 6 article: Should Matt Damon and Reese Witherspoon Go to Jail for Promoting a Ponzi Scheme?

A trillion dollars in losses requires accountability.

But until two weeks ago, all sorts of celebrities were shilling for their favorite coin — or rather, whichever coin company paid them the most endorsement money.

Matt Damon.

Reese Witherspoon.

LeBron James.

Kim Kardashian.

Charli D’Amelio.

Jamie Foxx.

Paris Hilton.

Ashton Kutcher.

Gwyneth Paltrow.

Tom Brady.

Steph Curry.

Elon Musk.

Mark Cuban.

Tiger Woods.

Larry David.

And dozens more.

They made untold millions by convincing the ignorant public to late-join a Ponzi scheme.

Now they’ve all gone silent.

Because now that the industry is crashing back to reality, real people are losing their shirts.

Call me old-fashioned, but I think someone needs to be held accountable.

Should celebrity crypto boosters go to prison for promoting Ponzi schemes?

Two Credit Union’s Announce Bitcoin Purchase Partnerships

Even with this litany of false hype, fraud, documented  losses and ongoing uncertainties around crypto, several credit unions have moved ahead to facilitate the purchase of these “currencies.”

CU Today on June 13 reported Achieva Credit Union’s involvement with a bitcoin exchange:

Dunedin-based Achieva Credit Union is adding a bitcoin exchange to its mobile app through a partnership with New York-based NYDIG, a fintech platform that partners with mainstream institutions from banks to insurance companies. 

According to the credit union’s website, it is charging a 2% fee for any crypto currency purchased or sold.

Tracy Ingram, chief digital and infrastructure officer, told the Tampa Bay Business Journal that Achieva had noticed more of its members were becoming “crypto-curious.”  

The article also listed other CUs offering crypto services to members:  UNIFY Financial CU, Idaho Central CU, Stanford FCU, and Visions FCU.

The Credit Union Times report on Achieva’s new service described how the employees were asked to try out the new functionality resulting in over $2,500 in Bitcoin purchases. The purpose was to make them “trusted consultants” about the process.

Prior to launching, Achieva employees were invited to test out the new Bitcoin function. The employees who signed up were given $10 to purchase Bitcoin and learn the process. NYDIG also kicked in another $5 for the experiment. During the three-week employee pilot, those Achieva team members purchased more than $2,500 of Bitcoin.

According to Achieva’s Chief Digital and Infrastructure Officer Tracy Ingram,  the employee trial achieved two things: Employees learned how to use the new app and how Bitcoin works in order to help explain everything to members.

“Achieva employees are trusted consultants for members and it was vital that our team learn how this new Bitcoin functionality works so that they can answer questions for members,” Ingram said. “We always want to note that there is risk involved in investing in any cryptocurrency, and we want our members to feel comfortable accessing the trading services.”

Stanford FCU: a “Trusted Institution”

The Stanford FCU press release contained another important issue in its description of its partnership with NYDIG:

NYDIG is proud to partner with Stanford FCU to power its Bitcoin services in a secure and compliant way,” NYDIG Head of Banking Solutions Rahm McDaniel said. “A trusted institution like Stanford FCU wants to ensure the Bitcoin services offered to its clients meet the industry’s highest regulatory, audit and governance standards, and that is exactly what NYDIG provides. We are excited to partner with them to ensure their members have access to the opportunities associated with this emerging technology.”

According to Stanford FCU, the credit union saw nearly 25,000 buy and sell transactions by its members to and from crypto exchanges in 2021.

The Central Issue for Credit Unions

NCUA’s May 2022 letter in essence approved these types of partnerships but did not address one of their most frequent functions-purchasing crypto currencies.

Instead NCUA obfuscated the issue by talking about Distributed Ledger Technology.  For example:  As with the development of any new product or service, when deploying a platform, product, or service using DLT as part of the underlying technology, credit unions should find an appropriate balance between the opportunities and the risks.

DLT is not the same as crypto currencies which are based on this technology.  NCUA approved a practice of questionable purpose and uncertain value because of the underlying technology.  From many perspectives, purchasing crypto currencies is nothing more than gambling.

If NCUA did not understand the import of its letter, than how can credit unions avoid the marketing hype and celebrity marketing of this form of financial entertainment?  Not to mention the “crypto-curious” members?

