Forbes Magazine recently published its first annual “Misery Index” ranking metropolitan areas based on several criteria, such as the economy, violent crime rates, commute time, weather, etc. If you haven’t heard, you know where this is headed — more bad news for Michigan. Detroit ranked No. 1 and Flint was No. 3.
Well, to borrow a football term, this is starting to feel like “piling on.”
We know Michigan has been suffering from what many have termed a “one-state recession.” We have the highest unemployment rate in the nation. We’re near the top in mortgage delinquency rates and foreclosure filings. There’s plenty of bad, depressing news to go around. And yet, this is a time to be optimistic about the future. In fact, an optimistic outlook might be the most important remedy for Michigan’s problems.
Have you ever been around someone who always complained about the weather or the economy or how much the credit union industry has changed or how tough it is to run a credit union? Contrast that attitude to the person who is the opposite. They might say, “I’ll take the snow over hurricanes or earthquakes any day. Spring is just around the corner.” The optimist is also saying things like, “We made a little money last year and we’re well capitalized. I’m proud of the job our staff are doing.” And on the economy, the optimist is overheard saying, “What a great climate for credit unions. We have so many opportunities to help people who really need it.”
In recent conversations with lawmakers in Lansing, I have heard three different lawmakers say the exact same thing. They believe that a big part of Michigan’s problem is attitude. That’s right — not the auto industry. Not the budget. Not taxes. It’s our attitude.
So in my President’s Report commentary this month — which I’m sure some cynics or pessimists will criticize as blind, useless optimism — I want to focus on challenging us as credit union leaders to think positively about the future. We need to see the many opportunities that exist for our industry to not only be relevant but to be an important part of the answer for moving Michigan forward. Every good leader understands that people respond more to an enthusiastic, positive call to action than they do to a threatening tone such as, “We need to cut expenses and start making money or there will need to be changes around here.” Yet there are occasions — especially in depressing economic times — we either knowingly or unknowingly migrate to a less-positive leadership tone. If you look at successful politicians, especially those in a presidential race, they always talk about change and they very craftily talk about how bad things are while still inspiring people to see positive things in the future. John McCain is positioned to claim the Republican nomination for the presidency, but he stumbled in Michigan, in part because of his “straight talk” about jobs not coming back to Michigan. Even if he was partially right, he should have focused on what he could do as President to bring jobs back to Michigan. People want and deserve an optimistic, upbeat outlook. For credit unions, the opportunities for a positive message in tough economic times are numerous. When looking at the situation through a positive set of eyes, the list of opportunities is lengthy. Here are 10 examples of how challenges or threats can be turned into opportunities.
The Housing and Mortgage Crisis — Credit unions are already helping their members with loan modifications in ways that other lenders wouldn’t consider. The MCUL and CUNA are encouraging state and federal lawmakers to provide clearer guidance on the level of risk that credit unions can take in the area of serving existing and new members with consumer-friendly mortgage products. Expect to hear more from the MCUL and the newly formed Home Saver Coalition (a consortium of banks and credit unions through the Michigan Bankers Association and the MCUL) about opportunities for expanding service offerings to help people get affordable mortgage financing to buy a home or stay in a home. This is good for Michigan’s economy and is simply the right thing to do. Nobody is better suited for this opportunity than well-capitalized, service-driven credit unions.
Job Skill Retraining — Programs like the Career Transition Program, a program sponsored by the MCUL’s CRI program and anchored by DFCU Financial (MW), provide credit unions with opportunities to help members with low-cost financing for getting the skills and training they need to re-employ. About 40 credit unions have committed funds but many are not marketing the program aggressively. This is the type of program that could do a lot of good for a growing number of households. Again, credit unions are extremely well suited to make a difference with this program and, in the process, get some great public recognition for doing so.
Financial Education and Counseling — Michigan credit unions have always done a stellar job of supporting youth financial literacy efforts. More than 45,000 students are reached every year through volunteer presentations in schools by credit union leaders. Some 300 student-run branches also give young people an opportunity to learn more about basic finance. But the opportunities are huge for expanding financial education, especially for adults. The MCUL is expanding its staff support in this area to help encourage and coordinate credit union community education efforts around the state. Scores of credit unions also provide counseling services through programs like Greenpath’s Accel program. All credit unions should strengthen their commitment of resources to sponsor local-level education seminars on finance topics and to provide basic counseling services to members. Consider the power of offering a free review of mortgage documents for members and non-members. It would be a great opportunity to promote credit union membership and provide a valuable community service, helping consumers avoid the effects of predatory lending practices that have contributed to the current mortgage mess.
