Why Can’t Bigger Be Better?

This is not an indictment of large credit unions. Instead, I hope it’s a reminder to all of us of why we're here.


I’m afraid my credit union’s outgrown me, and I wonder what that means not just for me, but for our industry. A risk I see in some credit unions, including my credit union is that the larger they get, the further removed decision-makers get from the member. Leaders become more focused on the institution than the members who make it up.  

This does not have to be the rule. In fact, it may well be the exception but it happens more often than it should. There are plenty of very large credit unions that excel at member-first service. Two that come to mind are BECU ($16.4B, Tukwila, WA) and State Employees’ Credit Union ($35B, Raleigh, NC).

What made me come to this realization was an event in my life. My ARM is up for reset. I saw the rate for new loans on my credit union’s website was favorable compared to the re-set rate I had, so I called about modification options. I expected to pay a fee and modify my loan. I was told they would have to basically underwrite the whole loan again, including an appraisal and title insurance, the whole shebang. 

This felt odd to me, as a consumer; they want me to pay for things I don’t need like title insurance and an appraisal. Plus the process of income verification and asset documentation is a pain. My first reaction was: if I have to go through this process I might as well look around at other lenders. The fees and process will be the same anywhere. 

During the GAC I asked other credit unions how they handle it. During a conversation with Norman Okimoto, CEO of Hawaiian Tel Federal Credit Union ($600.1M, Honolulu, HI)  he proudly called his vice president of lending so he could tell me directly about their member-focused philosophy. That philosophy includes being willing to modify an existing loan without underwriting it from scratch. I can share dozens of other examples of credit unions who shared similar practices. 

That’s not all. My credit union also won’t modify an auto loan unless you first refinance it with a competing lender! Yes, I know modifying loans can reduce the profitability of a loan and extend duration on the balance sheet, but it also keeps real cash in members pockets.

In the grand scheme of things these examples are small.  But to me they signal that the organization is focused on things that aren’t important to me as a member. It feels like they are more focused on growing and protecting their own balance sheet than their members’.  

I met Rex Johnson, a legend to many, for the first time a few weeks ago. He told me that, in his opinion, some of the best-run credit unions in the country are run from the bottom up, not the top down. Those that listen to the member and put their interests first are often the ones that have the best sustainable organic growth possibilities. That made sense to me. 

My hope is that as the credit unions that make up our movement continue to grow and thrive, they remember why we’re here.  We’re here to serve members. The further our leaders get from touching and seeing individual members the harder they have to work to ensure the culture of the organization clearly puts members first. 

As Doug Fecher from Wright-Patt Credit Union ($3.5B, Beavercreek, OH)  tells all new employees, “If you don’t like helping people, you better find somewhere else to work.”  


March 2, 2017


  • It could be regulation for the mortgage, but I have to say I am left scratching my head over the auto policy. To me this appears to be loan policy built on a scarcity mindset, that the credit union must protect its revenue sources by restricting it's member owners options. This is along the same vein of thinking that has lead many credit unions to shut down things like giving a member a payoff quote without a lengthy identity check and an interrogation as to why they are requesting it.
  • Mr. Jeffreys, Perhaps it would be good to explain how the mortgage process works for a CU's that are larger. With the higher volume of business that occurs as an organization becomes larger, there is a greater need to transfer credit risk, balance liquidity and concentrations risk to the secondary market. Once a loan is sold to the secondary market, it becomes part of a mortgage back security (MSB) or subject to the secondary investor requirements. Most often these loans can not be modified due to investor limitations on modifications to their investment. Perhaps less condemnation of your experience being a lack of focus on member service and more of an insight on regulatory restriction that keep CU's from being able to stick to their core member service values.
  • I'm pretty sure this isn't a secondary market issue in the case Jon outlines. He references this was an ARM. Most likely held and serviced by the credit union.
  • Of course you're right, but how many industries are being disrupted today because their leadership repeatedly says, "That's just the way things are and we can't help it"? We can help it. Change isn't easy, isn't cheap, and isn't instantly validated by a boost to the bottom line but the danger of accepting the world as it looked yesterday while upstart companies dream up a new tomorrow, is that it leaves us looking like we don't care about serving our members. We built the CU movement by taking care of people, let's not lose it to the new generation of companies that find ways to do what we keep saying we can't.
  • I understand my loan may have been sold. There are dozens of member friendly reasons credit unions sell loans- one of which may be so that the credit union could make more loans to other members. This a good thing. If this was the case and my loan was sold- all the credit union would have needed to do was explain that and provide me a set viable alternatives. In my eyes, the full refinance process is not a viable alternative. Taking the time to communicate with members especially something as complex as mortgages is tough in the age of automation and digital channels- but it can be a competitive differentiator.
    Jon Jeffreys
  • Jon, I think in your response the underlying issue is addressed... communication. It is not about the rules and regulations for members, it is about the understanding, the knowledge to improve their financial well being. Perhaps the answer is "no," but what are the options? What can we do? How do we get to yes? I see this not as a big vs. small, but an industry issue faced by many CU's. Consumers demand automation and digital solutions, until they don't. How do you wisely provide both?