We both love credit unions. The free-market think tank we lead considers them a vital part of America’s financial system. Professionally, we’ve worked with credit unions, their trade associations and fellow credit union members to fight off taxation efforts and raise the cap on member business loans.
Now, however, we’ll be withdrawing almost all of our funds from the credit union where we’ve done business for the past two years and depositing them in a big national bank. We aren’t doing this lightly. In fact, we soon hope to find a credit union that better suits our needs. But in the meantime, we hope we can offer a few lessons to other credit unions that want more small business members.
To an extent, our decision was driven by the things that credit unions just don’t or can’t do. Our organization – which can have as much as $1 million on deposit – didn’t have access to some of the kinds of services we all have on our own personal accounts.
Among other things, we couldn’t easily make electronic check deposits and couldn’t see check images online. When we looked for these features – and we spent almost a month searching – we couldn’t find a single credit union anywhere that both offered them to small business and could fit us into their field of membership.
This state of affairs, we believe, exists because of federal laws that cap credit union member business loans. Since credit unions face such onerous restrictions on the size of their loan portfolios, it’s natural and even proper that many underinvest in the IT systems necessary to support small business. In the long term, easing MBL restrictions and declining IT costs will almost certainly solve these particular problems. But this will take time.
We might have continued to put up with the IT inconveniences if we felt our credit union excelled in other areas but, ultimately, we didn’t. We have three pieces of advice to credit unions who want to keep small business clients, even without making big IT investments or lifting the MBL cap:
Take member democracy seriously: We inquired several times about serving on the credit union’s board or a committee. While we certainly weren’t entitled to any sort of governance role by virtue of our advocacy or level of deposits (our credit union is small enough that we are a major depositor), we do think we deserved a reply and perhaps an invitation to meet with some board members. We never got either.
If credit unions are serious about running their affairs on a democratic basis, they need to be at least as responsive to member requests as politicians are to requests from constituents. The ability of a small business to participate in organizational governance is a key benefit that credit unions enjoy over banks; they need to capitalize on it.
Realize that kindness can’t replace competence: Our branch manager and several of the tellers are lovely people. They know us by name, came to parties we threw and sent us holiday cards. But when it came to business-specific requests, they fell down on the job. Over two years, about a quarter of our e-mail messages and telephone calls went unreturned. This is a bad practice in any business and unpardonable for one that’s supposed to exist only to serve members.
Don’t do what you can’t do well: Some aspects of the credit union were indifferently run. One reasonably minor issue with a credit card took dozens of phone calls and several months to resolve. Nobody would take responsibility for dealing with it. By the time we finally reached someone who could, it was too late to resolve. The credit union could have saved itself a black eye if it hadn’t gotten into a business it clearly didn’t know how to run. Bad service is worse than no service.
We’re still committed to the credit union movement. We hope to move our funds back into a credit union before the end of 2014. But even if the MBL cap isn’t lifted, credit unions like ours can do a much better job serving their small business members.