In both credit union press announcements. NYDIG, the exchange and fintech partner, is relying on the trusted relationships and reputation of these two credit unions and their employees to not only offer, but also promote Bitcoin transactions.

I would just repeat the observations of Jared Brock above:

Call me old-fashioned, but I think someone needs to be held accountable.

Should celebrity crypto boosters (insert credit unions) go to prison for promoting Ponzi schemes?

In a future blog I will describe block chain, or distributed ledger technology, and how it might be useful for other purposes, not NFT’s and crypto currencies.

 

 

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When the Music Stopped for VyStar

On May 2, 2022 the $12 billion VyStar Credit Union celebrated its 70th anniversary with a ceremony at its founding location, the Naval Air Station, Jackson, FL.

The press release included the following announcement:  VyStar is also leading a digital transformation that includes a new website and online & mobile banking platform.  But then reality set in.

The Music Stops

On May 14,2022 the confetti hit the fan. The conversion to the new online and mobile platform failed.  As of the following Friday there were more than 13,444 comments posted on the VyStar Facebook page about the outage.

The situation as described in a CU Times story on May 22:  The brief outage, as explained to members, was planned to last for two days. As May 20 rolled around, seven days later, the $12.3 billion credit union’s 822,000 members still were offline and furious.   One Facebook posting:  “How in the Hell Does a Credit Union go a week with its online systems completely DOWN in 2022???”

The CEO Returns

Brian Wolfburg, CEO had been  on vacation overseas.  Upon his return he was interviewed by a reporter Jim Piggott for the local TV station, NEWS4 JAX.  The complete  18 minute interview is here.  The on air report excerpt  was just six minutes.

Wolfburg repeatedly references the credit union’s 70 year history to indicate that the credit union will “get it right.”   Members posted their skepticism in comments after the story such as:

Mikey19 DAYS AGO: I think the CEO should resign and the person that is in charge of this mess should be fired. Who is with me on this. Let’s email the Board of Directors to let them know our thoughts. VyStarBoard@vystarcu.org

Members File Complaints with Regulator

A June 6, CU Times article detailed member complaints with the Florida Office of Financial Regulation:

Complaint Filed May 20:  “VyStar Online Banking has been unavailable to members for 7 days now with no date given as when to expect the system to be operational. VyStar Management has been vague and evasive with little to no accountability for the botched roll out of its new online banking system. They have gone ‘dark’.   The story added:

CU Times has repeatedly asked for interviews with VyStar executives and board members. The interview requests have not been granted.

Potential Legal Trouble

A June 8 article in CU Today described the  potential of a class action suit.  Also the credit union would end its fee refund of fees incurred by the outage.

VyStar said that it proactively refunded/is refunding fees that it charged members from May 14 through June 9 as a result of the online and mobile banking conversion, but as of June 10 it will not do so.

Members Leaving

In a June 9 CU Today update, the story described members intentions to leave the credit union:

Action News Jax said it contacted VyStar CU regarding how many members have closed out memberships, but said the credit union did not provide any data. 

Class Action Suit Filed

June 13, CU Today reported on a class action suit:

In an interview with FirstCoastNews.com two weeks after the solutions went down, Attorney Austin Griffin, a partner in StoryGriffin PA, a consumer justice law firm in Jacksonville Beach. Fla., told FirstCoastNews VyStar members could go after the credit union with three possible claims: negligence, breach of contract and fiduciary duty.

Griffin told the publication that since VyStar is a credit union and not a bank, there is “an expected higher standard of care.”

VyStar’s Status Today

The latest update on VyStar’s web site reads:

Online statements now available. Access your accounts and make External and Internal Transfers via your computer, tablet or mobile device at online.vystarcu.org. Please note: We will continue to have planned daily maintenance from 1 a.m. to 4 a.m. EST when system access may be unavailable.

The Credit Union Times latest summary  is as of June 14.  Over 28,000 comments have been posted by members frustrated with their experience.

Context for the Event: VyStar Invests $20 Million in Nymbus

There are more factors to this story than a botched conversion.

In  July 2021, VyStar signed a deal with the Jacksonville, Fla.-based Nymbus as the credit union’s online and mobile banking partner.

