Why First Millennial Matters

A common bond across space and time is still a bond. Credit unions must make the case for millennials and beyond.

On Friday, CreditUnions.com posted a profile of a fictional credit union: First Millennial ($24.7M, Austin, TX).

Eight of Callahan’s millennial staff members spent a lot of time researching and writing the creative, convincing piece right down to the performance Quick Facts box that is included on all credit union profiles. This was a significant investment of intellectual energy for an April Fools’ Day prank (and one noticed by the mainstream press).

But, why? Why go to all this trouble? I mean other than to poke fun at the notion that somehow this cohort of colleagues aren’t quite as different from the rest of us as they (and we) like to think. While entertaining, this satirical piece raises important, difficult questions, including what is a common bond and why does it matter?

The common bond decision in federal court last week turned on arcane definitions, but the bankers’ nationwide campaign is simple: The common bond was supposed to keep credit unions small, local, and exclusive; today’s definition fails that test and should be rolled back.

That’s their story, but is it the truth?


A little context might be helpful. Credit unions were conceived so people that banks would not serve reliably could organize to serve themselves. That meant that ordinary individuals, untrained in finance, made lending decisions that experienced bankers often felt involved too much risk to bother with.

Not only that, credit union deposits were not insured and credit unions initially operated with minimal capital and very little oversight. In other words, the potential risk associated with joining and depositing money in a credit union was significant.

The common bond requirement addressed that. It put character front and center among the five Cs of credit. When you borrowed from your credit union, you were borrowing from people you knew. People who knew you. People who would be harmed directly if you defaulted and who would know you were the person who did it.

In other words, the common bond was not conceived as a limiting factor, but as a crude but extremely effective form of risk management.

Things have changed. A lot. Credit union deposits are insured now. Modern credit unions are extremely well-capitalized, tightly regulated, and regularly examined. In addition, thanks to a long history of discrimination by for-profit lenders, character, for all practical purposes, is no longer a permissible underwriting criterion, having effectively been replaced by credit score.

Today, the common bond requirement no longer serves in the role it was intended. It functions occasionally in a mission or marketing role, but mostly as an arbitrary limit on membership.

Still, it’s a key point of differentiation for credit unions, and it isn’t going away. So, it’s time we frame it for modern usage. And that’s where First Millennial comes in.

When the common bond requirement was established in law in Massachusetts in 1909 most people who might form or join a credit union didn’t have a telephone, let alone a car. Most had never been on a train or a ship or traveled much beyond the place they were born. Affinity and commonality of interest were territorial, even if based on employment or place of worship.

Not anymore. Because of high mobility, remote employees, and internet-based virtual communities, the concept of common bond no longer has natural territorial boundaries nor most of the other traditional limits. Today, an average American is as likely to have a true common bond with someone across the country as with someone across the street.

Maybe living in your parents’ basement, a taste for avocado toast, and an aversion to napkins isn’t quite enough, but the notion of virtual reality branches ought to make the point that this ain’t the 1930s anymore. Unfortunately, credit unions let bankers tell the movement’s story as if it was. That must change.

Cooperatives have always formed around affinity and a sense of shared values and interests, so the common bond still matters. But for credit unions to fill the need they were created to fill, we have to make the case for a 21st century definition, one that reflects today’s reality, not that of the Great Depression.

April 2, 2018

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