News & Highlights

The “R” in the DREAM Big Contest: Recreate and Reinforce

Kirk Drake (right) with Mike Lawson at 2017 NACUSO Network Conference

Last week we talked about the importance of differentiating with data … the “D” in Dream. Now let’s begin by talking about the Google machine. I cannot even remember my life before it? Did we go to the library to do research? Pull out our 10 year old Encyclopedia Brittanica? If you’re a Millennial reading this – Google it – it’s a thing.

Anyway- Kirk cracks the code on getting Google’s attention. Put simply, the ultimate goal is to have someone in your field of membership searching for a solution to a problem and bam – you have the answer and land on the top (or near) the first page of responses. So just for fun Google “good financing for a car loan in (insert your city name).” Was your credit union there? If so, congratulations. If not, why?

I don’t know of a credit union out there that doesn’t want to be known as the “trusted resource for financial services.”  How do you earn that trust? Not by product pushing and always leading with rate. Not with clever ads and shiny happy people on your website. It’s about identifying with your target audience and giving them resources, content, information and education, about stuff that has nothing to do with your products and services. A really good example is Point West Credit Union in Portland, Oregon. They were founded in 1932 to serve employees of Multnomah County. After the Great Recession of 2008 they focused their mission on community development. They received their CDFI designation in 2013 and merged two very small diverse credit unions in – NAACP and Hacienda Community.  In 2016 they funded $5.4 million in affordable loans to non-citizens! That’s a real differentiator. They have created a community within their community.  On Point West’s site they have a page dedicated to resources for non-citizens.

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A Message From the Future…

An encoded message is received from the future. In includes a warning from the last Credit Union President who sends back something to help rebalance the future between credit unions and fintech providers. WhatIsDSP.com

Improving Member Loyalty at Credit Unions | CloudCherry & NACUSO | Webinar

Is your Credit Union able to keep up with member expectations? Also, how do you deliver memorable experiences that boost loyalty?

Watch this webinar hosted by CloudCherry in association with NACUSO to learn about mapping and improving multi-channel member journeys and increasing member retention rates. Denise Wymore, Membership and Advocacy Director at NACUSO, and Rose Bentley, Member Experience Expert at CloudCherry, also talk about improving member loyalty and retention rates.

Voluntary Mergers: The Stuff No One Says Out Loud by Guy Messick

I get it.  You want to merge with a peer sized credit union.  Together you will have more scale, twice the number of branches, twice the membership size, twice the assets…twice, twice, twice.    Having all things twice should create the golden ticket of economies of scale.   But after the merger you seem to have twice the payroll but not twice the benefits.  What happened?   The dirty little details get in the way.

  1. If you don’t trim the payroll, you don’t save money. People are the highest cost of operations.   Unless you have fewer employees after the merger, you are not going to save money.   Are you willing to make those decisions?
  2. If you don’t trim the vendors, you don’t save money. The continuing credit union needs to quickly decide what vendor to use for each service.  Having multiple vendors for a service within a credit union does not create efficiencies.
  3. Be ruthless in you vendor selection. Past relationships with vendors are great but that is not a reason to keep a vendor if the vendor is not competitive on price and quality.  Buying a foursome at your credit union golf outing is not a sufficient reason to keep a vendor.
  4. The cost of terminating vendor relationships is a cost of the merger and should be calculated into the decision.  This is especially true for core IT services where the termination fees can be excessive.
  5. The staff expertise needed to run a credit union of X size is not the same as running a credit union of 2X size. The general level of expertise has to increase significantly if the size and complexity of the operation increases significantly.   There are all-star employees working at smaller credit union who could work at any sized credit union but the overall expertise level at smaller credit unions is not equal to the overall expertise required at larger more complex credit unions.  If the merger puts you in a peer class that is significantly larger, are you willing to make the necessary changes in staff?  That is a significant hidden merger cost.
  6. Larger credit unions tend to have different operational processes and a more formalized protocol and policy structure, which is often required to ensure consistency in member loans and regulatory compliance. Are you ready for that?
  7. The technology tools in a larger credit union tend to be more extensive and expensive than in a smaller credit union. Do you understand that cost and has that been a part of the analysis?
  8. If the merger puts your credit union within the jurisdiction of the CFPB, are you ready for the enormous costs of that oversight?
  9. Do you have the attitude to analyze the profitability of services and cut services that cannot be self-sustaining?
  10. Have you gotten past the post-merger identity of the CEO and directors? Does the board have the vision and talent for a larger, more complicated organization?
  11. How are you dealing with the staff issues? What will be the organizational structure and who is in each of the slots?  How are those decisions being made…by unemotional analysis or by cutting internal deals to be “fair”?
  12. How are you dealing with different salary levels and employee benefits? Do you have to pay retention bonuses to keep key employees around for the transition?
  13. Can you close branches? Do you have keep unprofitable branches open?
  14. Is there a strategy to tear down the “us vs. them” walls and tribe-like behavior that sometimes occurs post-merger?
  15. Do you have the metrics to measure the success of the merger?

