That Credit Union Blog

When I teach the legal aspects of social media, I usually ask the audience what the hardest part of doing a credit union blog is.  The answer?  Generating the content. You would not think that slapping up 400 words worth of blah blah would be that hard a couple of days a week.  But there’s a catch. It’s not 400 words of blah blah, it’s 400 words that are either informative, entertaining or both.  Otherwise no one comes back.

Since this is a Frivolous Friday post, I can feel free to reach a little bit and that’s what I am going to do.  I am taking my wife to see Dennis DeYoung tonight.  Those of you who know music are probably laughing.  To music aficionados, Styx is no longer thought of as a cool band and many of you might be thinking:  “were they ever?”  Yes, there was a time in small town America during the late ’70s and early ’80s when Styx was highly regarded.  In fact, that time period was their heyday before people began rejecting all those synthesizers and dramatic vocals. Nonetheless, Styx remains in popular culture occasionally popping up in commercials or cartoons.  Styx was over the top even by ’70s band standards, with not just one but two talented lead singers.  Today those singers are touring separately the one I’m seeing tonight is definitely the more theatrical of the two.

Which brings us to the tie-in.  Are credit unions cool still?  Were they ever?  If not, when was their heyday?  I would say that credit unions might have come into a little bit of coolness with the whole bank transfer day thing last year. That is, until people see that your typical credit union is often made up of hard working people who wear a lot of hats, focus on member service, and try their best to keep costs down.  In my opinion, credit unions aren’t cool in that James Dean style benchmark, credit unions are awesome in the bring-value-to-the-world sort of way.  Are they in their heyday?  That’s a tougher question. Many might say that in America, credit unions had their heyday in the 1930s when Ed Filene, Dora Maxwell and Louise Herring were expanding the Credit Union Movement into a national force.

Today, there are few new credit unions being minted and much has been made about how credit union assets as a group are increasing but the number of credit unions are declining.  I blame increased regulatory compliance but there are also market factors and competition making this happen as well.  So to tie all this together, are credit unions like the band Styx with their heyday over and the two lead singers touring separately and capturing ticket sales from aging Gen Xers?  Not at all.  It is entirely frivolous to compare the awesomeness of the Credit Union Movement to a band from the 70s.  But I have written more than 400 words on Friday so my job here is done.  Have a great weekend.

For the last few months, in a corner of my mind, an idea has been bouncing around my head, waiting for a Friday to emerge.  The idea is simple, really:  a new ultra low cost loan product for credit unions that would make members happy, increase a credit union’s loan volume (and its bottom line) and, well, revolutionize the industry.

Ladies and gentlemen, with all the seriousness implied in a Frivolous Friday post, I give you the Ugottaloan!

What do members want?  They want money and they want it now.  To get a Ugottaloan you need three things (other than a pulse):  (1) a driver’s license, (2) an email address and (3) a job.  Here’s how it works.  The member signs up for the program and gives the credit union all the information required under the Patriot Act, The Bank Secrecy Act and FACTA red flags, etc.  Maybe we’ll throw in a genetic scan too and of course a full body search, just to be on the safe side.  The important thing, though, is that the member has a job and an email address because that’s how the credit union gets paid and communicates with the member.

The Ugottaloan is pure, raw innovation because it features the Daily Periodic Statement and is 100% paperless (after the ream of initial disclosures of course although I’m thinking we could force the member to scan these in the lobby and then shred them).  The Daily Periodic Statement consists of a series of tabular format disclosure that go well beyond anything the Federal Reserve Board could imagine and far exceed any Congressional requirements.  Every single day, the member will know exactly where he or she is with the Ugottaloan if he or she chooses to read the email.  Just because that will never happen doesn’t really matter, right?  Members don’t read what they get now anyway.

But this isn’t even the best part of the Ugottaloan.  Members want their money and they want it now.  Let’s dig into the inner workings of the product, shall we?  I envision this product being in three tiers:  $500, $1500, and $3000.  After the member is approved (and underwriting here is very simple:  pulse, job, email address—approved!) the member can get cash advances any time he or she wants by swiping his or her drivers license in a card reader at the credit union.  This loan is hyper-open end.  The member can take as many draws as desired up to the balance available at any time.  The credit union gets its loan payments via direct deposit every time the member’s paycheck hits the member’s account.  The interest rate on the loan is 18% and there are no fees for anything.  Totally simple.  The monthly payment is based on 4% of the average daily balance.

Wait, you say, this doesn’t makes sense, a member can get cash advances on a credit card right now in a similar fashion.  Ah, that’s true, but the member also gets fee’d to death!  Here, the member can avoid check cashing companies, overdraft services and cash advance fees.  Sure, the 18% rate with a 4% minimum payment is akin to the old company store arrangements that Johnny Cash used to sing about but is it still better than the alternatives! 

And Ugottaloan sells itself!  Put up a banner:  “Gotta job?  Ugottaloan!”  Later you can add bells and whistles like a Ugottaloan debit card that lets the member use the loan program through ATMs or even allows members to buy things with it.  “Doesn’t it become a credit card at that point?” you say.  Well, maybe, we’ll have to think about that more, but the point is you can start out slow and think big later.  And even if it is, since it is paperless we can pound the member with disclosures and statements constantly and not kill forests in the process. 

Ugottaloan is nothing if not honest and it makes everyone happy.  The member is happy because money is easy to get and there when the member wants it.  Congress and the Fed should be happy because we are bombarding the member with a constant stream of information concerning the loan.  The member sees the balance every day and can pay it off anytime he or she want.  If that doesn’t happen, it becomes sort of an annuity for the credit union but at the same time the member pays less than with other life blood sucking products available.  The credit union wins because it gets paid first through the direct deposit process and if the member messes with that he or she gets cut off immediately and the member gets more tabular format emails explaining what happened.  Win, win, win!!!

Ugottaloan:  it’s the future of lending.

(Rob Rutkowski has to take the sole blame for this one…)