It’s been a month since we’ve reported on the unprecedented board of directors election at the Raleigh-based State Employees’ Credit Union. Industry consultant Chip Filson says “it could be the most significant board election in the history of the credit union system.” He reasons that it will show whether members support shifts in strategy directed by SECU leaders over the past two years.
To repeat, three member-nominated directors are seeking election to the 11 member board, challenging three incumbent directors. Online voting continues through early October, while SECU’s annual meeting is in Greensboro on Oct. 10.
Perhaps the most heated issue involves SECU’s lending policy. Through its 85-year history, SECU offered the same lending rate to its 2.7 million members, a rare policy in the financial services industry. SECU grew into the second-largest U.S. credit union with $50 billion in assets, typically offering market-leading rates on deposits and keeping operating costs at less than 2% of total expenses. It employs 8,000 and operates in every N.C. county. Its reserves top $4 billion.
Earlier this year, SECU started offering better loan rates to members with stronger financial profiles, aiming to compete more effectively for their business. Those with lesser credit scores now pay a higher rate. The change disappointed former SECU CEOs Jim Blaine and Mike Lord, who led the credit union from 1979 through mid-2021, and other long-term members.
“This discriminatory `industry standard’ practice has already hurt thousands of members and their families,” Lord says.
SECU CEO Leigh Brady says the changes benefit a majority of members. She provided these statistics:
- About 50% of state employee members or retirees who have borrowed in recent years are in SECU’s “A” credit score tier.
- 17% are in the “B” tier” (That leaves around 33% who would be in the “C” or “D” tiers.)
- 56% of all members (not just state employees) who borrowed in 2022 were in the A or B tiers.
- 17% of those who borrowed last year were in the C tier. (That leaves about 27% who would be in the lowest tier.)
Lenders use different scoring for their tiers. SECU has used these credit scores in its tier-based approach:
- A 720-850
- B 660-719
- C 600-659
- D 540-599
Brady says, “We found that we could provide more than two-third of those members better interest rates under a tier-based pricing model, while maintaining extremely competitive rates for members in the lower credit tiers, who are frequently unable to access loans from other banks and credit unions at all.”
That answer didn’t satisfy former CEO Lord. “SECU was formed to provide fair and reasonable rates to all members; not punish the many, to benefit the few. The simple solution is to lower the interest rates for all.”
Industry consultant Filson sums up the situation: Members “are using their voting to assert their views about the future direction of SECU. This is what democratic governance offers. This example is an event that could bring new life to other large credit unions, now groping with technology fixes, merger solicitations and even bank purchases to maintain their market relevance.”
As for the election, it’s gotten testy. The N.C. Retired Government Employees Association sent a note to its more than 60,000 members endorsing the three incumbent directors. That disappointed Blaine and member-nominated candidate Barbara Perkins, who belongs to the association.
She and Blaine met with the association’s executive director, Tim O’Connell, on Sept. 11 to ask him to send information about all six candidates to his membership. Before its endorsement, the association did not interview or provide information on the three member-nominated candidates, Perkins, Michael Clements and Chuck Stone. The group endorsed incumbents Thomas Parrish, Jo Anne Sanford and Alice Garland.
Three days later, a lawyer for the retired workers’ association sent Blaine a letter stating it would provide no further communications to its members. It noted that “Mr. O’Connell has informed me that [Blaine] used abusive, threatening and intimidating language in his office.”
Perkins and Blaine say the letter surprised them because they considered the meeting to be cordial and productive. “Jim never raised his voice. He was never ugly, but he was firm,” she says.
The most contentious point, she adds, came when Blaine noted he had received many emails from association members who were upset with the group’s endorsement. “Jim said the membership could get ugly over this, which Tim did not like,” she says. “Tim said he would take the concept of creating another letter to the board. We thanked him for taking the meeting, which lasted 45 minutes.”
O’Connell declined to comment on the letter criticizing Blaine or why his group didn’t talk with Perkins, Clements and Stone.