This statement by Joe Colca, Seniro Vice President of Digital Experience was part of the release:  “Our previous investment already demonstrated our confidence in Nymbus. We’re now proud to lead by example for other credit unions seeking a trusted fintech partner to implement sophisticated technology, people and processes to offer progressive products and member experiences.”

In October 6, 2021 Credit Union Times reported Nymbus had moved into VyStar’s head office location.  “A fintech with credit union funding is moving from Miami Beach to the campus that houses the headquarters of VyStar Credit Union in Jacksonville, Fla.

Nymbus said in a news release Tuesday that it made the move because of its relationship with VyStar ($11 billion in assets, 778,348 members). VyStar invested $20 million in April to help develop Nymbus’ month-old Nymbus CUSO to better extend its services to credit unions. In July, VyStar chose Nymbus as its new online and mobile banking solution partner.

In September 2019, VyStar created a $10 million fund to invest exclusively in fintech companies. VyStar has said it has supported Nymbus because it provides a way for it and other credit unions to keep up with members’ rising expectations for sophisticated online services. Nymbus’ website said it saves banks and credit unions “decades” in developing such services.”

Two senior managers of VyStar were also  members of Nymbus’s Board. Joe Colca, VyStar’s SVP on the board was quoted:

“Nymbus has proven to be an effective, valuable partner in our efforts to improve the member experience at VyStar and strengthen the credit union industry as a whole,” Colca said.

 VyStar’s FOM Expansion and Bank Purchases

Vystar’s first bank purchase was announced on January 15, 2019 with the  purchase of First Citizens Bank: VyStar Credit Union announced it plans to acquire $280-million Citizens State Bank, a Florida state-chartered bank headquartered in Perry. CSB has four locations: two branches in Gainesville, and branches in Perry and Steinhatchee, Fla.

The article continued that this purchase was possible because of an FOM expansion:

In November 2018  VyStar received approval from the Florida Office of Financial Regulation to significantly expand its field of membership by 27 counties—more than doubling the original 22 counties—to include all 49 counties of Central to North Florida. This expansion included Taylor County, where CSB’s Perry and Steinhatchee offices are located. VyStar currently serves the Gainesville community with two branch locations with plans to open additional offices in Alachua and Ocala by mid-year, the CU said.

Subsequently,  on March 31, 2021 VyStar’s purchase of the $1.6 billion Heritage Southeast Banking group  for $189 million was announced.  The closing has been deferred three times.   This would be the largest purchase of a bank by a credit union.

Largest Subdebt Placement by a Credit Union

To support these bank purchases and rapid growth, VyStar issued $200 million of subordinated debt in the first quarter of 2022.  This is the largest subdebt capital placed in credit unions to date. Arranged by Olden Capital, the issue was sold to 41 investors including credit unions, banks, insurance companies and asset managers.

Without this external capital infusion, Vystar’s net worth would have been 7.9% of March 31, 2022 assets.  With the debt and using a four quarter asset average as the denominator, VyStar reported a net worth ratio of 10.15%.

“Values-centric” brand campaign: “Do Good. Bank Better.”

From an October 2021’s CU Today story  New Branding Campaign:

VyStar Credit Union has launched a new “values-centric” brand campaign, “Do Good. Bank Better.”

VyStar said the multimedia campaign has been inspired by the people, businesses and organizations that it serves, and that it elevates VyStar’s “powerful promise to support its members and communities by offering better banking options and giving back to strengthen the places it calls home.”

“We proudly live by the words, Do Good. Bank Better., and this is just the beginning of our efforts to continue sharing our nearly 70-year story,” said VyStar President/CEO Brian Wolfburg in a statement. “As we evolve as an organization, we remain true to our roots by upholding our standard of leading by example and showing goodwill in everything we do.”

The Member’s Chance for a  Choice

VyStar has been on a very ambitious multiyear growth spurt:  converting charters and expanding the FOM, purchasing whole banks, investing in multiple fintech companies, raising external capital and launching a new public relations and branding campaign.

Members’ reaction to the online conversion failure shows how much confidence has been lost in these many expansion efforts.  The situation calls into question multiple initiatives especially the credit union’s investment and role in Nymbus plus its thrice-deferred bank purchase.

This episode and its background are now occurring in a rapidly changing economic and financial environment.  Investments and other assets that appear sound when the cost of funds is near zero now have a very different risk profile.

