The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Be Careful Not To Go ‘In The Red’ This Shopping Season

On November 30th, 2009, posted in: Uncategorized by

Unfortunately, because my wife hates me, I ended up in a Wal-Mart at the crack of dawn on “Black Friday.”  I’ll spare you the details related to this unfortunate incident.  However, suffice to say it will never happen again.  You say, “hey, buddy…never say never.”  Nope, it’s not happening again.  Never.

Somewhere between chaos and insanity I found an inordinate number of bargain-hunters who appear to have total disregard for their body clock and their wallets.  The only difference between these shopping zealots and the opening of deer season is the color orange.  There they were in all of their resplendent glory, basking in the fluorescent lighting, leaning forward against their battering ram of a shopping cart poised to land the “big one.”  What I saw hovered somewhere between imposing and downright scary.

“Black Friday” is named for that key day of the year when retailers everywhere have the chance to move their financial condition from the “red” to the “black” – a clever euphemism for going from losing your shirt to making some jack.  Because of the consumer’s insatiable desire to shop, retailers are theoretically able to move the entire negativity of the calendar year to “successful” in one day.  What’s that tell you about our spending on that day…maybe a little over the top?

I’m a “ying-yang” kind of guy – meaning that for every action there is a reaction.  So flipping the year from negative to positive for the retailers may very well mean that the consumer has gone the other way.  True enough, too many folks will go more in debt on this special day of consumer carnage than any other day of the year.  Ouch!

As I inched my way through the checkout line, I watched (along with Bentonville) as the color of Christmas transitioned to black.  I didn’t see too much cash changing hands.  Seemed to me there were lots and lots of swiping going on.  Was it debit or credit?  I sense a goodly portion of it was credit.  Uh-oh, here we go again.

My fellow consumers – ladies and gentlemen – please be careful and prudent this shopping season.  Don’t go in the “red” and spend the better part of a lifetime (not a calendar year) crawling out of credit card debt.

I don’t have an awe-inspiring message here beyond some plain-old encouragement for my fellow consumers to practice self-restraint and prudence during this special time of year.   Unfortunately, in my role at the Credit Union I have seen the other side of the exhilaration experienced at the height of the holiday shopping season.  Yes, January and February roll around much too soon and the smell of new has long ago passed.  What’s left?  Debt – lots and lots of it.  I see it every year and it breaks my heart.

If you have any shopping left, be careful, spend wisely, and don’t go in the “red” for the sake of the retailers going “black.”

Overdraft Legislation Would Have Unintended Consequences

On November 23rd, 2009, posted in: Uncategorized by

A phrase getting a lot of attention around our office over the past couple of weeks is “unintended consequences.”  To define “unintended consequences” seems to be an exercise in stating the obvious.  But for the purpose of keeping us all on the same page, let me share some thoughts. 

Unfortunately, you realize as a decision-maker that “unintended consequences” have raised its ugly head when you hear (or think) these types of exclamatory phrases: “We did what?…uh-oh…you’re kidding me, right?”  And my personal favorite: “Hmmm…never thought of that.”  We’ve all been there at least a time or two and wish like heck we could get a do-over.  As they say: “The horse is out of the barn.” And that usually leads to the follow-up exclamation: “Time to wipe up the spilled milk.”

This past week, we asked thousands of St. Louis Community Credit Union members to reach out to their respective legislator(s).  Our call to action involved informing our U.S. Congressmen and Senators that the proposed legislation involving overdraft privilege would have “unintended consequences.”  Boy, would it!  By my count, a lot more bad than good.

While I’m a big fan of voting with my feet as a consumer (in other words, taking my business elsewhere when companies have bad service or charge too much), I also understand the need for legislators to insert themselves into activities from time to time to protect the consumer from unscrupulous activities found in the business world.

As an example, a large majority of banks has for far too long let fees and practices related to overdraft privilege get out of control.  They can’t help themselves – they’re for- profit.  Quite frankly, the American public (to some degree) must share in the blame game because too many of us did not vote with our feet.  Well, Congress has inserted itself with the idea to help.

