Credit Unions Are Subpar on Subprime? Bummer!


By Linda Bodie, Chief Innovator, Element FCU

I was recently reading a blog post by Sarah Snell Cooke titled, “Credit Unions Are Subpar on Subprime.” My initial thought after reading this headline was, ‘Uh, no we’re not! We’re credit unions. It’s part of what we do.’ Then I read the blog. Wow.

I was disappointed to see that banks and credit unions look almost identical regarding loan portfolios and credit score mix. According to the Equifax chart, we’re like twins. That’s disturbing on several levels.

What about the little guy? What about people helping people? What about education and passion to help members on their path to financial wellness? What about saving members from predatory lenders? What’s going on?

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I’ve been CEO of Element Federal Credit Union for more than 18 years. During that time, I’ve created and changed a lot of things. Changing our credit union’s mission and philosophy was not one of them. For more than 18 years, we have committed ourselves to the person, not the dollar. Every decision starts with the person, the humanitarian focus—not the numbers.

Let me tell you one of many, many stories just like this:

Charlie came to Element in July 2015. He needed a small personal loan for $1,000. His credit was not good, and he had several collection items. We couldn’t approve the loan, and as expected, he was disappointed. But instead of saying, ‘No, see ya later alligator,’ Pam, our loan officer, asked if he would like to review his credit with her. He seemed shocked. No one had ever offered to help him. She sat with him for 30 minutes, and made a plan to start picking off one collection item at a time. Work on paying them off, one baby step at a time. Pam also told him to get receipts for everything he paid off so he could keep a good record of all that he had done. If he could stick to the plan, he could come back in 6 to 12 months, and see what we could do.

Subprime credit scores are not subprime people.

A funny thing happened. He came back to the credit union a year later. He had followed the plan and paid off his collection items. His credit score had risen from 516 to 637. He had a laminated folder with everything in it: His plan for cleaning up his credit and all the receipts from his payments. He was so proud and so happy. And Pam was, too. He was able to get that small personal loan and now has two car loans and a full relationship with us. And he still brings his laminated folder with him whenever he wants to talk about his financial plans.

Not every story ends this way, but many of them do. In fact, we have had two board members—long before they were board members—experience financial turnarounds, because we took the time to coach them through their issues. They were so thankful, and they totally ‘got it,’ and understood why our mission is critical to so many people. They wanted to give back and help us continue that same mission, so they volunteered to serve on our board.

Subprime credit scores are not subprime people. They are human beings with real hardships and challenges. Death, divorce, abuse, neglect, lack of financial education and how the system works, sucked in by predatory lenders, ‘young and dumb’ … you name it. Each one has their own unique story. You just have to listen. If they want help, we help them.

For more than 18 years, we have committed ourselves to the person, not the dollar. Every decision starts with the person, the humanitarian focus—not the numbers.                                                                                          

 But I’m not that naive. I know it’s about the money, and it’s about the regulator, and it’s about the safety and soundness of the financial system. I get it, and yes, it’s important. I fight with examiners over our lending philosophy, which oddly enough is the frakking credit union philosophy and why we were founded in the first place. We make loans to good people with bad credit scores or no credit scores. Yes, we lose some, but we price according to the risk. Yes, it’s 10 times the work, but it’s 10 times the reward. We choose to help the 98% and price to allow for the 1-2% who just won’t make it.

We have a reputation in our area. If other banks and credit unions can’t approve a loan because their credit standards are so ridiculously tight, they send the person to us. We get so many referrals, and they’re really good loans and really good people. It’s unbelievable. Financial services are becoming a privilege in which many no longer qualify. Is it just too hard? Does it take too much time? Is it too risky? Are we too lazy? Are we becoming “banks” where only the numbers matter? What about the love and passion for our members, our communities and our world?

Read the original post, Credit Unions Are Subpar on Subprime.

From the consumer perspective, from your potential member perspective, the pressure is real. And life is hard. People need us now more than ever. Let’s not give up on them, and let’s not give up on the love we have for humanity and the well-being of everyone … no matter what their credit score is.

As always, life is just better with song. One of my all-time faves and inspirations that keeps me grounded to our mission, "Under Pressure":

“It’s the terror of knowing what this world is about

Watching some good friends screaming “Let me out”

Pray tomorrow gets me higher

Pressure on people, people on streets

Turned away from it all like a blind man

Sat on a fence but it don’t work

Keep coming up with love but it’s so slashed and torn

Insanity laughs under pressure we’re breaking.

Can’t we give ourselves one more chance?

Why can’t we give love that one more chance?

Because love’s such an old-fashioned word

And love dares you to care for

The people on the edge of the night

And love dares you to change our way of

Caring about ourselves

This is our last dance

This is ourselves under pressure.”

 

Thank you Queen and David Bowie.

Peace, love and credit unions.