I recently read an amazing book entitled Maxed Out authored by a fellow named James Scurlock. The book details the questionable practices of banks and credit card companies and explains in vivid detail how these actions impact American consumers. I asked James to comment on what his research could mean for credit unions. Here is what he had to say:
As I’ve traveled the country with Maxed Out, one of the most common questions I hear is, Is a credit union a better choice than a traditional bank?
As a writer, I’m not qualified to give financial advice, but I always have to agree that, in theory, a credit union offers a lot of advantages.
As a fly on the wall of the banking industry for the past two years, I can tell you this: customers are confused, frustrated and often very angry. The Better Business Bureau receives more complaints about banks and credit companies than any other industry. Customers can’t understand their credit card agreements and increasingly don’t know what their mortgage payment will be a year from now. Credit card fees have increased one thousand percent in the past decade – for no discernible reason.
The subprime mortgage fiasco has shaken the markets as well as millions of homeowners. Many remember Alan Greenspan’s testimony three years ago, where he suggested that Americans take out adjustable rate mortgages, and feel betrayed. Is it any wonder that consumer confidence just hit a record low? Or that most of your customers don’t know where to turn?
Compounding the confusion is the fact that the line between ivory-tower bank and shady finance company has become hopelessly blurred. All of the major banks either own finance companies, or are in the subprime credit business themselves. For their customers, it’s been trial by fire, and, just as the go-go behavior of the banks in the 1920s (and the resulting banking crisis) shaped a generation’s cynicism, the fallout from our modern easy credit binge will be with us for decades.
The big banks are running scared. Citigroup recently promised to stop two of the most confusing credit card practices – universal default and “anytime, any reason rate increases” while JPMorgan Chase, the world’s biggest credit card issuer, announced that it will no longer use double-cycle billing – a mathematical sleight of hand that even a professor at M.I.T. couldn’t understand! Banks have pledged to work with subprime borrowers to stave off an impending wave of foreclosures and they’re getting grilled on Capitol Hill.
But the people I talk to, the regular customers, say it’s too little too late. A prominent consumer advocate is now developing a rating system, much like those used to rate food safety, to give frustrated customers an idea of which products are safe and which are not. In the meantime, millions of Americans are looking to make a change and my guess is that interest in credit unions is at an all-time high. If this industry can do a better job of telling Americans what a credit union is and why it’s different from their bank, my guess is that millions will happily make the switch.
I encourage you all to pick up a copy of James’ book (www.amazon.com) or, better yet, rent his movie which is coming out on DVD June 5th (www.netflix.com). Credit unions have a real opportunity to be the straight shooters in personal finance…I hope James’ post provides you the ammunition to have this conversation at your credit union soon.
Comments
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George,
Thank you for this very timely piece. I thik this book shows us the overwhelming need for promoting thrift.
Many credit unions today are promoting debt. The argument being it’s where they make their money. BUT, we need to remind members to “pay themselves first.”
You’re right, we have been given the much needed opportunity to be the straight shooters in personal finance.
How do you think Courtesy Pay stands up to that category? Or the 7 year car loan? Or the interest only mortgage? Is that in the member’s best interest?
Great post!
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GH, Stellar interview – I’m dying to see the movie. Denise, as always you’re spot on. Love the statement – “we have been given the much needed opportunity to be the straight shooters in personal finance.”
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The premise of Scurlock’s work is one all credit unions need to consider going forward. Thanks for the comments Trey and Denise.
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Great review George. One aspect that needs to be understood. Larger credit unions have moved to a sales culture. The staff needs to make the sales benchmarks set by the management. The culture of service, though voiced admirably, is mostly just lip service. You can’t have both. So to maximize growth that condtions many aspects of the business the sales culture is the choice. I remember speaking with a retiring CEO and asked him if he could do anything over again what would it be. He said he would have never introduced a sales culture, it destroyed his CU. They are big now but at what price?
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I respectfully disagree that a Credit Union can not sell and provide service at the same time. As our friends at Filene have revealed that the average CU member owns 10 accounts. The average CU holds less than 2 of those. Who better to take care of the members’ business than the CU? No one, of course. We must never sell something to a member that they do not need. We must not push a product to a member simply because we need to generate income. However, I believe that it is a primary mission of every CU to improve the financial well being of its members. To do that, we must indentify their needs and provide them with a CU solution that will improve their financial well being. That moves service beyond the low level that msny live at, fast, accurate and friendly. This “exra mile” service is in alignment with both the CU mission and member needs. This is not a sales culture or a service culture. It should be the Credit Union Culture.
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I love your comment about being the “straight shooters” of personal finance, Denise. When I did some member focus groups for a credit union during a branding project recently, the members actually used the term “straightforward” to describe how their credit union is different than a bank. We built their entire brand value proposition around what I call the John Wayne personality type. I also agree with Michael Neill that sales and service are not mutually exclusive. In fact, we do our members a disservice when we do not use our trusted position with them to advise them on the things that would truly improve their financial lives. Perhaps Gene is referring to some misguided attempts to impose a bank-style sales culture on a credit union. I have seen it happen, too, Gene, and it can erode the credit union’s brand position and destroy employee engagement. It happens when goals and incentives are misaligned with the brand and the mission. However, I have also seen that when the goals, the coaching, and the incentives are aligned with a member-centric mission, both member loyalty and employee engagement skyrocket.
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