# What are the measures of a good Credit Union ?



## MrEarl (27 Nov 2015)

Hello,

What are the measures of a good Credit Union and how would they rank in priority ?

Obviously, dividend rate on shares is very important to those who save, but the lending rate is clearly of greater concern for those who borrow.

Service deserves a mention - be it the welcoming approach at the counter (while a certain Bank we won't name attempts to force it's customers to use machines and won't allow it's staff to deal with "small" customers), perhaps advice or at least guidance when it comes to making a loan application or discussing finances etc.

What else is there to consider and how important are the above considerations, when it comes to accepting that you may not get all the "bells and whistles" you get in a Bank, or there may be a cheaper loan rate or better dividend to be had elsewhere ?


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## Gerry Canning (27 Nov 2015)

1. Is your money safe?
We have 400 unions , but unlike Banks only a tiny few are in hassle, and we didn,t have to pay billlions to bail them out.
I understand most have nuff reserves to stand future hits.
2.Lending rates
 @circa 7.5% are not high , there are no funny charges slipped in either.
Car Hp can be cheaper but Bank loans are generally @ least as high.
3.Cu,s have correctly tightened up their loan process,
In the main = ability to pay & not having other bad debt are the issues.
4. Dividends are presently low.
That is (nearly) a strength in that their surplus funds are getting little nuff in market + they continue to strengthen reserves for next downturn.
5. Societally,
They run small loans up to k2 that compete with money lenders.
6.Profits stay in our community.
My Cu made 1million, that stays here.(banks profits go away)
7. Most importantly.
They are of and part of our community.
8. Other services.
They are branching into Debit cards and will continue to move into a full consumer mode.  

Yes , Iam a fan !


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## thedaddyman (27 Nov 2015)

Prudence
I would have a concern about those that invested in massive offices for themselves (Newbridge is a case in point). Was it really needed?
+ one on the community element as well, especially given that banks are going out of their way not to have customers darken their doorsteps


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## Gerry Canning (27 Nov 2015)

thedaddyman said:


> Prudence
> I would have a concern about those that invested in massive offices for themselves (Newbridge is a case in point). Was it really needed?
> + one on the community element as well, especially given that banks are going out of their way not to have customers darken their doorsteps


THE DADDYMAN,
I think Newbridge and their ilk are largely outliers and not usual.


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## MrEarl (29 Nov 2015)

Gerry Canning said:


> THE DADDYMAN,
> I think Newbridge and their ilk are largely outliers and not usual.



Yes,that is also my belief.

It would appear that there is a significant push on the credit union movement to see credit unions merge, but why ? ... is it because they need to, in order to survive, or is it because ultimately the Central Bank would rather have to regulate 200 than 400 for example ?

If a credit union provides a safe facility for saving, or granting loans, coupled with participating in the community, then is it not a good credit union regardless of size for example ?

Does the community want the credit union to offer debit cards, atms, current accounts with standing order and direct debit facilities, along with other financial services ?  If so, at what cost (and how is it paid for) ?

Should the credit union provide advisory services, or is it then running the risk of doing the job of MABS for example - notwithstanding the fact that some people might be more comfortable speaking with someone they know in the local credit union, than a stranger in MABS... if the answer is yes, then how is this cost covered ?


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## Monbretia (29 Nov 2015)

The merging is happening partly because of the new regulations and the need for credit unions to have all sorts of extra staff like in compliance and audit.  It is not feasible or cost efficient for many of the smaller credit unions who basically have very few paid staff and a few volunteers to hire in this sort of expertise needed, some are getting outside providers to do it on contract basis part time but I think it's just getting too difficult for small ones to keep all the balls in the air.

Regarding advisory services this is something I think should be provided, especially for example where the cu can see through top up loans or restructuring that maybe a customer is having difficulty budgeting.  I personally think all restructured loans should come with a financial advice/budgeting appointment for the customer.   Now of course CUs would be seen to be stepping on the toes of MABS if they offered this with whom they usually would have a relationship through dealing with MABS budget accounts and helping with getting people away from moneylenders.   The alternative is that all customers in that boat be referred to MABS for a review but realistically those customers would be very far down the priority list with MABS who would prioritise people with debt/utility/court problems so it could a hell of a time before they would get that appointment.

