The Remarkable Success of Michigan’s Credit Unions is Largely Attributable to Their Historic Willingness to Join Hands, Pool Resources and Work Together.
And, with More Battles Looming over Regulatory Reform and the Credit Union Tax Exemption, the Need for Unity is as Critical Today as Ever Before.
Why should a credit union be a member of the MCUL?
That question really isn’t any different than asking why an individual should bea member of a credit union. Individuals come together to form credit unions because they know they can accomplish a lot more together than they can separately. By cooperatively pooling their money, even people of modest means create a formidable capital resource available when a member needs to borrow, and an opportunity for savers to earn a fair rate of return. Everyone benefits.
By combining their resources to form a strong and effective trade association, credit unions do the same thing. And —as has been the case since the League was organized more than 70 years ago — the need for that combined strength is as critical today as it ever has been.
Indeed, change and challenges define the credit union movement’s horizon. Another serious threat looms to the credit union tax exemption. Much-needed credit union regulatory reform has come up against a strong head wind of opposition from the banking lobby. New technologies and changing regulatory compliance requirements make staff training and education an acute and never-ending need.
Michigan’s employment and economic growth continue to lag, and the future course of interest rates and the economy is anybody’s guess. In short, this is not an auspicious time for Michigan credit unions to go without the strength and safety provided by an effective trade association.
“Our industry is involved in a ‘seachange,’” observes Mark Day, president/ CEO at Genesee First FCU (FL). “The number of credit unions in Michigan is now less than there were in 1950. The competitive threats and complex regulatory environment are challenging every Michigan credit union.
“The MCUL has an important role to play in stewarding Michigan credit unions through these changes. Our credit union has been a supporter of the League since its inception — and that will continue in 2006.”
A consolidation trend stretching back to the 1960s has created numerous large and sophisticated credit unions with multiple common bonds and a vast menu of products and services. But even the largest credit unions can’t hope to match the influence with legislators and regulators wielded by the MCUL and CUNA, which can claim to represent some 4 million Michiganians and 87 million Americans, respectively.
Nor can any single credit union match the cooperative image advertising, the media advocacy efforts, the education and training programs, or the information resources fostered by the MCUL and CUNA.
“The League simply does things for me that I can’t do myself,” said Southeast Michigan State Emp. FCU (OC) President/CEO Martin Hansen. “Things like publicizing the value of credit union membership through extensive cooperative advertising and media advocacy programs, or representing credit union interests in the legislative and regulatory arenas.
“Plus, we’re heavy users of the League’s education and training programs, which are very valuable and informative. There are other education resources available, but the League’s programs are credit union-focused and more relevant to what we do.”
Any catalog of the League’s achievements, however, has to include what has been prevented as well as what has been accomplished. Indeed, the former might be more significant than the latter, as today’s credit unions remain free of corporate income taxes and able to grow in a generally friendly regulatory and legislative environment.
Given the long-standing hostility of the banking industry — represented by one of the best-funded and most sophisticated group of lobbyists in the country — the success of the credit union movement both in the legislatures and in the marketplace is a historical development of some note. Unity and strong trade associations have made these triumphs possible.
“The Michigan credit union movement remains influential within the halls of Congress, as well as the NCUA and OFIR, because of the MCUL’s political advocacy and its timely quality responses to our regulators’ requests for comment calls,” noted LAFCU (LN) President/CEO Robin Frucci. “Without the MCUL, only a few credit unions would devote the time to respond to comment calls — exposing ourselves to the well-funded attempts by the banking industry lobby to strangle us with unfriendly regulations.
“Support of the MCUL from all Michigan credit unions is vital to the strength and survival of our unique cooperative financial system.”
Remarkably, given all that the Michigan League provides, MCUL dues are significantly lower than any of the top 10 state leagues in the nation after the MCUL Board of Directors permanently reduced membership fees by an average of 40 percent in 2002. Supporting credit union unity and securing the future of credit unions through participation in the League and Credit Union System have never been a better or more affordable investment.
In serving its members, the MCUL’s leadership has not been content to wait on events, acting only when threats and dangers are imminent and acute. Over the previous year, a three-tiered, proactive approach has been adopted that will help position the Michigan credit union movement to be stronger and more secure in the future.
Those three key areas are legislative advocacy, cooperative image advertising and the Community Reinvestment Initiative (CRI). Each is critical to the future success of the Michigan credit union movement, and each can only happen when credit unions join hands and combine their resources.
Consider: Although Michigan credit unions now hold more than $30 billion in assets and can claim some 4.4 million members, surveys show that literally millions of Michiganians don’t even know what credit unions are or what makes them unique — and, as one would expect, can’t give a single reason why anyone would want to join one.
A recent survey of 1,400 Michigan consumers indicated that 23 percent of those responding, which included both credit union members and non-members, did not know enough about credit unions to have an opinion about them. Among the non-members, 39 percent could not give a reason why anyone would want to join a credit union, the equivalent of some 3.5 million Michigan consumers.
“A person who has no idea what makes credit unions unique isn’t going to understand why Congress and the state legislatures should craft public policy to protect and promote that uniqueness,” said MCUL President/CEO David Adams. “Having millions of people —among them legislators and journalists — who know nothing about credit unions is not a healthy situation. When bankers and their lobbyists approach the uninformed with their anti-credit union rhetoric, they’re pushing at an open door.”
