The Banker’s Dilemma
Truliant Federal Credit Union President and CEO Marcus Schaefer wrote this message for the credit union’s quarterly newsletter released in October.
Oh Happy Day! The bankers are interested in selling services to consumers and small businesses again in the Carolinas and Virginia. A regional leader for a megabank in the trillion dollar asset range announced last week that bankers in Charlotte are “hungry for business” again. He also needed to address concerns that their product-pushing culture had resulted in opening accounts or credit lines for customers without their permission as bank employees sought to meet sales quotas. Therein lies the banker’s dilemma: how do you give priority to the stock shareholders through profit maximization while also truly taking into account the consumers’ best interest?
It is no coincidence that credit unions recently crossed the 100 million member-owner threshold in the U.S. More and more consumers are realizing that credit unions like Truliant are structured to prioritize your well-being and best interest over profits. Let’s say a consumer comes into a credit union and requests a $40,000 vehicle loan to buy the car or truck of their dreams. At Truliant, don’t be surprised if we remind you that you’ve told us that you’re saving for your child’s college expenses and that a $25,000 car loan will have you driving off in style, while keeping you on target for college funding. Most banks will likely drool at the prospect of the money they’ll make on the $40,000 loan and the employee may actually receive a commission for steering you away from a better overall decision impacting your broader financial goals.
Truliant is not in and out of the consumer and small business market, shifting emphasis where profits are highest. We have consistently encouraged savings and investments in the Credit Union as our members have rebuilt their personal financial balance sheets post-financial crisis. We also continued lending to individual members and small business members right through the downturn and bumpy recovery.
The point is that it’s not about “the bank” or “the credit union.” It’s about you the member, and your family. Truliant has understood this for the last 62 years and it can be seen in our decisions, policy, products and services. More importantly, you can sense it in our people and how we interact with you.
The mega-banks are still slogging through the penalties and fees for making and selling faulty mortgage loans. In fairness, many of these loans were made by institutions they acquired. Recently there were $15 billion and $17 billion dollar settlements.
Yet these behemoths are highly profitable. Federal regulators are raising the issue as to whether or not they are too large and unwieldy, representing a continuing risk to the economy in the future should one of them stumble again. They will either have to raise a great deal more capital or break into separate businesses.
Under any scenario, banks have the dilemma of trying to maximize profits. Truliant must only understand and meet our members’ needs while working to improve their lives. Although large banks do a great job servicing their large commercial clients, consumers are better served by mission-driven credit unions like Truliant. The benefit to your financial institution shouldn’t tip the scales in favor of pushing products that aren’t best for you.
Luckily, at Truliant we don’t have to choose.