And on your other point I actually think people would be less comfortable laying all their financial data and spending habits out for someone they know in the local cu rather than MABS so don't know what the solution to that one is.  Maybe CUs could buddy up and an suitably trained budget advisor from one town could do a day in the next town to facilitate these appointments, this would keep it at arms length from the customer as it could be provided as a totally separate budget advice service.  But that won't fly as MABS would go mad 

Actually UB had a similar service years ago, don't know if it still runs, but they had specially trained Money Sense Advisers in branches and the meeting with them was totally separate to any of your UB business as such, you could get advice on all sorts of budgeting issues.   Was not well promoted or supported and was just brought in I would think with RBS took over as they had it in the UK where it did seem to be much more used by customers.


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## Gerry Canning (30 Nov 2015)

MR Earl,,

I think the main push came from our failed Central Bank regulators believing that CU,s were a bit like the Banks ie Basket Cases.
Sadly it seems our Cu,s have rolled over to bullying by Central Bank, and Cu,s appear to have a plethora of new (reasonable) sounding regulations foisted on them by our failed Central Bank.These Regulations are a large cost to Cu members.
Central Bank are very good at giving regulations , historically its just their application of regulations that failed them !

Having given Mr Central Bank a (touch) there is no doubt Cu,s needed tightening up etc.

But I am very sceptical of letting Central Bank lead them ?


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## MrEarl (30 Nov 2015)

Gerry Canning said:


> MR Earl,,
> 
> I think the main push came from our failed Central Bank regulators believing that CU,s were a bit like the Banks ie Basket Cases. ... But I am very sceptical of letting Central Bank lead them ?



Agree entirely Mr. Canning,

Unfortunitely, I cannot see opportunity to prevent the Central Bank from basically forcing Credit Unions to merge (or be taken over), no matter how well run they are etc.  In time, I think the Central Bank would like to see the credit unions merged into a dozen building societies (or similar), which would be far more appealing and convenient for the staff of the Central Bank.


Perhaps the League of Credit Unions should be lobbying the Government to ensure that sufficient resources and financial support is provided to all credit unions, to ensure the are comfortably able to meet the Central Bank's requirements going forward... this way, the smaller ones don't suffer as a result of whats being imposed on them.


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## thedaddyman (2 Dec 2015)

Gerry Canning said:


> THE DADDYMAN,
> I think Newbridge and their ilk are largely outliers and not usual.


 I agree but the original question was what was the measure of a good credit union, to me one measure was have they wasted money on large white elephant buildings


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## Gerry Canning (2 Dec 2015)

thedaddyman,

(They) ie credit unions in general, didn,t waste money on large white elephant buildings.
Some branches of the 400 ,did waste funds and they as outliers would not show signs of a good union.
Thankfully most showed nuff sense in the fluffy times to not act like Banks did..

For all  my distrust of Central Bank , the one thing Central Bank has done is ensure all Unions have good reserves in place and I believe good guidance for future hassles.

A good measure is clarity on their annual accounts, my own unions accounts are very clear and transparent.


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## rob oyle (2 Dec 2015)

thedaddyman said:


> I agree but the original question was what was the measure of a good credit union, to me one measure was have they wasted money on large white elephant buildings



I know that comment was specific to one CU, but I find it hard to see my hometown CU (Donegal Town) doing exactly that in 2015, even having seen what others went through in the last 7/8 years.


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## MrEarl (3 Dec 2015)

thedaddyman said:


> I agree but the original question was what was the measure of a good credit union, to me one measure was have they wasted money on large white elephant buildings



While I would agree with you that on occassion, money was indeed wasted on large white elephant buildings, I think you will find that that is something unique to certain individual credit unions.  Members of those credit unions would not have been wrong to challenge their board of directors on such an issue.


