Elections, Awareness, And Innovation

Day two at ACUC sees focus on polling, projects, the regulatory burden, and how to compete.

The credit union industry’s largest trade group is staying out of the presidential election, and its top lobbyist says the 2018 races may actually really be the ones to watch.

That’s because even if the Senate does flip to the Democrats this fall, they’re likely to lose control again two years later when that party has to defend 25 of the 33 seats up for grabs then, said CUNA chief advocacy officer Ryan Donovan.

In his presentation Monday afternoon at America’s Credit Union Conference in Seattle, WA, Donovan laid out scenarios that included combinations of Hillary Clinton and Donald Trump winning and the House and the Senate changing hands, or not.

Donovan said a Trump presidency would be too unpredictable to make predictions about right now, but that a Clinton administration might be similar to the first one. That’s because Bill Clinton was very inclined to cross the aisle to make deals, Donovan said, and that Hillary Clinton may well have the same temperament.

Depending on the congressional makeup, then, the door may open a bit to discuss field of membership changes and charter enhancements and increased attention to community financial issues in the Senate Banking Committee, Donovan said.

For instance, a Republican-controlled House Banking Committee could be expected to continue pushing for regulatory reform, and a President Hillary Clinton also may feel less ownership of the Dodd-Frank Act and the structure of the CFPB, Donovan said.

Meanwhile, a Democratic trifecta that includes taking the House, Senate and White House which Donovan deemed particularly unlikely in the House would result in a CFPB maybe a bit emboldened, and tax reform then becomes more doable, the CUNA lobbyist said.

I’m really more interested in 2018, Donovan added. The Senate is likely then to remain or return to GOP control and there could be more Supreme Court vacancies, as well as the expiration of Richard Cordray’s term as the lightning rod CFPB director.

These all could be campaign issues that lead to spurring reform, Donovan said.

The NCUA, Brexit And CDFIs

NCUA board chair Rick Metsger returned this week to the Pacific Northwest, where the former Oregon lawmaker announced Monday the regulator’s new drive to get 200 more credit unions certified as Community Development Financial Institutions.

Metsger said the NCUA has partnered with the Treasury Department to streamline the application process, and he said any of the more than 2,000 credit unions already designated as a Low Income Credit Union by the credit union regulator would likely pass muster for CDFI designation.

The Treasury Department allocates its CDFI money based on sector, so if more credit unions are certified, more money will go to the movement. In fact, 200 more would bring the total to 495 which would result in half the Treasury money going to credit unions, Metsger said.

Increasing the number of credit unions with this certification will allow significant dollars to be put to work helping people of modest means meet their financial needs, he said. This is the core of the credit union mission.

Metsger said the Office of Small Credit Union Initiatives has been asked to devote seven staffers to the task of analyzing a credit union’s products and services and other data, and if the credit union is qualified, will provide an application and the data needed to complete it.

I would add that the benefits of CDFI certification do not mean NCUA examiners will be visiting more often, Metsger said.

The NCUA board chair also spoke briefly about the British vote to leave the European Union. He said besides stock market turmoil, we really don’t know the impact yet. Metsger did note that Treasury Secretary Jack Lew said the financial system as a whole is doing so well, that there’s plenty of liquidity available to handle the markets re-pricing.

There’s no panic, the NCUA chairman said. This is a far cry from 2008, and add to that the fact that the credit union system also is one of the best capitalized in the financial services industry.

Compounding TRID

You never know what you might learn at trade show booths. John Bley, a former director of the Washington State Department of Financial Institutions and now an attorney with Foster Pepper in Seattle, shared an anecdote about how far the regulatory reach has gotten.

It’s kind of funny, but federal regulations are getting so numerous that now the federal government is not only using acronyms but compound acronyms, he said, pointing out that TRID is an acronym for TILA RESPA Integrated Disclosures. TILA, of course, is an acronym for the Truth in Lending Act, while RESPA is the Real Estate Settlement Procedures Act.

What’s not so humorous, Bley said, is the unintended consequences of the growing regulatory burden in many areas, including the proposed new payday lending rule.

The cruel irony is that many of the rules promulgated by the CFPB are designed to protect the most vulnerable of consumers in our economy, but instead have the unintended effect of denying them an opportunity to use the credit product at all, he said.