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DREAM Big Contest!

After last week’s interview with Kirk Drake, CEO of Ongoing Operations I bought a copy of his new book, CU 2.0: A Guide for Credit Unions Competing in the Digital Age. We are truly fortunate to have this book in our industry. How often do you see a “Credit Union” book on amazon.com?

We give it two-thumbs up, a gold star, the credit union Pulitzer prize.

In the beginning of the book Kirk makes a very valid point.  in 2008, just 9 years ago, we were handed the financial world on a silver platter. Massive bank failures, mortgage loan foreclosures, customers struggling to get credit they needed while the banks raised fees. And yet credit unions market share soared from 7% to 8%. We can probably contribute some of that to the “Bank Transfer Day” Movement led by a non-credit union member in response to her frustrating relationship with B of A. We treated it as a one and done instead of seeing it as the re-charge of the credit union movement.

Why did that happen? Because we continue to operate in the old model which is ripe with over compliance and risk aversion. Credit unions are not known for being innovators. At our very best we are fast-followers. My favorite chapter is “Death by a Thousand Cuts” where Kirk describes the Finctech world in a way that I actually kind of understand Bitcoin now. We are in the business of moving money and yet these Fintech players like PayPal, Apply Pay, Venmo, even Starbucks are “using” our member’s money with little or no regulation to provide the level of service they have come to expect. Right now, in the click of a button or a swipe of my phone I can pay for something or buy something. In the meantime many credit unions still require a “wet signature” on a loan application.

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Five Things Your Credit Union Needs to Learn From a Bouncy House

Every year our Volunteer Fire Department hosts a 4th of July Picnic in our tiny little town complete with a parade, barbecue, burgers and dogs, kid’s games, silent auction, music and of course a big fireworks display. This year I was in charge of the kid’s activities. I don’t have kids, but I know what kids like – a bouncy house. And since our event is on the giant Town Hall lawn it’s a perfect spot to get your bounce on.

I put “Bouncy House Rentals” in the Google machine and to my surprise found there are several in the Albuquerque area. Who knew? I clicked on the first one listed, the page took too long to load and when it finally did a form popped up that said email us or call us today to get a quote. Pass. So I clicked on the second site listed. Loco Jumps. The page loaded right away.

The banner was a kid smiling and this promise: “Our Jumps are Always Clean and Sanitized.” Again, not having kids this isn’t something I was even thinking about but now that I read it, heck yes I want a clean and sanitized bouncy house.

The only other copy on the main page was this:

We provide the best rentals, we’re always on time, and always professional. So if your looking for the best jumpers possible in New Mexico, reserve them below or call anytime to speak with us in person at (505) 792-6620.

You could order by date (and then see what is available on that date) or by category. Since I was renting on the 4th of July (super busy day I assumed) I went for the date. This took me to an order screen where I could plug in my start and stop time (I assume I was renting by the hour) There were quite a few houses left but Beagle Bouncer caught my eye. Here’s his description:

Cool 3D design and it has a flatter bouncing surface for more jumping fun! Also known as the Cutest Jumper there is.

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NACUSO Spotlight on Kirk Drake, CEO of Ongoing Operations

Kirk with his oldest son, Warren

This month we are focusing on a long-time member and supporter Kirk Drake who has just published his first book CU2.0: A Guide for Credit Unions Competing in the Digital Age.

PART ONE: Life Story and Experiences

What’s your current position and can you give me a brief overview of what it is you do in your work?

 I am currently the President and CEO of Ongoing Operations, LLC and founder of Credit Union 2.0.  I focus on helping credit unions engage members digitally and compete with the onslaught of regulatory and fintech challenges – or as I like to call it Credit Union 2.0.

