Meeting with a credit union Board member...
Today I met with a Board member of the credit union near my town. We spoke for about an hour. This person was inspired to join a credit union herself after she learned about and then visited Mondragon, a network of worker-owned cooperatives (employing about 26,000 people) in Spain. Mondragon has their own credit union, which has enabled them to have access to large reserves of capital and to grow their cooperative enterprises. The credit union is a crucial part of what makes Mondragon thrive.
What I learned from this Board member of our local credit union:
The Board of Directors of a credit union in the U.S. has a lot of responsibility and power in the workings of the credit union. The Board meets monthly, with the CEO present, and makes sure that the credit union is following all the regulations. The Board decides personnel policy and can set the interest rates! The Board has the power to renew (or not) the CEO's contract. The Board can also suggest new kinds of loans or other programs. For instance, this Board member suggested that, given the rising cost of oil, the credit union give out energy efficiency home improvement loans at a good rate. The Board agreed with her and they have created this kind of loan.
Most interesting to me, I learned that each month the Board reviews losses --this means that the Board decides what to do about people who aren't paying back their loans or are not able to pay their credit card bills. As an illustration, the Board member told me about one credit union member who had a very high credit card bill, and the credit union suspected this person would never be able to repay the debt. So, the Board decided that it would forgive the interest and ask the person to pay back to principle of the loan --the actual amount borrowed. They had the power to forgive the interest!
I also learned a little about how the credit union makes its earnings. Like a bank, it creates earnings from interest on loans as well as from investments. According to the Board member (and she is still learning about all this), the credit union primarily makes investments in other credit unions. She also thought that the credit union could invest by putting money in a commercial bank account, like a CD.
This still feels pretty vague to me --how the credit union invests its money. I may see if I can ask the CEO.
I did learn that, along with the Assistant Director of the Credit Union, the Board sets the investment policy for the credit union. So, the Board can say: we want 10% of our assets to be in "socially responsible" funds or accounts. And the staff will have to do that.
The staff of the credit union can be members of the credit union, but they dont have to be. It seems they can also run for the Board, but I dont think any of them has done that lately.
I believe this is one way that the typical US credit union is different from the Mondragon credit union, where the workers are the decision makers. I'll have to clarify how the Mondragon credit union differs from the typical US credit union.
The Board member pointed out one difference: the Mondragon credit union offers business loans for emerging coops. The credit union in my town does not offer any business loans. There may be some laws prohibiting federally chartered credit unions from giving business loans --but this Board member is researching this. She is not too worried about this because there is a great Community Development Corporation (CDC) in town and they give business loans to risky ventures --though apparently the interest is high, about 7-8%. How is a CDC different from a CDFI?
I shared with the Board member what I recently learned about community development credit unions, and she was very excited about this info! She may see if her credit union can become a community development credit union!
Some other memorable thoughts from this Board member:
I asked her about a socially responsible bank like Wainwright and she said her big concern was that, since it was not a cooperative, it could be easily purchased by a bigger banking company. I wonder if Wainwright has any policy about this.
Today I met with a Board member of the credit union near my town. We spoke for about an hour. This person was inspired to join a credit union herself after she learned about and then visited Mondragon, a network of worker-owned cooperatives (employing about 26,000 people) in Spain. Mondragon has their own credit union, which has enabled them to have access to large reserves of capital and to grow their cooperative enterprises. The credit union is a crucial part of what makes Mondragon thrive.
What I learned from this Board member of our local credit union:
The Board of Directors of a credit union in the U.S. has a lot of responsibility and power in the workings of the credit union. The Board meets monthly, with the CEO present, and makes sure that the credit union is following all the regulations. The Board decides personnel policy and can set the interest rates! The Board has the power to renew (or not) the CEO's contract. The Board can also suggest new kinds of loans or other programs. For instance, this Board member suggested that, given the rising cost of oil, the credit union give out energy efficiency home improvement loans at a good rate. The Board agreed with her and they have created this kind of loan.
Most interesting to me, I learned that each month the Board reviews losses --this means that the Board decides what to do about people who aren't paying back their loans or are not able to pay their credit card bills. As an illustration, the Board member told me about one credit union member who had a very high credit card bill, and the credit union suspected this person would never be able to repay the debt. So, the Board decided that it would forgive the interest and ask the person to pay back to principle of the loan --the actual amount borrowed. They had the power to forgive the interest!
I also learned a little about how the credit union makes its earnings. Like a bank, it creates earnings from interest on loans as well as from investments. According to the Board member (and she is still learning about all this), the credit union primarily makes investments in other credit unions. She also thought that the credit union could invest by putting money in a commercial bank account, like a CD.
This still feels pretty vague to me --how the credit union invests its money. I may see if I can ask the CEO.
I did learn that, along with the Assistant Director of the Credit Union, the Board sets the investment policy for the credit union. So, the Board can say: we want 10% of our assets to be in "socially responsible" funds or accounts. And the staff will have to do that.
The staff of the credit union can be members of the credit union, but they dont have to be. It seems they can also run for the Board, but I dont think any of them has done that lately.
I believe this is one way that the typical US credit union is different from the Mondragon credit union, where the workers are the decision makers. I'll have to clarify how the Mondragon credit union differs from the typical US credit union.
The Board member pointed out one difference: the Mondragon credit union offers business loans for emerging coops. The credit union in my town does not offer any business loans. There may be some laws prohibiting federally chartered credit unions from giving business loans --but this Board member is researching this. She is not too worried about this because there is a great Community Development Corporation (CDC) in town and they give business loans to risky ventures --though apparently the interest is high, about 7-8%. How is a CDC different from a CDFI?
I shared with the Board member what I recently learned about community development credit unions, and she was very excited about this info! She may see if her credit union can become a community development credit union!
Some other memorable thoughts from this Board member:
I asked her about a socially responsible bank like Wainwright and she said her big concern was that, since it was not a cooperative, it could be easily purchased by a bigger banking company. I wonder if Wainwright has any policy about this.
posted by oat collective at 12:35 PM
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