As credit union professionals and volunteers are well aware, banking lobbyists have been aggressively attacking credit unions of late, targeting everything from the credit union exemption from corporate income taxes to credit union membership policies and proposed credit union regulatory relief. Protecting the tax exemption and promoting legislation and regulations that encourage credit union success and growth are key missions of the state leagues and CUNA.
“An informed legislature, media and public are the cornerstone in our strategy of longterm success in resisting the banker attacks,” Adams said. “Persons who understand that credit unions are not-for-profit, memberowned cooperatives that offer consumers a better deal will recognize that the motives of the banking industry’s attacks are simply anticonsumer and have nothing to do with ‘fairness’ or a so-called ‘level playing field.’”
Educating Michiganians on credit union uniqueness and the better deal that not-forprofit financial cooperatives offer Michigan consumers is the essential mission of the Michigan Credit Union Brand Campaign, which launched the state’s first-ever statewide credit union TV ads last summer.
“When we ask members to contact their members of Congress to preserve our tax status, will they be motivated to act? Getting out the message of our cooperative advertising campaign will improve the likelihood that they will be,” Adams said. “And, when we need the support of state and federal lawmakers, their own perceptions of credit unions will be influenced by a well-coordinated, statewide cooperative advertising campaign.”
The League’s Community Reinvestment Initiative, or CRI, seeks to underscore credit union uniqueness by enhancing voluntary credit union community involvement and the credit union social mission. This also has a critical bearing on future credit union success.
“Most for-profit corporations recognize the need to show a degree of social responsibility,” Adams says. “These efforts may accomplish a lot of good, but they’re still viewed as either a cost of doing business or another means of maximizing stockholder profits.
“Significantly, it took an act of Congress, the Community Reinvestment Act, to wake up the nation’s banking industry to their responsibilities in developing and building their local neighborhoods. We want to show lawmakers, the media and the communities that credit unions are different. Credit unions exhibit social responsibility not because they’re legally obligated to, but because it’s part of their mission — it’s the right thing to do.”
Some specific ongoing areas of activity for the CRI project include exploring opportunities for further expanding credit union lending programs to better target the underserved; expanding access to credit unions through shared branching and business models that provide access to ethnic groups who would benefit from credit union services; educating young people, seniors and others regarding basic financial skills; participating in local community and civic activities, donating to charities and helping local communities grow and thrive; developing resources and information regarding the credit union pricing difference on basic consumer financial services; and expanding credit union participation in student loan and scholarship programs to help develop Michigan’s workforce and economy.
“It’s an ambitious agenda, but we know that most Michigan credit unions are already involved in many similar projects,” Adams said. “In fact, much of CRI is just a matter of recording and documenting what credit unions are already doing under the traditional credit union philosophy of People Helping People.”
CRI is encouraging each credit union to formally embrace its social mission by incorporating it into its strategic plan. “Doing so will not only help credit unions keep their ‘eye on the ball,’” Adams said. “It will also put us in a much stronger 5
position when the next round of banker attacks begins. “The heart of the bankers’ case for credit union taxation is that credit unions are really no different than banks. Maintaining a record of credit union social responsibility will give us positive proof to refute this erroneous claim. When members of Congress or the state legislatures ask us how we’re different, we’ll have tangible evidence of how credit unions are not only improving the lives of their members, but also benefiting the social and economic well being of their communities.”
The final key initiative in the MCUL’s three-prong approach — strong legislative advocacy — is, of course, a traditional core MCUL service. But today’s legislative and regulatory environment has given that core service greater urgency.
“Credit unions may be growing a bit jaded with calls to increase funding for our state and federal PACs, MCULAF/MCULLAF, and get more involved with grassroots legislative advocacy,” said MCUL Chairman James Dahl. “But the need is real. “This is a critical time in Washington, and Lansing as well. Both the federal and many state governments are seriously short of revenue, and the loud clamor from banker lobbyists to tax credit unions is likely to resonate with some lawmakers.
Credit unions can’t afford to become complacent.” Every credit union needs to adopt a plan for its political involvement, such as MCULAF/MCULLAF fund raising, direct involvement in meetings with lawmakers and participation in the MCUL and CUNA Governmental Affairs Conferences and “Hike the Hill” events.
“Our PAC numbers sound impressive, and Michigan is usually at or near the top of total PAC fund raising,” Dahl said. “But it’s sobering to realize the banking industry typically outperforms us in PAC fund raising by a factor of about 8 to 1.
“We need to do an even better job with MCULAF and MCULLAF, and the League will continue to build on credit union people power to overcome the bankers’ funding advantage. The grassroots participation of credit unions and credit union members is essential in making this happen.”
Every year, each credit union makes an individual decision on whether or not to participate in the MCUL and CUNA — but this individual choice has far-reaching ripples that impact on the entire credit union movement. Will credit unions be strong enough to promote credit union regulatory reform, maintain their tax exemption and ensure that today’s and tomorrow’s consumers enjoy the benefits of cooperative financial services?
Will credit unions have the resources to provide effective regulatory advocacy, build and maintain a positive image among the media and the public, and foster continued growth in credit union membership in the face of continuing banker attacks?
“In Michigan, all these things and much more can be achieved — can only be achieved — when credit unions join hands under the banner of two of the nation’s premier trade associations, the MCUL and CUNA,” Dahl said. “We all believe in credit unions, and we all have a vital stake in a strong state and national trade association.”