RALEIGH, N.C.–The direction of the nation’s second-largest credit union—and a dominant presence in its home state—has gotten extensive local media attention, including a long report examining why three challengers are running for its board and a philosophical disagreement over risk-based lending.
Under the headline “Do the Right Thing,” which is the motto for the $50-billion State Employees’ Credit Union, a lengthy report by The Assembly reviewed what is now taking place at SECU, which it described as “purest examples” of what credit unions espouse to be, “treating members equitably and with an unusual degree of personalized care” during its 86-year history.
The credit union has long “bucked financial industry trends,” and that has included charging different loan rates to members with different credit scores, the Assembly reported.
Changes Under New CEO
But that changed under former CEO Jim Hayes, who came to SECU from outside the organization and succeeded the well-known and outspoken Jim Blaine (who led SECU from 1979 to 2016) and then Mike Lord, who maintained Blaine’s philosophical approach when he led the organization.
While CEO, Hayes, who left earlier this year to become CEO of State Department FCU, made a number of changes at the tradition-bound SECU, including implementing risk-based pricing.
That has led to pushback by some people, including three people who gathered 500 member signatures each to run for three open board seats after being rejected by the credit union’s board nominating committee, according to the report.
The candidates have branded themselves “member-nominated,” according to The Assembly.
Voting Underway
Online voting (a first this year for SECU) ended Oct. 3. Members who attend the Oct. 10 annual meeting in Greensboro, N.C., can also vote there. “The rival slate’s main grievance is the plan’s move toward pricing loans based on credit score, rather than offering all members the same rate, as was tradition at SECU,” the Assembly reported. “But they also say the credit union’s longtime focus on customer service is fading, along with the transparency that they think helped make members so loyal. They each said they were surprised to hear first from Blaine, rather than current SECU leaders, about some of the changes afoot.”
Also Detailed
The report also:
- Details Blaine’s return to the CU’s annual meeting, at which he offered strong remarks in 2022 after being pushed by wife, who reportedly said, “If you don’t go to the annual meeting and say something, I will.”
- Says Blaine warned that risk-based lending would mean many members pay more, including people like prison guards, teachers, young people. “And you have one of the lowest loan-loss rates, despite lending to those high-risk people,” he said, according to The Assembly. “Something doesn’t compute.” The report said Blaine proposed the board discuss his questions with staff and advisory board members and make the results of those discussions available to all members, and that the board write an updated strategic plan and post it online. The resolutions passed.
- Discusses the “pivots” that Hayes said the credit union was making while he was CEO.
- Says former CEO Mike Lord called the move to risk-based pricing “unconscionable.” Opposition to SECU adopting risk-based lending and other new policies coalesced around a blog Blaine soon launched. The page features a purple duck—a reference to leaders “ducking” responsibility—and a picture of a mule, a nod to Blaine’s stubbornness. All of this is cast upon a background of orange flames.
- Notes that Blaine often discusses his views on his blog.
- Offers SECU’s view on why it has had to make the change, including responding to changes in the market and its own loan portfolio.
- Quotes current CEO Leigh Brady, a 35-year veteran of SECU, as saying the new loan pricing policy is “working,” and further noting, “There are lenders that just absolutely will not lend to anyone below a 660 credit score. We do. We lend below 540.”
- Brady was also quoted as saying the SECU board has also discussed ways to get members to refinance if their credit score improves, that SECU doesn’t charge fees for refinancing or paying off a loan early. It offers counseling and online resources to help members improve their credit.
The full report in The Assembly can be found here.