Where did you grow up and what was it like living there? Where did you go to school?

I grew up in Southern California until I was 15 and then my family moved to Southern Oregon.  I finished high school in Grants Pass, Oregon and feel more connected to that area.  It was a small town (20,000 people) that was really isolated from the mainstream – but was amazing for grounding me and providing some amazing opportunities like starting a high school bank. After that I attended George Washington University in Washington, DC and eventually graduated from the University of Maryland University College.

What would you say most motivates you to do what you do? What are you most excited or passionate about?

 I love meeting new people (especially passionate credit union people) and helping them solve their problems.   These days I am very motivated by helping our industry become relevant.   I feel that we have missed the boat on connecting to members digitally and are at great risk of becoming obsolete to consumers.  Helping credit unions connect in their communities and online has me fired up and focused!

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Advocacy Updates

Report on Advocacy Fund spending… NACUSO Working for You

Through the support of our members and partners, NACUSO raised approximately $273,000 in contributions toward its Advocacy Fund (and predecessor Legal & Litigation Fund) over the past 3 years.  The goal of the two funds together are to enable NACUSO to conduct crucial advocacy work on behalf of CUSOs and their credit union owners / partners.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars (we provided detail of how the funds were spent from 2014-2015 last year, which is also included in the attached Report), we would like to provide you with the following information, which was provided in detail to each contributor in the first quarter of 2017.  NACUSO spent the following amounts from the Advocacy funds during 2016:

$24,000     Dollar Associates, LLC - paid for advocacy work with Congress and NCUA on CUSO issues
$24,000     Messick & Lauer, P.C. - paid for advocacy work with NCUA and meetings with Congress on CUSO issues
$   718     Travel to Washington DC for meetings with Congress and NCUA
$48,718    Total amount spent influencing Congress and NCUA for favorable CUSO environment

The remaining funds, out of the total $273,000 in combined contributions, equal $110,323.  This represents the balance in Restricted Cash as of 12-31-16, as per the NACUSO Advocacy and Legal Fund Analysis report (click link below).

The NACUSO Board and its Legislative & Regulatory Advocacy Committee is continuing to prioritize the advocacy of a regulatory environment that is pro-CUSO and pro-collaboration within our industry.  NACUSO needs your support for this initiative and to accomplish its purposes.  While strategies may change over time based upon circumstances and opportunities to advance the cause of CUSOs, the necessity for funding of such initiatives is essential if NACUSO is going to remain in a position to impact the decision-making process for CUSOs and the credit unions that invest in, or utilize them.

Click to Contribute

For a summary of how NACUSO has worked to maintain an environment that is supportive of collaborative investment, the following report entitled NACUSO Working For You (see below) provides a summary of the work we have done on your behalf.  To capsulize some of its key points, a summary of what we feel are the NACUSO “wins” this past year are:

  • Effectively opposing the costly extension of Vendor Authority to NCUA.
  • Worked with NCUA on the revised MBL Rule.
  • Advocating for the expansion of CUSO powers to originate loans credit unions are authorized to make, to help bring scale and expertise benefits to credit unions in all loan categories.
  • Encouraged NCUA to be transparent in its budget and rule making including the OTR calculation.
  • Working with NCUA to minimize adverse impact of the CUSO Registry and to correct the acknowledgements initially in the Registry.

To emphasize the last bullet above, initially, in its first version of the CUSO Registry documentation that CUSOs were required to submit with their data to NCUA in 2016, the agency’s acknowledgement form required CUSOs – when submitting their data – to accept responsibility under regulations that only apply to credit unions but were not intended to, apply to CUSOs.  These acknowledgments, if left unchallenged and signed by CUSO officials, could have exposed CUSOs to potential penalties under regulations that do not, and were never intended to apply to CUSOs.  Upon becoming aware of this inappropriate acknowledgement requirement, NACUSO worked directly with senior NCUA staff to bring our concerns to their attention.  NCUA agreed to the NACUSO position and made the needed changes to the acknowledgements for the CUSO Registry data submission process.  In addition, for those CUSOs who had already submitted their registration and signed the acknowledgements, NACUSO developed a letter with the appropriate wording for those CUSOs to send to NCUA to clarify this acknowledgement concern. (more…)

NCUA Meeting Provides CUSO Guidance 6/16/16

NACUSO Visits NCUA to Discuss the CUSO Registry and CUSO Reviews

On June 14, Jack Antonini, NACUSO President and Guy Messick, NACUSO General Counsel met with NCUA Staff on the results of the CUSO Registry and the thinking on how CUSO Reviews will be handled.

