RALEIGH, N.C.–Some changes being made—especially around risk-based lending—and other moves put in motion by the new CEO at the nation’s second-largest credit union have drawn the attention of local media in this state.
At issue are an evolution in product and service offerings, in addition to culture, that are occurring at the $53-billion State Employees’ Credit Union (SECU), where CEO Jim Hayes has been leading the 2.7-million-member since 2021.
After documenting SECU’s growth from humble beginnings, Business North Carolina reported on BusinessNC.com, “No one disputes the credit union’s remarkable achievements. Now, though, how it operates is being challenged by insiders who say some of its distinctive policies need updating in a fast-changing sector. Like most change, it’s causing sparks, in this case from critics who say SECU is straying from its core mission.”
At the center of the debate is the credit union’s decision to adopt risk-based pricing in its lending policies, meaning those with lower credit scores pay higher rates to reflect the risk. Risk-based pricing was staunchly opposed by the credit union’s long-time CEO, Jim Blaine, who was outspoken on the issue at CU meetings and in CU publications, including CUToday.info, on his belief in treating all members equally. Blaine’s successor, Mike Lord, a three-decade veteran of SECU, maintained that policy position.
The ‘Key Thrust’
But Lord retired in 2021 and SECU’s board turned to an outsider, Jim Hayes, from Andrews FCU, to succeed him. “During his 18 months on the job, Hayes has reorganized SECU’s senior leadership and is directing some fundamental changes rejected for decades by his predecessors,” Business North Carolina reported. “A key thrust: The credit union should grow by lowering rates on loans to members with strong credit ratings, while also remaining highly focused on those with modest incomes. Four of five SECU members are not state employees, but rather family members or in private-sector jobs. About 16% of members’ total debt is with SECU, down from 26% five years ago and more than 30% a decade ago.”
‘Under the Radar’
According to Business North Carolina, the changes at SECU likely would have remained “under the radar” had Blaine not appeared at the credit union’s annual meeting in 2022 to speak for approximately 15 minutes. Blaine’s appearance at the event was a surprise, according to the report.
During his remarks, Blaine, who oversaw growth to $30 billion in assets from $335 million as CEO, read a statement describing the credit union’s history and posed seven questions, making motions asking the directors to respond to his queries by meeting with advisory boards and issuing a strategic plan to explain “a new culture and new direction for SECU,” Business North Carolina reported.
The motions passed.
According to the report, the credit union followed up with three meetings in November and December in Greensboro attended by more than 500 members and employees, and Hayes said SECU planned to start using credit scores in loan decision-making by February.
Blaine told the publication risk-based lending will hurt most members financially and diminish SECU’s unique culture.
‘Higher-Quality’ Borrowers Sought
Hayes told Business North Carolina “Only 10% of our members with A and B credit were borrowing from us. We need to be able to price loans that will bring some of the more higher-credit quality borrowers back into SECU.”
He was further quoted as explaining, that SECU’s lending appeals to members with C, D and credit scores, ranging from 530 to 660, and that the plan is to offer a more narrow band of rates so that members will still pay less than at other institutions. “We tend to lend a lot lower than our peers, and we’re going to continue to lend that deep.”
Changes Being Watched
The changes at SECU are being watched by many and are not welcomed by all.
“SECU was the single best credit union in America, serving working-class people in every county in North Carolina,” Martin Eakes, cofounder of the Durham-based Self Help Credit Union, told Business North Carolina. “We will have to wait and see if it maintains that reputation. Some of the changes SECU has made in the last year are not good for North Carolina.”
Added State Employees Association of North Carolina Executive Director Ardis Watkins, “(SECU) is critical to the financial success of state employees. (Risk-based lending) eliminates loan options for many state employees who may not make enough or don’t have money to buy a car or a home. It sounds to me like they are positioning the credit union to be a bank.”
Under Hayes, SECU has also made other changes, including investing more in technology, moving to introduce business loans, and advertising on TV. As CUToday.info reported here, it has also made changes to its dress code.
Business North Carolina’s full reporting can be found here.
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