In Monday’s briefing with Treasury Secretary Henry Paulson on the agency’s regulatory overhaul, Dan Mica said the proposed changes (which include the demise of the NCUA) could mean the end of credit unions as they are today, according to CUNA News Now.

The article goes on to explain Mica’s analysis of the impact on credit unions (and in the end, consumers):

• All institutions desiring federal deposit insurance – whether banks, thrifts, or credit unions; including state-chartered institutions – would be required to obtain the new “federal insured depository institution” (FIDI) charter (report p. 160);
• The recommendation would combine the five federal regulatory bodies into three – the National Credit Union Administration would cease to exist;
• Cooperative institutions could operate under the FIDI charter. However, to qualify for the tax-exemption, these institutions would be required to elect “community status” and meet a series of apparently stringent tests in terms of asset size, field of membership, and service to the underserved. It appears small banks also could meet such tests and claim the tax-exemption (report p. 161);
• A Presidential Executive Order may be issued to all federal regulators expanding an existing interagency working group and directing them to more closely coordinate during the current financial crisis. After the expansion, NCUA will still not be included;
• Finally, there is insufficient information about the new federal regulatory body that would oversee all payment systems.

Is Mica right? Is this the end of credit unions?

• Download the PDF of the Blueprint for a Modernized Financial Regulatory Structure here.
• Thanks to Trey Reeme for the phone call and dialogue about this.

This week I’m at the CUNA Governmental Affairs Conference. It is enormous.

I’m here working with the NCUF’s REAL Solutions to hunt down CU industry thought leaders and record their thoughts on the conference, and, in particular, gather insights on serving low-income consumers.

We’re documenting the conference through video interviews, podcasts, and photos which are all viewable (with more to come) at realsolutions.coop.

One of our chats was with Doug Fecher, CEO of Wright-Patt CU. In this video, he unpacks the story of a vocal low-income member and how it lead to their payday lending alternative StretchPay:

Also, CU Communicator Jeff Hardin and Boardcaster Ginny Brady have been covering the conference on their blogs as well. Definitely check them out.

And if you’re in town, come hang tonight at the TwittaBloggerSocial Meetup – going down at Capital City Brewing Company.

One of the saving graces of the leftover-filled dead week between Christmas and New Year’s Day are the year-end wrap-ups. No wrap-up story ever won a Pulitzer, but they’re interesting to read. So, to the pot-luck of lists and reprisals, I’m going to add my own.

This being a blog, and therefore collaborative, I’m eager to hear everyone else’s contributions to and opinions on the OpenSourceCU.com Top Credit Union Stories of 2007 (Now With Resolutions!). During this week of warmed-over dressing, think of this list as a sizzling sirloin steak, hot from the fire, ready for you to tuck into (for you vegetarians, think of it as whatever it is you tuck into that’s really satisfying…salad maybe? potatoes? tofu?)

My seven top credit union stories of 2007…bon appetit!

No. 7: The iPhone

It has its flaws. It’s wildly expensive. It’s great-grandfather was the Newton. But this zeitgeist-expanding gadget moves the bar for mobile computing and, ultimately, mobile banking services. It also allows for easy use of social media and opens the number of communication channels. Think about the annoyed member posting to a blog while in line to wait on a member service representative to fix a mistake another MSR made. If someone using a iPhone actually stands in lines waiting for MSR’s.

Resolution: It’s an antiquated attitude that technology and social media are just toys. I would love credit union staffers to open their minds to new technology and look at it from a perspective of early adopters and ask some simple questions: How is this used? How does this impact me? How could this impact my credit union?

Sub-Resolution: Personally, I need to avoid being a curmudgeon myself and open my own mind and ask similar questions. Keeping up with technology is hard, but invaluable.

No. 6: Gigi Hyland’s calling for a more consumer-centric approach to products.

Said Ms. Hyland in January: “The main themes of my remarks were to urge credit unions to continue to be consumer-centric in product and service delivery and to provide insight into the regulatory perspective on current issues, such as BSA and membership growth.”

Okay, this isn’t earth-shattering, and there are discussions like this all the time, but it’s validation from the top that CU’s need to approach their products and pricing the same way other companies do – with a focus on what the market demands.