Once again the regulators have been on vacation.

The credit union’s reputation is being stained. Its operations, business initiatives and internal capabilities appear strained on several levels.  The net worth ratio is created, not earned.

The best solution may be to follow the advice of the member who posted:  Let’s email the Board of Directors to let them know our thoughts. VyStarBoard@vystarcu.org 

Members are the owners.  They should do more than vent frustration by exercising their power to choose their representatives for the board.  They should take back their “home” if they truly want to see the credit union “do right” for its members and communities.

 

 

 

 

 

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Credit Unions and Consumer Education: An Example from Rhode Island

In response to last week’s bog about the gaps in financial education courses for high school students, I received an example of a credit union effort from five decades ago.

In the 1970’s and early 1980’s Rhode Island credit unions were a source of system innovation. The state had a strong dual chartering option.  State credit unions were authorized NOW accounts (negotiable orders of withdrawal) a forerunner of share drafts and checking.

There was a private share insurance option which was initiated because NCUA would not insure the credit union NOW accounts. That insurance option was also provided to Rhode Island’s mutual savings banks. That dual coverage became an Achilles heal during the S&L troubles in the mid- 1980’s.

The state field of membership options included the traditional employer, community, and associational common bonds.  The community charter included  anyone who lived or working in the state.

Rhode Island’s influence extended to the national leadership where Joe Cugini, President of Westerly Community Credit Union, was serving as  Chair of CUNA when Ed Callahan, Bucky and I arrived at NCUA in 1981.

But an even more unusual leadership role was that of the league President, Bob Bianchini.  While League President, he was also elected and served as a state representative in the Rhode Island legislature.

Here is his account of his focus on consumer financial legislation while in the legislature.

“I was elected in 1978, at the same time I was serving as President / CEO of the Rhode Island Credit Union League.  Serving in the legislature was a part time endeavor (legislators were paid $300 dollars a year) so most everyone who served also had other employment or other sources of income.

“Credit union issues were not often paramount during the time I served. When legislative efforts regarding consumer financial services were proposed, credit unions were almost always included in any proposed legislation.

“I avoided sponsoring any legislation that affected financial institutions, but to be completely candid, when such legislation was proposed, my colleagues often would ask me for an explanation and my opinion. I would often do the same when bills were proposed that impacted other industries. I would frequently seek an explanation or points of view of my colleagues who labored in those particular industries, such as education, legal, automotive, medical etc.

“When I proposed the consumer education, the first legislators from whom I sought support were the teachers who served with me in the House.  My explanation of what I hoped would happen would be that kids would receive information about basic consumer education.  For example, how to balance a checkbook, what types of savings and loan products were available to consumers, the importance of balancing income and expenses. I’m sure there were other topics included as well.

“The opposition to my original bill from the Department of Education was based more on a standing concern by the Department.  They opposed any specific topics  inserted in school curriculum through legislative efforts, rather than opposing the idea that kids should be exposed to basic consumer education.

“The compromise we reached was that consumer education would be included as part of all social studies classes. I can’t recall if it was 8th or other grade levels.

“It’s now 43 years later and I don’t know whether that practice still exists. If it does, I would think it might impact the grade level assigned to the state’s commitment to taking financial courses.

“At that time, I informed our league board and legislative committee of my efforts. Although I can’t recall other legislative and regulatory issues that the league was following then, I’m sure it was a full agenda.”

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A CEO Reports to His Team

Learning from others is how many inform their own leadership approach.  Each month Weokie FCU’s CEO Jeff Carpenter sends a briefing to staff about the important events.

The brief excerpts below are from his April update. Used with permission.

The complete report includes pictures, member testimonials, project priorities and performance numbers.

Open communication contributes to shared efforts with common purpose.  Both are vital for effective organizational performance.

Living Our Vision & Mission

WEOKIE adopted a new vision in 2022 and has been working hard to make the vision, not just words on a paper, but a reality. I wanted to pause a minute each month to share some of the “stories” of how we are  “making a difference, one person at a time”

Calculating the Coop’s Value

Why Cooperation Matters

“Cornerstone IMPACT 2022: I attended my first “in-person” meeting of the Cornerstone Credit Union League’s Annual Meeting and Convention entitled IMPACT.

“WEOKIE is stronger when we cooperate with other credit unions and the Cornerstone League is a great facilitator and cause agent for credit union collaboration.

