The Good and Bad News… about being a Financial Cooperative (ie. a Credit Union)
What’s the difference to Joe if he loses the car to the credit union or the bank? To Joe, there’s probably not a lot. It’s personal, it’s painful, no one seems to understand and he’s angry.
Every now and then I have to take my lumps in the public, I assume from someone whose car we had to repossess or who is in the midst of the collection process. Often there are adjectives included to ensure I know just how mad they are. I get it; but regretfully sometimes the final determination satisfies no one. The important issue in this case is that a credit union, as a financial cooperative, is obligated to all the membership to take appropriate steps when a borrower can’t make their payments. There’s not much difference than if one individual lent money to another individual. Well, there are a few differences. The first difference is that there is a group of people, the cooperative, lending the money to Joe and the other difference is that the group has agreed to try to make the loan at the lowest rate and fees possible, because we don’t want Joe using a loan shark and of course the bank is obligated to their stockholder to maximize their profit.
Great Basin members were as hard hit by the recession the last three years as other Northern Nevadans. Many families lost one or both jobs. Difference number three; the cooperative is governed by a board chosen from the group to represent the interests of the group, but also to guide the collection process with the individual borrower to ensure we did everything possible before repossessing the car. In the last three years the credit union modified $4.5 million dollars of loans, both consumer and real estate. Every month the board reviews reports of the modified loans, and of every loan that the cooperative has had to charge-off as a loss. This includes the situation of the borrowers, the efforts of the collection process and whether there were offers of loan modification to try to minimize the loss to the cooperative. Let’s be clear, every loss adversely affects the financial health of the cooperative. While I’m here, difference number four; the board members are all volunteers and cannot be compensated in any manner by law.
So the question might be asked – why repossessions and charged-off loans at all? I might point out the federal regulators and the AICPA requirements here, but let’s focus on the essence of a cooperative. Why should one person pay and the next not? Everyone participates in a cooperative and a central idea is to keep it fair to all the members, all the cooperative’s owners.
Finally, we have some great employees and volunteers at Great Basin and they have done a tremendous job the last three years under the worst of circumstances. Maybe we’re not perfect and we may have had to disappoint some people, but I know what we do here and the efforts we take to be the absolute best financial cooperative – or credit union – that’s possible.