Resolution: Credit Unions need to leverage that tax-exempt status to continue (or in some CU’s cases start to) offer cost-competitive pricing, provide dividends and serve immigrants and under-served communities. I’d also like to see credit unions trim their product offerings to better serve their membership and community. If you cannot profitably provide dozens of products and services, then take a good, hard look at your product mix and eliminate those that are underperforming or aren’t profitable. Don’t keep up with the Jones’s. Keep up with your field of membership.

On the surface, this is an oxymoronic request, but really, it’s about finding a niche and drilling down and serving it. Some CU’s can profitably operate wide. Most cannot and need to focus on their core membership, find what that it needs and really serving it in ways banks and other CU’s can’t.

No. 5: Hackers steal 45.7 million credit card numbers from TXJ Companies

The breach of security is the largest in history and reflects the importance of CU ID theft prevention policies. Given that credit unions have a 3.8 percent market share in revolving credit, the breach affected over 1.7 million credit union members. And that’s just credit cards. Debit cards, with fewer consumer protections, were likely part of that mix and even a small percentage would be thousands if not millions of debit card numbers.

Resolution: Credit Unions should treat debit card fraud the same way they treat credit card fraud. See top story No. 4 for support of this resolution. Members need to know all their transactions are secure, credit or debit. From my experience in credit union operations, I know this is expensive, but a credit union should act in the best interest of its members.

No. 4: CURIA momentum

At latest count, 141 members of the House of Representatives are signed on as co-sponsors of H.R. 1537. By raising the percentage of assets from 12-ish to 20 percent, this will allow CU’s to better serve under-served areas and small businesses, which in turn creates wealth in a community.

Resolution: Credit Unions need to mobilize staff and, in turn, membership to ensure members of Congress support H.R. 1537 and understand the difference and mission of credit unions. An adage of advertising says that when the marketing director of a company is tired of hearing his/her advertising message, it’s at that point that its impacting the consumer. Talk about it until you’re sick of it.

No. 3: Wings/Continental credit union flap

Nasty, nasty stuff.

Resolution: Stop doing this.

No. 2: Zopa

Peer-to-peer lending could be a threat to credit unions, given credit unions’ philosophical mission. Instead, Zopa is partnering with credit unions, each improving each other’s credibility and reach. I’m excited about this partnership.

Resolution: Like the No. 7 resolution, credit union staff needs to be more plugged into technology and how it affects their products, services as well as how members use it. It’s a competitive advantage to embrace it and folly to ignore it.

No. 1: The housing bust

Although credit unions didn’t seriously contribute to the questionable practices that puts the country on the precipice of recession, every credit union every member will be affected. As much as credit unions need to compete, they also must council and advice as part of their financial services product mix.

Resolution: With a tax-exempt status, strong capitalization (in general) and sound, conservative policies and procedures, credit unions are primed to be part of the solution, right?

There you have it, my year-end list complete with a side of resolutions, served hot and fresh. Enjoy!

Discussion of branding – major, national brands in particular – is akin to a lively discussion of battle. The players are intriguing. Heroes and states engaged in a struggle for life and death tear at each other for wealth and power. Indeed, Sun Tzu is often referenced in marketing classes. Which is silly or inspiring depending on your viewpoint.

CUNA just released a white paper that takes a measured look at a nationwide credit union brand. Currently, major brands are struggling with how to engage customers more deeply and relevantly; it’s a little baffling that a national credit union branding campaign is something discussed.

A national branding campaign is expensive. It’s terribly wide. It requires an existing infrastructure. And technology is coming into existence design to create communities and thwart mass marketing.

For CU’s to engage in a national branding campaign is akin to storming onto the battlefield, weapons drawn. Without sufficient resources (if you’re in battle, that would be other people, and in business, that would be capital), the campaign is doomed to fail. And failure in the case of a national campaign is in terms of wasted dollars and wasted impressions. And in a movement with limited resources, failure is harder to absorb.

Not only is it expensive on the national media side, any branding campaign must be activated at a local level. Unless credit unions spend money in addition to the campaign (a rule of thumb is that activation is three times as costly as the sponsorship), there is no direct tie to the actual credit union, and the message is lost.