“The meeting had excellent educational content and numerous opportunities for R&D (Research & Development, aka Rip-off & Duplicate) great ideas that other credit unions are pursuing.”

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Technology versus Slow Checkouts

America loves innovation.  Especially in technology.  We celebrate, honor, and enrich those entrepreneurs who bring efficiency and ease to our life and work with their inventions.

Technology underwrites greater productivity, reach and speed in credit union services. It enables 24 by 7 interactions. Manual processes from loan underwriting and live teller interactions are replaced by AI decisioning and intelligent teller machines (ITM’s).

Even phone responses and “live” chat are now automated to the point where one must opt out to “speak” with a real person.

What society prizes, is what the people will create. One writer contrasts our modern view of success with the culture in ancient Greece.

The ancient Greeks gauged progress differently from us. “What is honored in a country will be cultivated there,” Plato said. The Greeks, imperfect as they were, honored beauty and justice and moral excellence, and so they cultivated these values. We honor speed and connectivity and portability, and so that is what we get.

The author asserts our current focus leads to: “cognitive dissonance from our misplaced faith in technology, and an attendant disregard for other forms of human progress.”

The Introduction of “Slow”

I was reminded of this contrast between ancient and modern values after reading about a new approach in retail services in Europe, called Slow Checkout.

Jon Horvat describes this approach in retail and service industries: With so much buying happening online or through self-service kiosks, the art of shopping has lost much of its attraction. Some market-savvy executives have noticed this shortcoming and have recently introduced slow checkouts, which turn the routine chore into a meaningful experience.

Many retail experiences, that is personal shopping, are no longer personal.   Human contact, especially the kind of interactions characterized  by local farmer’s markets have been eliminated in the race for self-service and cashless checkout innovations.

The pressure to automate customer interactions will only accelerate as labor shortages occur in many retail service sectors.

Executives at several retail grocery chains in Europe noticed something was missing in their retail experiences. Some customers wanted human interaction.   Jumbo a Dutch supermarket chain and Carrefour, the French grocery leader, both introduced “slow checkout” lanes after discovering that people wanted to chat when then paid for their groceries.

Harvat describes this approach as follows:

These small-talk cashier lanes are gaining popularity. They are called “chitchat” checkouts. The French name, blablabla caisses, is a bit more expressive.

About 150 of Carrefour’s French stores have opened blablabla caisses, with plans to have at least one till in every location by the end of March. The lanes are marked for only those who want to talk with cashiers. There are no time limits for the customer, although most try to respect those waiting in line. The lanes come at no extra cost to the consumer.

Shoppers are encouraged to take their time on the slow checkouts; cashiers greet with bonjour and can ask about the family or the weather. No managers will be around to speed the process up. The aim is to slow it down.

Both customers and cashiers report greater satisfaction in their roles where interaction is encouraged.  Shopping is a social experience, not just a purchase transaction. Small talk is an important experience for people living alone or feeling lonely.  Cashiers enjoy the opportunity to communicate with people, giving them a sense of expanded agency in their interactive role.

Credit unions have traditionally been an area where these interactions have been a valued part of the member experience.  Members get tired of talking to machines or referred to online applications or processes.  They want to talk with real people.

People are social creatures.  These chit-chat interactions show that economics, the best rate or the fast turnaround, is not the only, or even the most important, human need in every circumstance.

Every person has needs that surpass material economic sustenance. Humankind does not live by bread alone.

The Boutique Credit Union

One person who has recognized this critical capacity for human interaction is Bo McDonald.  He is a credit union consultant who has focused on the unique capabilities and experiences provided by smaller credit unions.   While some may see credit unions with assets of under $100 million or below the credit union average size as a disadvantage, he sees these as “boutique businesses.”

When inspired by passion they provide member experiences long lost in some billion dollar institutions.  Ultimately every credit union is founded on relationships, even if the only measures traditionally used are the number or size of  transactions.

These boutiques may not have the growth patterns of their larger brethren; but they demonstrate the enduring power of cooperative design.  For  when we look under the technology covers increasingly deployed by credit unions, we learn that what members really value is someone to talk to  when they have a need.

Boutique credit unions demonstrate that real progress can also be achieved by slowing down and giving members your undivided attention.

 

 

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