Getting back to the original question... 

What are the measures of a good Credit Union and how would they rank in priority ?


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## so-crates (3 Dec 2015)

Having recently had to make two phone calls, one to ring a large bank's all singing and dancing phone banking service and the other to ring my CU, I can undoubtedly say the customer service experience with the CU was immeasurably better and an extremely important measure of how valuable their staff are and how valuable the CU is to me. 

40 minutes on hold to the bank and no useful answer since it was impossible in this case to use the automated service, their online info couldn't answer and I needed to speak to a person instead of an algorithm - NO PERSON ANSWERED. 40 minutes of your-call-is-important-to-us-please-hold-and-blah-blah-blah. 40 minutes of intensely irritating musak. 40 minutes of teeth-grinding irritation that it was costing me to call them. 40 minutes. Says it all really. I gave up. 

Contrast that with ringing the CU, after a short intro, I can easily get through to a person. They quickly identify and confirm me, that person even knew me personally. They answered my query promptly, competently and completely.  

In the CU I can walk in and instead of having to run the gauntlet of people trying to divert me to a machine I can speak to a person. Let's face it, I only go into a bank branch because I need to talk to a person - I am not of an age where technology is a challenge to use - if I have made the effort of coming in I expect not to have to repeatedly deflect the floor walkers with repeated assurances that I cannot transact my business with one of the toys scattered on the floor. 

I know that the CU provides many with a banking lifeline. I know that it is a big contributor to the community (instead of a faux "we care" attitude). But for me - it is being treated with courtesy. I am coming in to transact business, I am best positioned to determine whether interacting with a machine will serve my purpose. Even if there is an automated option it may be I am too unsure to use it and need the re-assurance of looking the person in the eye when I transact my business. It is incredibly rude to decide on my behalf what is best for me. It is incredibly patronising. It is incredibly poor customer service. 

If I am ringing them, I am calling in to ask a specific question, I should not have to navigate a mental puzzle in the hope of finding a person to talk to.


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## ThatNewGuy (5 Jul 2016)

Gerry Canning said:


> 1. Is your money safe?We have 400 unions , but unlike Banks only a tiny few are in hassle, and we didn,t have to pay billlions to bail them out.
> I understand most have nuff reserves to stand future hits.



I was going to start a thread but I think this point hits what I was wondering - _how _do you know this?

Is there a CU comparison site that looks at financial health, and (on the basis that I don't think there is), are you able to review financial statements of CU's to look at their % equity to liabilities etc? Surely they must publish the results of audits?

Having never really looked at CU's I'm interested to see what I can learn before opening an account - to me the value is in diversification of deposits (from banks), but I have no interest in opening an account anywhere if I don't know what type of exposures or capital levels the CU maintains.


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## willyfones (5 Jul 2016)

It sounds like you are comparing CU with CU and not comparing Credit Union vs the Banks.

So in that case I would look at the board of governance and read the numbers in the annual report published on each website. You will probably see they are cash rich and lend too little.

I think the other weakness of Credit Union is there online banking systems are out of date,, its hard to compete with the vast sums the banks would spend on technology,, the other main weakness is the age profile of members,, banks recruit from college,, I don't see Credit Unions doing this,, they need to encourage younger members to join.

But I would see what other services are offered, 

Loan protection insurance (for free)
No compound interest
No penalties for paying off loans early
Money given back to its members in cash draws, dividends.

I would happily avoid using banks if only I could.


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## MrEarl (5 Jul 2016)

ThatNewGuy said:


> ....Having never really looked at CU's I'm interested to see what I can learn before opening an account - to me the value is in diversification of deposits (from banks), but I have no interest in opening an account anywhere if I don't know what type of exposures or capital levels the CU maintains.



If you are coming at this in terms of how secure your savings might be, then you should be able to rest fairly easy.....