Control the Battlefield

In any great story of underdog triumph, strategy and cleverness trumps sheer strength. Leonidas knew not to fight the Persians on their terms and met the invading force at Thermopylea. Paris would’ve failed fighting the immortal Achilles head on.

It’s time credit unions stopped envying the mighty and, instead, become crafty and wise.

The solution lies apart from the Siren’s song of a national campaign. Credit unions should invest in creating real competitive advantages:

• Improve infrastructure through shared branching and ATM networks
• Create community-specific products
• Train staff in the specific needs of the community and SEG

What do credit union’s know best? They know their SEG’s. They know their communities. They know their members. No big banking brands have this knowledge. Credit unions can do what banks do (provide services); banks cannot do what credit unions can do (know their members):

• Use social media to communicate deep, not wide
• Design branches to reflect the membership
• Revive the membership drive and go meet with SEGs
• Leverage annual meetings as a celebration of the CU and its members
• Invest in local businesses by using their services

That’s the credit union’s battle ground: local not national. Getting sucked into a national campaign is costly, difficult and ultimately, nearly impossible to win.

In a session on reaching the 18 – 30 year old Hispanics”, Reverend Ed Gomez of El Buen Samaritano Epsicopal Mission said the best way to build trust, engage, and serve the Hispanic culture, and I would argue any culture, is to get outside of our own heads – both when we communicate and design products.

In a quote I swiped from the YES Summit blog, Ed said Wells Fargo did this…

...because it hired Hispanic staff, including management, and engaged the market by participating in local community events. It made its presence felt on the personal basis and used the relationships it built with community leaders to design products specifically suited to people who operate outside the majority economy.

Wright-Patt CU wanted to be more relevant to young adults, so they hired 23 year-old Dustin Limburg on as Marketing Representative for Young Adults. When I asked him how they are approaching the market, Dustin said, “We basically look at them like a separate SEG.”

How are you getting outside of your head and speaking the cultural language?

This morning we had the opportunity to hang out with some Gen-Yers and talk about how they bank, save, and plan for the future. Here’s a snapshot (note: because they didn’t speak in html code, I added the links) -

Marsha

...is a 23 year-old University of Texas student and Starbucks Barista. She says:

My debt is in student loans and credit cards. After I graduate, I’m going to law school. When it’s all done, I expect to have $200,000 in student loans. It could take until I’m 45 to pay them off.

I bank with a credit union, and do all of my banking online. All of my loans are through Wells Fargo and Sallie Mae, but if my credit union had private loans I’d use them.

I go to my mom for financial advice. There is so much clutter on my credit union’s homepage that even if they had financial advice I still wouldn’t read it.

Do I think about retirement? Well, I know I want to go to France and I want to write a book.

Aaron

...is a 24-year old developer for St. Edwards University. He says:

I do all my banking online. I use ING for everything. I used to use a credit union because my parents were members. But I dropped them when they killed their mobile banking.

ING’s Orange Checking account makes me more aware of how I pay my bills because I’m getting a yield. It helps me save and probably helps me pay on time.

Elysa

...is a 19 year-old University of Texas student. She says:

I probably wouldn’t go to a financial literacy seminar put on by a credit union or bank, but I’d listen to a speaker invited by my sorority.

I’m a business student, and plan on learning about investing through classes at school.

I have no debt, I was always told to pay my credit cards in full (my dad is financial advisor).

John Donovan of peer-to-peer lending community Lending Club kicked off his presentation by comparing his company to an “online credit union.”

Lending Club began solely in Facebook and launched independently in September of this year.

Using Google’s OpenSocial platform, Lending Club is placing themselves inside of popular social networks “the same way you put a physical branch where people are.” From their blog:

OpenSocial offers the ability to retrieve information about a user, and get distribution, across many social networks. What it means is that Lending Club borrowers will be able to leverage their network of connections more broadly, that lenders will be presented with better opportunities to invest in people they trust and feel more comfortable with (such as friends of friends), and that a broader distribution will help find better matches between lenders and borrowers.

John also brought up the prospect of a white label partnership between Lending Club and credit unions. In this scenerio, Lending Club would play back-end provider to a CU-branded P2P lending community. This is pretty interesting considering Zopa’s announcement last week. I wonder if they were planning that before they heard about Zopa’s US plans.