Unfortunately, the “unintended consequence” of their proposed legislation would hurt many consumers and credit unions – not the least of which is St. Louis Community Credit Union:

Unintended Consequence #1: In an attempt to lower the consumer’s cost related to overdrafts, the result will more than likely be an increase in the fees associated with insufficient funds (i.e. bounced checks).  Why?  Retailers will attempt to clear a check twice and then add merchant charges when it doesn’t clear.  That totals up to three to five times more in fees versus the overdraft privilege of $15 charged by SLCCU.

Unintended Consequence #2: In an attempt to prohibit an overdraft through an ATM or debit card transaction, consumers would not have access to emergency cash when needed.  The result may be the need to use a more expensive payday loan to bridge the gap until the consumer gets paid.

Unintended Consequence #3: Less fees collected by SLCCU means less of all the good we provide to so many.

No kidding.  The “unintended consequences” of passing The Overdraft Protection Act of 2009 is that you and your family may ultimately be negatively impacted.  So tell ‘em “NO!”

Our Impact On The Community – By The Numbers

On November 16th, 2009, posted in: Uncategorized by

It has been said that you only know what’s in a sponge when you squeeze it.  That is the truth.  St. Louis Community Credit Union and credit unions as a whole are getting squeezed by regulation and legislation.  I can’t speak to the make-up of other credit unions, but I know the DNA of St. Louis Community, and there’s a lot of “fight in this dog” as it relates to protecting the benefits of our members.

The “Overdraft Protection Act of 2009” (if passed in its current form) could actually hurt our members.  There are two big issues confronting our members:  (1) The idea that our members may be limited to only six overdrafts per year; and (2) the prospects of losing the right to overdraft through the ATM or through the use of one’s debit card.

Now, if you don’t use overdraft protection, you don’t care much about such action being taken.  You’re probably thinking…balance your checkbook and none of this will matter anyway.  You would be right, sort of.  But you should probably know that those members who use (and love) our overdraft service pay fees to utilize it – enough fees that enable the Credit Union to offer lots of other services (that you may use) totally free.  Chances are, you have visited one of the branches that are paid for, in part, by member overdraft fees.  The list is endless of how overdraft activity has allowed us to reach more members with more services.

If you go by the numbers, here are just a few of the important ones to keep in mind related to what SLCCU does for our community.  And yes, some of what we do is a result of our overdraft program.

1…We have one passion and a singular mission: to improve our members’ standard of living and better their lifestyle.

8…Offices in the urban and near-urban area of St. Louis.

15…Dollars charged for overdraft protection. The average among St. Louis area financial institutions is more than $26.

23…Years since SLCCU last raised the fee related to overdraft protection.

25…Percent of our total loans come from members with a “lower than prime” credit score. (The banking industry is nowhere near this level of help.)

50…Percent of SLCCU members that are defined as low/moderate income.

107…Financial education presentations provided by SLCCU to the community free of charge during the first seven months of 2009 in order to help people avoid paying fees.

300…Dollar minimum to open a Certificate of Deposit. The market average is $1,100.

1,235…Members that use our Freedom Payday Loan Alternative in order to avoid expensive payday loan companies.

4,043…Second-chance checking accounts opened in the past two years that help people reestablish themselves and stop using expensive check-cashing facilities.

9,600…Number of new members that will open accounts at St. Louis Community Credit Union in 2010.

36,378…Number of total members that have a better life by belonging to SLCCU.

2,700,000…Dollars saved because SLCCU members only pay $15 per overdraft.

2,890,000…Dollars in finance charges and fees saved by SLCCU members when compared to the cost of using a traditional payday lender.

4,212,806…Dollars saved by SLCCU members on an annual basis by using “second-chance” checking instead of a check cashing facility.

As you can see, we do a lot of good for our members and our community.  Because we give back so much to create economic well-being, you can see why we are against any legislative action that would hurt or hamper our ability to make our members’ lives better.  There are even more numbers, but we’ll save those for another day.