CU's members shares are protected by the Deposit Protection Guarantee Scheme for the first €100k (confirm your individual CU on the CB's list)

In addition, the ILCU provides the Savings Protection Scheme which is there to help CUs in financial difficulty, with intent to help protect members against loss on their shares


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## ThatNewGuy (6 Jul 2016)

MrEarl said:


> If you are coming at this in terms of how secure your savings might be, then you should be able to rest fairly easy.....
> 
> CU's members shares are protected by the Deposit Protection Guarantee Scheme for the first €100k (confirm your individual CU on the CB's list)
> 
> In addition, the ILCU provides the Savings Protection Scheme which is there to help CUs in financial difficulty, with intent to help protect members against loss on their shares



Perhaps pessimistically, but I have no confidence in the DGS! It also applies to banks but in the event of it being needed I have no confidence the Central Bank have enough reserves to honour it (how could they possibly? Ireland could clear it's debts if they had that kind of cash in the back pocket!). So I'm more interested in diversifying into a well capitalised institution (and also just generally having access to CU services then) which is less connected to the wider system. The annual statements aren't easily found on CU websites I find, - it's a shame theres no information aggregation service about CU's in general


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## Gerry Canning (6 Jul 2016)

ThatNewGuy,
(no confidence in the DGS)
Think about that view .
If DGS fails ,I reckon we will have a lot more to worry about than our cash!

What is a (well capitalised institution) .?
Were not our Banks well capitalised?

DGS is I think as certain as you get in this life !


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## MrEarl (7 Jul 2016)

Hi,

The Irish Central Bank is actually part of the European Central Bank as I understand it, so on that basis you ultimately doubt the ability of the European Central Bank to cover €100k per person, for little old Ireland ? ... remember, all they have to do is print more money to cover something like this (although granted, printing more cash risks inflation etc).

Here's a little "light reading" for you: http://www.depositguarantee.ie/en/home


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## ThatNewGuy (7 Jul 2016)

I subscribe to the view that cash deposits could get "converted" to IOU bank equity in a major liquidity crisis, preserving your notional 100k! Don't get me wrong, this is a minor side view - I am still "in" 3 separate banks currently and will continue to be so for the majority of my banking, so don't want to get lost down that rabbit hole.
I just think it would be good to be invested locally in a CU also for a variety of reasons, but _because_ CU's are small and local I was just wondering whether it was easy enough to compare them, in terms of services, financial health, rates etc. I'm still surprised there isn't somewhere that does that - even the ILCU perhaps for its members.


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## MrEarl (8 Jul 2016)

ThatNewGuy said:


> ....I just think it would be good to be invested locally in a CU also for a variety of reasons, but _because_ CU's are small and local I was just wondering whether it was easy enough to compare them, in terms of services, financial health, rates etc. I'm still surprised there isn't somewhere that does that - even the ILCU perhaps for its members.



Like you, I would love to have access to a service where a simple comparison of CUs was possible.

However, putting aside what would be nice for information purposes, do keep in mind that you cannot join any CU, you must be part of their "common bond" which essentially means you can only join a CU where you live or work etc.


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## 24601 (9 Jul 2016)

ThatNewGuy said:


> I just think it would be good to be invested locally in a CU also for a variety of reasons, but _because_ CU's are small and local I was just wondering whether it was easy enough to compare them, in terms of services, financial health, rates etc. I'm still surprised there isn't somewhere that does that - even the ILCU perhaps for its members.



The ILCU does do something like this for its member credit unions in that quarterly prudential returns are analysed at a national level as well as by asset group. This report, called *PEARLS*, gives an indication of the health of each individual credit union versus the overall national result which can be compared against internationally recognised goals for each indicator. These reports provide internal management information for CU's though, and not widely circulated. 

In terms of services etc. the Central Bank would have this information because CU's have to detail what services they offer as part of their annual returns - this information isn't published as far as I know. A rates comparison would be impossible for loan products as each Board sets this and they can change regularly enough especially with the diversification of loan products offered. However, the Central Bank has to approve loan interest rebates and dividends on shares prior to general meetings so this information is available to them but not published. I'd imagine there's quite a few CUs that would object to having a lot of this info published, but many do upload their Annual Reports to their websites. 