The CUSO Registry sign-up period and the follow-up by NCUA found there were approximately 900 CUSOs.   NCUA believes that there are more CUSOs that have not reported.  Under the NCUA Regulations (Part 712.1(d)), “A CUSO also includes an entity in which a CUSO has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members.”   So these subsidiary CUSOs are considered CUSOs and required to make annual reports to NCUA.   The NCUA staff believes that many CUSOs were not fully aware of this requirement and there are a number of subsidiary CUSOs that have not reported.   NCUA will be following up with CUSOs to obtain these filings.   NCUA is also scrubbing the data and asking for clarification if the data is indicating that there may have been a reporting error. (more…)

Report on Advocacy Fund spending…NACUSO Working for you

Through the support of our partners, NACUSO raised approximately $63,000 in contributions toward its Legal and Litigation Fund in 2014 with a primary purpose to develop strategies for the most effective way to seek the repeal and/or mitigation of the impact of the CUSO Rule that NCUA had adopted in November 2013.  Subsequently, NACUSO established an Advocacy Fund to supplement the Legal and Litigation Fund.  The goal of the two funds together were to enable NACUSO to coordinate legal decision making, with a crucial advocacy component that will have more impact than the always risky option of legal action.  In total, $190,600 was contributed to the NACUSO Advocacy Fund.  Combined these two related initiatives received total contributions from NACUSO partners of approximately $253,600 in 2014 and 2015.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars, we would like to provide you with the following information.  NACUSO spent the following amounts from the two funds during 2014 and 2015:

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CUSO Registry Clean Up Period 4/22/16

As most of you know, all CUSOs are obligated under the NCUA Regulations to register certain information directly with NCUA on an annual basis.   Over 800 CUSOs did so in February and March.   NCUA is now in the process of making sure all CUSOs have registered.   Their new deadline is April 30.  They are taking CUSO information from the credit union 5300 call reports and sending out letters reminding “CUSOs” that they have to register.   Some credit unions may have incorrectly listed a company as a CUSO.  Other credit unions list their CUSO but use an acronym for the CUSO instead of the CUSO’s full name.   NCUA, not knowing better is sending letters to any and all companies listed on the call reports. (more…)

Regulatory Update 3/15/16

Letter to NCUA regarding CUSO Registry Acknowledgement: Yesterday, NACUSO informed you of a change we negotiated with our General Counsel (Messick & Lauer) with the NCUA regarding the CUSO Registry Acknowledgment each CUSO is required to agree to when submitting their CUSO registration in the NCUA’s CUSO Registry system.  As we pointed out in our Regulatory Alert yesterday, the acknowledgment required CUSOs to agree to be bound by statutes that only apply to credit unions and which imposed penalties that are not applicable to CUSOs.

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Change to the CUSO Registry Acknowledgement 3/14/16

During the process of assisting with CUSO Registry questions, it came to our attention that in order to complete the CUSO Registry, CUSOs were required to agree to be bound by statutes that apply to credit unions and which imposed penalties that are not applicable to a CUSO.  On behalf of NACUSO and the many CUSOs in this industry, Messick & Lauer (NACUSO’s General Counsel) have advocated and negotiated to revise this acknowledgement to more accurately describe the duty of CUSOs to respond to the CUSO Registry.  It is a contractual duty with the credit union and not a direct regulatory obligation to NCUA.   As NCUA continues to pay more attention to CUSOs, NACUSO will continue to take action to be the voice of CUSOs and to resist any attempts at regulatory overreach.  The NCUA has changed the acknowledgement text.  For your reference, the text of the previous and current CUSO Registry acknowledgments are below. (more…)

Regulatory Update 2/26/16

NCUA’s CUSO Registry Training & Demonstration webinar held on February 11 is now available to be viewed.  If you missed the webinar, or want to view it again, to help you in completing the CUSO Registry, you can watch it by clicking on the following link:  View 2/11/16 Webinar. You have until March 31, 2016 to complete your initial registration of all CUSOs.