How? By driving up costs so much that those on the margin of credit worthiness can no longer be served profitably by credit unions, or close enough to profitably to justify the cost.

And that, Bley said, is to the delight of existing providers of credit who already have the infrastructure in place to better deal with the onslaught of regulation and cost of compliance.

Regulators need to do a better job of keeping this in mind when they promulgate rules, Bley said, adding that most if not all of the rules proposed serve a public purpose and in most cases can be justified.

What is lacking is a better analysis of the high cost of unintended consequences, he said. Public policy should facilitate more competition and more options for consumers, not less.

An Awareness Campaign

CUNA CEO Jim Nussle used his time on the bully pulpit during Monday’s general session to provide more details about the trade group’s new awareness initiative.

Nussle said the initiative has been developed by a task force led by Teresa Freeborn, president and CEO at Xceed Financial Credit Union ($947.7M, El Segundo, CA) that has spent a year testing messages and messaging using CUNA data that has been collected for more than 15 years, including 16,000 interviews.

The number one thing we’ve learned is that talking about the credit union difference makes the biggest difference, Nussle said. He said the new effort would not be another national branding campaign. You have your own brand. You need to celebrate that, he told his audience.

Credit unions have been disruptors since their beginning, Nussle added, and we were consumer protection before Richard Cordray was born. He said credit unions continue to be frustrated by burdensome oversight from people who don’t live this every day.

He’s Well Aware

Garth Griese, president and CEO of Service One Credit Union ($139.6M, Bowling Green, KY), does live that reality every day. He said that differentiating is a challenge in his market of about 100,000 people, where his credit union is competing with 20 banks and three other credit unions.

Griese said Service One is continually working to show the community the credit union difference, which at his institution includes lower interest rates and no application fees for loans, something for which some of the local banks charge $75 to $189.

Hiring people for their engaging personalities as much as their existing skill set is another tactic, Griese said, and his credit union has gotten involved with community affairs such as sponsoring a Taste of Bowling Green festival with proceeds going to the local Dream Factory organization that serves children with physical challenges.

We’re trying to get our message out there, but it’s a long process. I tell my staff that we have to grow if they want new opportunities, that we all have to find new ways of thinking. But it’s evolutionary more than revolutionary, he said.

i3 Incubated Equals i4

Revolutionary is more of what the Filene Research Institute had in mind when its director of innovation, Andrew Downin, announced in his breakout session the creation of the I4 Incubator.

The incubator builds on the institute’s i3 program that brings credit union innovators together to brainstorm on new products and services. The incubator will be used to determine consumer interest in the possible products, as well as test them to determine their impact on financially fragile populations and re-test them to determine their market scalability.

Three apps moving from innovator to incubator were outlined Monday:

  • HomEase is a push notification app that lets members know what stage they’re in the mortgage process. Eleven credit unions have tested the prototype live, and found that 67% of the members who used it, used it all the way through the process, and that it reduced the number of telephone calls per loan from 6.1 to 4.4. Downin said Filene is working with technologists from D+H (providers of UltraData, Mortgagebot, and LaserPro) to further explore the potential app, which was inspired by Domino’s Pizza’s delivery app.
  • Centsus does some social engineering on shopping behaviors. The app integrates with transaction software to send push notifications about 24 to 48 hours after the purchase is made. Downin said the user picks from among five emojis to characterize how they feel about the purchase then. It then learns how financial behaviors impact emotions for that user over time, Downin said, and prompts them to spend happier.
  • Mary Beth Spuck, chief administrative officer at TwinStar Credit Union ($1.1B, Olympia, WA) and a former i3 participant, described the Member Megaphone app designed to reward credit union members for referring new members. Inspired by Uber’s referral functionality, Member Megaphone was piloted at six credit unions, where it generated 795 new members in six months, $449,044 in new deposits, and $906,031 in new loan balances. One member brought in 22 new members directly and 161 indirectly, Spuck said, and those six credit unions had 28% member growth compared with only 2% in same time period in the previous two years.

Downin said credit unions don’t have to a Filene members to be a prototype tester and he invited queries at innovation@filene.org. He concluded with this quote from credit union pioneer Edward Filene: Progress is the constant replacing of the best there is with something still better.

Also from ACUC:

  • Collaboration And Credit Union Survival
June 27, 2016

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