Also, in July they hosted a consumer-generated video campaign, asking users to explain the value of Lending Club and P2P lending. Here’s one particularly well-done submission, followed by one particularly wacked-out submission:

(I dedicate them both to Ron Shevlin)

Christopher Morris has set up YES Summit social network at yescucommunity.com. He used Ning, a free (for a basic account) tool for building custom social networks, to create it. The YES CU Community allows users to engage in conversation forums, post blogs, join and create groups, “friend” each other, and share photo and video content (Ning automatically converts video files to a flash player…awesome).

In Christopher’s session explaining the network, he said they built it to 1) Facilitate and perpetuate discussion on reacing the 18 – 30 demographic and 2) Provide hands-on education to allow users to play in a social networking space and see how it works.

I like that CUNA is experimenting with this. A conference-specific social network has the potential to add a lot more depth and follow-up opportunity to the experience. Facebook and LinkedIn are both much better ways for me to keep up with new credit union friends than the lunchbox I keep my business cards in. Admittedly, half of this is because I always forget to bring my business cards to conferences.

Ning’s functionality and back-end interface are really impressive. To add features to your network, you simply drag and drop:

Definitely worth checking out if you’re looking for a way to kick off an online community.

Later today I’ll be speaking at CUNA’s YES Summit on whether or not it makes sense for credit unions to blog.

In short, I’m going to say this (spoilers ahead):

Heck yes, it can be a great fit – but only if the credit union is culturally ready, has realistic expectations of the resources and commitment blogging takes, and is using it to add value to their members.

I’ll also be covering the conference here on OSCU over the next three days.

I’d love to meet up with any CUers in Austin for the week. Drop me a line.

Here are three cool stories for your Monday morning (er, afternoon – I started on this first thing today and now it’s lunchtime):

CUblogs.org

Robbie has set up cublogs.org, where you or your CU can set up a free blog powered by WordPressMu.

Robbie points out, “And if you are one of the 3000 or so CU’s without a homepage, drop me a line. I would love the opportunity to help out any CU setup a free website!”

He’s had a great discussion going on about Mutual Savings CU who is using WordPress as their content management system.

By the way, it really is depressing that nearly 3,000 CUs have zero web presence. NCUA data from year end 2006 shows 5,524 of 8,362 CUs having websites. That doesn’t mean home banking. Web. Sites.

Filene plans a Radical Sabbatical

Our friends at the Filene Research Institute are creating positions for crazy good sabbaticals. Radical, if you will. So, if your employer can spare you anywhere from three months to two years, you best get to applying.

Mark Meyer explains the opportunities perfectly on their new podcast. Mark’s buttery voice is rivaled only in this industry by Rob’s.

CUNA nears launch of MoneyMix

The folks at CUNA are getting a much-needed update to their youth-oriented product. Don’t know if this means Googolplex is out, but IMHO it should be. Yikes.

The thing I like most about the MoneyMix product (slated to launch 8/31) isn’t the blogging functionality – it’s the savings tracker. I can’t tell too much from the screens, but it’s a good idea if it gets pulled off correctly. For starters, a Facebook app would be ideal, as the social aspect of goal-sharing shouldn’t be overlooked. Consider Wesabe, which, by the way, makes your online banking interface look like a baby-hating seal clubber.

Teach the kids, as Javelin says.

The Mica Minute. Yes, one of the best-known names in our industry is embracing social media (hat tip to Rob and his latest Frivolous Friday post).

It wouldn’t be an Open Source CU post without some constructive criticism. Gotta say I’m not too keen on the “guidelines” post (why not just put it on a separate page?), but I’m pretty happy about everything else. Hey, I’ve beat up on CUNA once or twice before, so now it’s time for some CUNA-love.

I’m pleasantly surprised that comments are posted immediately – a good call. Heck, I’m just thrilled that comments are allowed! Way too many folks wouldn’t allow comments. Also, I’m on board with the simple Blogger theme as a start. It’s a real, genuine blog. (I shouldn’t have to point that out, but I’ve seen way too many “blogs” that aren’t really blogs.)

