The Agenda Item You Won't Find On The Agenda

It's one of the best cities in America in which to hold a conference, is in a tie for Best American City with a Song Named After It, and it's conveniently located within a drive or a short flight of a huge number of credit unions. So it shouldn't come as too big a surprise that NAFCU reports it is expecting a near-record number of attendees when it holds is annual convention this week in San Francisco.

The agenda will be about what you would expect: Presentations from federal regulators ("We're here to work with you"), a good dose of politics, and no doubt plenty of Q&A (heavy on the Qs, light on the As) about the pending Durbin Amendment rule and its affect on interchange. And let me put to rest right now the widespread rumor that NCUA reps will be standing on the dock during boarding for the Bay Dinner Cruise and announcing a new assessment that involves swimming back to shore.

Hush. Speak Not Its Name

There is one important item, however, that won't be on the agenda-and to be fair wasn't a breakout session during CUNA's America's Credit Union Conference (an awkward sounding brand name if ever there was one) or CUES' Annual Convention in recent weeks either.

The Big Picture Issue worthy of some discussion: how have those assessments and thin-as-a-shadow margins and still-dragging recession changed credit unions-for the worse?

Don't worry, you still won't be able to get to your first tray of free hors d'oeuvres in the exhibit hall before you'll hear some self-congratulatory back-patting about the job credit unions have done in fulfilling their "mission" to help the average Joe do an above-average job in getting through tough times. And all of that's good, helping to keep CUs focused on the broader, altruistic cause, and at least temporarily also allowing you to forget you've just eaten a half-dozen deep-fried and breaded bite-size blobs on a toothpick that certainly run counter to doctor's orders.

The thing about white hats, though, is they are 1) easy to shoot at and 2) can get dirty sometimes. In a recent news story that got wide play and was distributed by the Washington Post and the Bloomberg news services, credit unions were accused by one person of a "moral lapse." The story focused on the payday loan "alternatives" offered by many credit unions that some critics have alleged aren't alternatives at all.

"To millions of member-customers, credit unions are the financial equivalent of a trusted uncle, dispensing prudent loans for cars, homes, and education without the profit motive of traditional banks," the news story began. But this wasn't a kumbaya story.

Instead, it was about NCUA's decision to allow the annual interest rate cap to rise to 28% under this voluntary payday loan alternative program in which the CU must allow at least one month to repay, and the member can't take out more than three such loans in a six-month period.

Still sounds good, until the story pointed out, "because these firms can charge a $20 application fee for each new loan, the cost to borrow $200 for two months translates into an annual rate of more than 100%."

And those are the good alternatives, the report said, noting CUs that make such loans outside the program can charge "significantly more to borrow."

You may already be thinking of all the risks and costs that come along with such short-term loans and rationalizing the pricing. But the public at large isn't joining you. Instead, it sees just the APR, and in the case of consumer interest groups, they can put a lot of negative PR in APR. Getting scrutiny was the "MyInstaCash" product from Mountain America CU in Salt Lake City, which is a five-day loan for $100 that costs $12; an APR of 876%, the news story recounted.

Frankly, it's probably a break-even deal to make 12 bucks on a loan of such risk, but it won't look that way to everyone. Linda Hamilton, identified as a Salt Lake City community activist, was quoted as saying, "They are promoting these loans as payday alternatives, but they are not really alternatives, they are egregious payday products. We look at it as a moral lapse of credit unions."

To be fair, the same story cited the payday loan alternative offered by North Carolina's State Employees CU, which carries an APR of 12% and no additional fees.

But which story do you think most people are going to remember? The "moral lapse" or the morally responsible? And which story do you think the bankers will be spreading around Congress and legislatures?

A Good Place To Look

It's not easy for anyone to step back and see themselves as part of the bigger picture and even in a full-length mirror no one likes to see any flaws. But annual meetings such as the NAFCU event should be good places to take a closer look at that reflection-and not just the financial data that is often a staple of anyone with a microphone and a podium.

Trade groups should (but don't, as the result of "dues" diligence) provoke these kinds of questions: What's our market niche? Are we staying true to it? What successful things have we done that have gotten us here? What's our mission? What are the threats to any of those things, and what can we do?

After all, this is no time to be leaving your moral heart in San Francisco.

Frank J. Diekmann can be reached at fdiekmann@cujournal.com