Using overdraft protection is a controlled event.  It’s a decision that is yours to make.  Members choose to use overdraft protection of their own volition.  What could happen if Congress limited the number of overdrafts per year to six?  I would hate to think that a member would have a medical emergency, need a prescription filled, need gas to get to work or, worse yet, go hungry for a couple of days waiting for their paycheck.  All reasons, I’ve been told by SLCCU members, for not taking away this needed and appreciated service.

Yes, when you squeeze the sponge that is St. Louis Community Credit Union, two things are evident:  (1) You witness all of the good that pours out; and (2) We’re not giving up the fight for the well-being of our members. Both are a promise.

What if we didn’t have fees?

On November 9th, 2009, posted in: Uncategorized by

I am deeply concerned about some proposed legislation currently being debated on Capitol Hill.  It is known as H.R. 3904: “The Overdraft Protection Act of 2009.”  It is with the cooperative spirit of credit unions in mind that I ask you to read the information below and join me in contacting your legislator(s) to express your concern.

In an extension of the ongoing soap opera starring banks as the villain, abusive overdraft practices have been targeted by legislators as their next corrective action against the big, bad banking industry.  Unfortunately, credit unions have been rolled up into the broad-based definition of a “bank.”  While you and I both know that we are nothing like a “bank,” our elected officials and a variety of consumer groups see no distinction as it relates to overdraft protection services.  While the distinctions are plentiful between our program and others, our U.S. representatives and senators appear to be clouded in their view.

For those who don’t know what overdraft protection is, it is a fee-based service that banks and credit unions provide to protect consumers from “bouncing checks” – it also covers debit card and ATM transactions, too.  More specifically, it pays the amount of the item that would normally be returned for “insufficient funds” (NSF).  While the cost of the overdraft protection per item is the same as the NSF item ($15 in our case), this service saves the consumer on a number of fronts: (1) the merchant fee for “return item” processing (i.e. $40); (2) the embarrassment of a returned item; (3) the protection from the prospect of receiving a “ding” against one’s Chexsystem record; and (4) the ability to use that merchant again without penalty.

Here’s the crux of the matter.  Many legislators are concerned with: (1) the cost per overdraft; (2) the means by which you sign up for overdraft protection service; (3) the action taken by you to activate the feature of the service, and (4) the number of overdrafts.  While we concur that the abuse by some institutions must be stopped, St. Louis Community Credit Union should not be penalized by some loose association with big banks. 

For comparison, we charge $15 per item (NSF or overdraft); most institutions charge in the $30 range.  By industry measures, it costs a financial institution $13 to process the activity.  As you can see, SLCCU isn’t getting rich by those standards.  Yet, fees we do earn allow us to provide a “kaleidoscope of value” to you, your family and your fellow members.

As an example, if members didn’t pay fees, St. Louis Community Credit Union could not offer financial counseling and debt counseling free of charge.  We could not have an extensive financial education initiative throughout the community that reaches thousands of people per year so they can learn “how not to pay fees.”  Money orders could not be just 49 cents.  We could not be a part of the CO-OP ATM network that provides the opportunity for members to avoid paying surcharges or interchange fees at thousands of ATMs nationwide.

The list is expansive.  Without fees, St. Louis Community Credit Union could not pay some of the highest interest rates on CDs and money market accounts in the region (usually in the top 5-10 in every term, if not higher.)  We could not allow for only a $300 minimum balance to open a CD.  We could not offer a suite of products that are modestly priced (or free) to a market segment of higher-risk consumers that would otherwise be relegated to using check cashers, payday lenders and usurious priced “pay-cards”.

What if we didn’t have fees?  Could St. Louis Community Credit Union have eight offices located in the urban and near-urban communities that, for so long, have been slighted in being offered affordable, mainstream financial services?  Would our offices close earlier, not be open on Saturdays and lack convenience to meet the needs of our members? 

Without fees and loans that are priced according to risk, would St. Louis Community Credit Union be a shell of itself?  As a result of having to likely downsize our scope and reach, would we “shut out” thousands of consumers, who would have to turn to the aforementioned “fringe” banking element that delights in serving this disenfranchised market niche with astronomical fees and rates?