On the more general point, the key indicators of viability for any credit union are capital adequacy and the capacity for surplus generation. Nearly all credit unions meet the 10% regulatory reserve requirement comfortably, and whilst this one-size-fits-all reserve requirement is bizarre, it does provide the sector with serious breathing space to get its house in order. In fact overall reserves are far in excess of this 10% - something like 15% nationally I think I read. They are extremely inefficient at the moment though with many running operational losses as loan interest income no longer covers the day to day operations. Nearly all credit unions are overdependent on investment income which is close to nil at the minute and unexpected to change. There'll be a lot of them running deficits over the next few years. In saying that, I don't think things are as bad as they may appear to be. If they could make some evolutionary changes to the business model and get on board with initiatives that pool resources centrally for better use they could turn things around. The cost base for the movement is crazy.


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## MrEarl (10 Jul 2016)

24601 said:


> The ILCU does do something like this for its member credit unions in that quarterly prudential returns are analysed at a national level as well as by asset group. This report, called *PEARLS*,
> 
> ...... In saying that, I don't think things are as bad as they may appear to be. If they could make some evolutionary changes to the business model and get on board with initiatives that pool resources centrally for better use they could turn things around. The cost base for the movement is crazy.



I think you are correct, about the quarterly PEARLS report only being circulated for internal purposes. There'd be little appetite in most credit unions, for publishing such information for fear of public criticism or nervous members withdrawing their funds, potential borrowers trying to use information from the report to negotiate a better loan deal etc.

I agree with you about evolutionary changes to the business model and the cost of running the movement, but those benefiting without having to work very hard would hardly encourage change, would they ?


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## 24601 (12 Jul 2016)

MrEarl said:


> I agree with you about evolutionary changes to the business model and the cost of running the movement, but those benefiting without having to work very hard would hardly encourage change, would they ?



Oh yeah, it's the same with mergers in all industries I suppose. There's always going to be resistance from staff and other vested interests. In particular, there'll be layers of middle management type roles in credit unions that may be involved in progressing mergers but at the same time would be the first to go in the event of rationalisation in the new entity. There'd be no need for 2 CEO's, 2 risk officers, 2 compliance officers and multiple assistant managers. Also, due to the heavy emphasis on face to face service it's probably fair to say that many credit unions are overstaffed at teller level. That's before you even consider auditors, IT providers and other external consultants that are making a fortune from credit unions because of their atomised structure. If they were even able to get their act together in terms of co-sourcing a lot of the back office stuff they'd be able to reduce their cost base considerably and refocus their efforts on growing their loan books.


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## MrEarl (13 Jul 2016)

24601 said:


> ....If they were even able to get their act together in terms of co-sourcing a lot of the back office stuff they'd be able to reduce their cost base considerably and refocus their efforts on growing their loan books.



The back office stuff is one area I would have thought the ILCU should be able to help by providing central functions, but for some reason... it doesn't seem to have crossed their minds


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## 24601 (13 Jul 2016)

MrEarl said:


> The back office stuff is one area I would have thought the ILCU should be able to help by providing central functions, but for some reason... it doesn't seem to have crossed their minds



To be fair to them it is something they offer but it all came way too late. Their Internal Audit Function, Compliance Centre and Risk Advisory Service were all set up years after the 2012 Act was passed into law. Any progressive credit union had a Compliance Officer, Risk Officer and IAF around commencement in 2013 so the ILCU offering was too little too late. They'd argue, probably with cause, that their delay is the credit unions' fault rather than the ILCU's as they can only provide services that credit unions demand and are willing to fund - bit of a vicious circle as so many CU's don't trust the League so they can't win. It's primarily a governance issue though; there's lots of excellent staff in the ILCU but it's run by a volunteer board that does more harm than good.


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