For future posts, here are some pointers. Dan/his staff probably already gets this:

• I hope that he’ll keep the same voice in his writing as he has in the YouTube videos. The “guidelines” post smells like the legal department, and I doubt Dan wrote that. Hey, that’s OK.
• I hope to see occasional participation on other credit union blogs either by staff working with him on this or by the man himself. (Think John Edwards’ Twitter page, and his “from staff” tweets. i.e., it’s OK for your staff to get out there for you – just be transparent about it.) I mention participating on other CU blogs (like Filene, UFirst, or Rob’s blog/podcast, for example) because when you enter social media, you’re not on an island to yourself.

All in all, I’m impressed. Kudos!

Dan, how about an email interview about social media and why you’re taking the plunge? You can reach me at trey [at] trabian [dot] com.

Everyone else feel the way I do about this? Impressed?

The Rule of Propinquity – the world is run by those who show up.

That is an alluring idea. I like that idea (thank you Representative Bishop for sharing it with us).

There were thousands of us who gathered for the first three and a half hour session. We had a brief break for the standard box lunch with bland chicken wrap and then we hunkered down for another two-hour session.

GAC is not for the weak of backside. If you are thinking of attending next year, I recommend you train for it. Schedule yourself for days of back-to-back meetings (preferably with sales people – or some other medium where you do very little, if no, talking).

Alright, joking is probably not appropriate.

The morning opened with Joe Lieberman (ID – CT). He’s a member of the Congressional Credit Union and understands the role they play in our economy. He vowed to fight any attempt at taxation and committed to supporting CURIA.

Rep. Roy Blunt (R – UT) joked that he drove past several banks on his way to work this morning, and although they were not open yet, he was confident they would be opening today – despite what his banker friends were telling him in 1998. He gave his nod to the movement.

Rob Bishop (R – UT) took the stage and told several delightful stories of DC in days past (Mr. Bishop was a history teacher for over 20 years before entering politics). Scott Simpson, the President of the Utah League, and he are good friends and it is clear that Mr. Bishop is in our corner.

Rock Star Time

Then it was Credit Union Rock Star Time. Rep Paul Kanjorski (D- PA) came out to a standing ovation. If you are like me and you don’t know a lot about politics – know this – WE LOVE PAUL KANJORSKI. He is the representative that wrote CURIA (Credit Union Regulation Improvement Act). He and Ed Royce (R – CA) will be introducing it in about a week. CURIA looks like it may have a good chance of passing this time around (third times a charm) and we have Mr. Kanjorski and Mr. Royce to thank for that.

Representative Steny Hoyer (D – MD) received a very warm reception. He is the new House Majority Leader. He seems to appreciate the idea that 80 million consumers want (and often need) an alternative to profit driven financial institutions.

Hey, did you know that there is a law that no one financial institution can control more than 10% of the US money in circulation? Did you also know that Bank of America is trying to amend that law because they are over 9% right now? Almost one out of every ten bucks in America sits at Bank of America. Shiver. Banks have enjoyed six straight years of record-breaking profits with this year being the best in history. Banks actually made more money than the oil industry. Scary.

Back on point…

Representative James Clyburn (D – SC) was next. He is also a supporter, but urged us to continue to look for products and services to offset the problems of payday lending. In fact, he said he felt strongly that it is our DUTY to find alternatives for people currently using payday lenders.

Anna Escobedo Cabral, US Treasurer, told us a bit about what is going on with the US Treasury and gave her nod to the work that credit unions do.

Gigi Hyland, NCUA, talked of being accused of liking credit unions too much (her father even jokingly gave her a CU cheerleading megaphone when she came under fire last year for this). She seems to know credit unions well, which I think is helpful if you are responsible for regulating them. She also seems to be fair-minded.

Lastly, James Carville and Mary Matalin. Wow. Those two are funny. They are extremely well versed and knowledgeable about their politics (she Republican, he Democrat). They have been married for over ten years. The dynamic is hysterical. If you ever get a chance to see these two, I highly recommend it.

And then we broke for wraps.

The GAC started with a three and a half hour general session.

Three and a half hours is a long time. Three and a half hours gives you far too much information to blog in one post. So I will attempt, from my politically naïve position, to give you highlights.

Allan McMorris (CUNA Board of Directors Executive Committee) opened with great points about the need for membership growth, the need to attract younger members, the need to serve the unbanked and the parallels to credit unions and Harley Davidson fans. I only raised my eyebrow once – when he said credit unions should be on MySpace and YouTube.