Without fee income, how would we offer free “second-chance” checking accounts with no minimum balance; free home banking; free bill pay; free “credit score” counseling; 9% APR “credit-builder” loans to people with bad credit; and free “electronic” statements?

Another concern among legislators is that consumers don’t know that they have the product until after the fees start hitting their account.  That’s not the case at St. Louis Community Credit Union.  Members are invited to opt-out of the service should they so wish.  Very few do.  Why?  Because they see the value of having the added protection associated with their checking account.

Another concern is whether or not overdraft protection should be accessed through use of your debit card, point-of-sale, or by using an ATM.  Well, it’s your money.  We believe you should have access to it as you see fit.  If you choose to use the overdraft protection when getting cash from an ATM or to pay for dinner with your debit card, that is your call.  After all, you’re the manager of your account – not us.

Finally, Washington is concerned with the number of times consumers can use the overdraft protection.  The proposed legislation would limit activity to once per month, and no more than six times per year.  If this happens, the likelihood that SLCCU would raise fees and cut services (to make up lost operating revenue) is real.  In addition, merchants would have more NSF items to process and, as a result, their costs may go up as well.  This is not a pretty picture, especially in light of such tough economic times.

Please understand – and tell your legislators – that overdrawing an account is a controllable action.  Consumers make the choice to overdraw now or write the check later.  You decide if the debit card purchase can wait or the ATM withdrawal is postponed until after the next payroll hits.  The fact that folks use these programs of their own volition should not be viewed as suspect.  Rather, government officials must understand that consumer usage is clear evidence that overdraft protection has value.

Let’s keep that value intact.  Please contact your legislators and ask them to leave the choice of having overdraft protection up to you.  If you don’t know who they are or how to contact them, visit http://www.congress.org.  Thank you for your loyalty and support of the credit union cooperative movement.

A Pinch Of Salt For An Acidic World

On November 2nd, 2009, posted in: Uncategorized by 2 Comments

We picked up an extra hour this past weekend.  What do we do with it?  It’s not often you get to practice a “do-over” with time, but as Saturday night passed into Sunday, sure enough we got 60 extra minutes.  How will you play that extra time?

I’m in for being a little kinder, a little gentler, and a little more caring.  In addition to changing my clock and the battery in my smoke detector, I’m going to change my attitude (just a little).  I’m going to add one hour of being really kind, caring and gentle during this next week – that’s about eight more minutes per day of really focusing in on making people feel a little better.

If I need an example of how to be kind, caring and gentle, I’ll use our South City staff.  If you’ve never visited our office just off the corner of Gravois and Hampton, you’re missing a real treat.  The men and women who commit to great service inside the four walls of this decade-plus old office make it come alive.  The staff’s love for our members is like syrup on your fingers…it’s sticky…all day…every day.  Here’s another food metaphor – the South City staff is like salt in your coffee.  What?

Did you know that salt is the great neutralizer when applied to coffee?  Coffee (for those who don’t partake) is acidic.  In addition to “the kick” of caffeine, coffee is loaded with acid.  I heard it once said that too much coffee ends up creating a feeling something like somebody paved your stomach with asphalt.  But, if you want to take the edge off your favorite morning beverage just add a pinch of salt.  How ‘bout that?

Many members live in a world filled with an edge.  It is an acidic time.  The newspaper is paved with acidic reports.  Unemployment, reduced wages, foreclosures, and bill collectors have all become part of our lexicon during the worst recession since the Great Depression.  Negativity is prevalent in too many discussions.  The world is tough right now and we all need a little help in taking the edge off.

Our staff knows that and tries really, really hard to help.  At St. Louis Community Credit Union, we practice being kind, gentle and caring.  We’re the pinch of salt in the acidic world in which we live, and nowhere is it more obvious than inside our South City office.

I’m not picking which office is the best among our eight offices.  They’re all staffed with great people who practice being kind, gentle and caring.  It’s just that I had a chance to visit with the ladies and gentlemen of South this past week and I was reminded of their commitment to our members.

I’ll bet you a cup of coffee they will use their extra hour to love our members just a little bit more.  Need a pinch of salt to take the edge off?  Go South.