The P2P Economy — The February 2008 edition of Harvard Business Review showcased its list of “breakthrough ideas for 2008.” At the top of the list was the P2P economy. After describing the effect of peer-to-peer networks on the media industry (i.e., blogs, YouTube, file-sharing, etc.), the magazine suggested that, “a shock like the one that jolted the media is poised to strike other industries, perhaps more disruptively. It is already being felt in financial services. Start with the phenomenon of microcredit, the lending of small sums to, and then within, social groups at the village level in poor economies, with members collectively guaranteeing the bank’s loan. Combine that with the power of a global digital network, and a new model for banking begins to take shape.” This sounds an awful lot like the credit union model. This kind of intellectual, high-level discussion should cause credit union leaders to wonder if we’re not in a great position to reinvent ourselves to meet some of these micro-credit “banking” needs through creative, collaborative programs.
Patronage Dividends — I’ve recently written about how impressed I am with the new application of an old credit union idea, offering year-end supplemental patronage dividends similar to those offered by DFCU Financial and Dow Chemical Emp. CU (MM). This is a huge opportunity for credit unions that have excess capital. The idea is simple: Be competitive throughout the year on rates and fees. At the end of the year, plan to either reduce capital/assets modestly or break-even on ROA by offering a supplemental patronage dividend. Tout this as the credit union difference and members/potential members will see this as a great reason to do business with the credit union. Banks and other providers simply don’t operate this way. At a time when credit unions are struggling to grow organically (without mergers), patronage dividends are a great way to encourage people to do business with the credit union.
Collaboration with Bankers — The recently-formed Home Saver Coalition formed by the MCUL, the MBA and the Michigan State Housing Development Authority (MSHDA) provides a great example of how two industries can disagree on a few fundamental points (such as the credit union tax exemption) and still find opportunities to partner in ways that are win-win for each industry and the customers/members they serve. We might even find along the way that we have more in common than we have differences. What could be next are opportunities to partner in areas of student loans, competing against captive finance companies and business lending by strengthening communications with state agencies whose funds could be more effectively leveraged through a bank/credit union coalition.
Touting the Credit Union Difference — Even in a very difficult budget climate for Michigan credit unions, the MCUL cooperative advertising program continues to build support. In 2008 we had to step up the fundraising deadline in order to raise money for a spring advertising campaign due to the high cost of fall advertising associated with the presidential election. In spite of the earlier deadline and the bottom-line pressures faced by credit unions, the campaign’s participation is already at a record-high level of 53 percent of credit unions, compared to 48 percent in 2007. In the coming weeks, we hope these numbers will go even higher. Whether done individually or through cooperative advertising, credit unions have huge opportunities to tout the credit union difference as part of our advocacy efforts. In tough economic times, credit unions are more relevant than ever and we have to invest in marketing and communications to get that message across to members, consumers, community leaders and lawmakers.
Taking Advantage of New Powers — Thanks to the efforts of our Michigan credit union community and the MCUL, state-chartered credit unions have an unprecedented opportunity to expand their fields of membership, invest in CUSOs and seek new powers from an OFIS Commissioner who has the authority to approve “any power necessary to compete in the financial services industry.” We are now seeing credit unions of all sizes exercising their ability to expand their fields of membership and offer new services to their members. This is not the case for federal charters or state-chartered credit unions in other states. Never before have Michigan’s state-chartered credit unions had this kind of flexibility. The MCUL stands ready to advocate on behalf of the industry and credit unions individually in order to get the regulatory authority necessary to grow and expand. Competition is fierce, but one of the great benefits of a trade association is its ability to contribute to a positive regulatory climate. We have that in Michigan and we can all work together to make it even better in the future.
Leveraging the Credit Union Value Brand — In tough economic times like these, people are looking for value. Discount retailers offering groceries, home improvement products and other consumer products are in high demand right now. This is also true in financial services. Credit unions can’t always offer the best rate or the lowest fees but often they can. Credit unions have a huge opportunity in tough economic times to pitch their “value brand” to consumers.
Membership Enhancements through Partnerships — Partnerships with service providers like AAA and Sprint give our industry the opportunity to offer exclusive credit union member discounts on products like auto insurance and wireless phone services. CUcorp will continue to look for these opportunities and so should credit unions. Generally, we bring more to the table when we do this collectively but whether it is done individually or collectively, we have good opportunities to create more membership enhancement programs that create a stronger value proposition for being a credit union member.
The possibilities are endless. But I do agree that the foundation for future success, especially in difficult economic times, is a healthy dose of optimism and positive thinking. Credit unions are more relevant than ever and opportunities for collaboration and cooperation are all around us. We at the MCUL/CUcorp look forward to identifying, prioritizing and seizing as many of these opportunities as possible.