We had a surprise speaker – Joe Theisman. He is certainly a charismatic guy. He talked about momentum – how one play in a game, one interception – can change the course of the outcome. He talked about how we can sometimes sense momentum – in a person or a movement – and we are drawn to it. That is a tantalizing concept. Is that happening to us now? With i3, Credit Unions of Washington and all of the other innovative programs popping up around the country?

Brit Hume was extremely articulate and interesting. He did admit (jokingly) that the reason he is not covering the Anna Nicole Smith trials is because he thinks her body was a lot more interesting when she was alive.

JoAnn Johnson and Rodney Hood, both of NCUA, gave insight to what NCUA is working on this year; including Prompt Corrective Action, the matrix for establishing CAMEL ratings and enforcement of by-laws.

And then… drum roll… Martin Sheen took the stage. I am here to say – credit union professionals are not above celebrity worship. There were more flashbulbs going off and more people creeping up to the front of the audience than any of the other speakers combined. Mr. Sheen opened with a quote from Gandhi (movie). He talked charmingly about the time he spent in Ireland last year, working towards his college degree. He also described his favorite charity – the Dorothy Day Foundation.

Then he started talking politics. I’ll put it this way… the liberals loved him and the conservatives hated him.

And I’ll leave it at that.

Celebrity One

Washington Governor, Christine Gregoire, was on our flight to DC on Friday. At baggage claim, I asked for a photo. She was very gracious.

The Washington and Oregon GAC participants are all staying at the St. Gregory Hotel. The conference is held at the Hilton Washington, but there are so many participants that rooms at the Hilton fill up within hours of the conference being announced.

Celebrity Two

There are over 4,000 credit union supporters here. This is the biggest credit union gathering in the world. Speakers at the event include: Allan McMorris, Dan Mica, Brit Hume, JoAnn Johnson, Steven Preston, Rodney Hood, Martin Sheen, Senator Joe Lieberman, Representative Roy Blunt, Representative Rob Bishop, Representative Paul Kanjorski, Representative Steny Hoyer, Representative James Clyburn, Anna Escobedo Cabral, Representative Spencer Bachus, Gigi Hyland, James Carville and Mary Matalin.

It’s a bit overwhelming.

When you walk into our hotel, you are greeted by none other than Marilyn Monroe. I also asked her for a photo.

Celebrity Three

On Sunday night, we attended the 19th Annual Herb Wegner Memorial Awards Dinner. It was an amazing showcase of the best of our industry.

Carol Schillios, President / Founder of the Fabric of Life Foundation won the Individual Achievement Award for the work she has been doing in changing the lives of women and their families in Mali, Senegal, Vietnam and Zimbabwe.

Prospera Credit Union was the Outstanding Program Award for the program they developed that puts reasonably priced pay day lending centers in Goodwill stores.

Lastly, the Lifetime Achievement Award was presented to Barry Jolette, President and CEO of San Mateo Credit Union, whose list of accomplishments are far too long to list in this post.

Watching the video documentary on the three recipients was both humbling and motivating. I was amazed by the tremendous things they have been able to accomplish. It made me proud of my profession and my industry. It also made me want to return to Seattle and do more.

I am about to leave for the Seatac to Reagan International flight. The folks at Trabian asked me to blog the CUNA Governmental Affairs Conference. I can’t lie. I’m nervous about it. I’ve never been to the GAC, and, as much as I hate to admit it, I don’t follow politics very closely.

I was going to have my first post be about the avalanche of marketing material I have received in the last few days, inviting me to vendor booths – many of them enticing me with the chance to win a Nintendo Wii. (Looks like Wii is the new iPod.) However, my boss, and conference partner, Bill Hayes, reminded me that the success of credit unions relies heavily on our business partners. They also do a great deal to off-set the cost of this conference for credit union employees – and – business partners are our friends.

So I will refrain from poking fun at the plethora of postcards I received with Wii puns in them.

The congresspeople I will be meeting with are:

• Congressman Jay Inslee
• Congressman Jim McDermott
• Congressman Rick Larsen

I’ve packed my suits, my snow boots, my Project Differentiation material and my laptop.

See you in DC.