The members of State Employees’ Credit Union, the second largest such institution in the country, ousted three members of their board of directors. Michael Clements, Barbara Perkins, and Chuck Stone, each of whom opposed a recent shift in the credit union’s lending policy, claimed seats instead.
Roughly 13,000 members cast votes in the rare contested election, which The Assembly reported on in-depth earlier this month.
At the heart of the dispute between the incumbent slate and the challengers was a recent decision to move to tier-based lending, in which members with better credit scores would receive lower rates than members with worse ones. SECU had long offered all 2.7 million of its members the same rate on loans, a policy that is extremely rare in the financial services industry.
The current board and CEO Leigh Brady said the change was necessary in a fiercely competitive environment, but some former employees and longtime members said the decision was an abandonment of SECU’s core principles and unnecessary given its financial strength.
Read Carli Brosseau's reporting from The Assembly: Challengers Sweep SECU Election
Ben Schachtman: All right, Carli, you've been reporting on the State Employees' Credit Union and some turnover on their oversight board. But before we get into that, just for people who aren't familiar, what is the State Employees' Credit Union?
Carli Brosseau: The State Employees' Credit Union is a credit union, which is different from a bank, in that the members which are, you know, in a bank, the customers, but in a credit union, they have an ownership stake. So everybody has a vote, each member has an equal vote on the leadership of the organization. There are a lot of members of the State Employees' Credit Union, it's the second biggest credit union in the United States with about a quarter of North Carolinians and the asset size of the credit union is about $50 billion, which puts it around the size of a regional bank.
BS: And so recently, there has been a vote that ousted three members of the State Employees' Credit Union’s 11-member board, and voted in three members, some people have called them dissident members — what's going on with the situation?
CB: Like I said, the members are owners, and so they can always vote for the members of the board. Historically, that was a really small vote. But this year, they did online voting, and there were a lot of kind of contentious issues since last year's annual meeting. Some members were upset about a change in the lending policy. Previously, everyone had paid the same rate for a loan. And now SECU is going to a system where the price for a loan is dependent on a person's credit score. That's something that's really common in the financial services industry. But it was kind of a point of pride for SECU that they did not follow that trend, which these new board members believe is discriminatory and just sort of philosophically against the institution's identity. There were other issues too, about kind of all related to whether SECU is becoming too big an institution and too much like a bank, too corporate and not reflecting its particular membership.
BS: And correct me if I'm wrong, but it seems like one of the proponents of these three new members, and also sort of that maybe more old-fashioned approach has been Jim Blaine, who was the CEO from the late 70s to I believe 2015. Can you say a little bit about that?
SB: Yeah. So Jim Blaine was the CEO who really guided SECU through this huge period of growth, they went from a much, much smaller credit union to now this sort of $50 billion, behemoth. And a lot of the identity that people are talking about was really something centered around him. SECU had these slogans like, ‘Send us your mama,’ as in like, you can trust us enough to send us your mama — there was kind of like this folksiness to it that he really instilled and this very old-school philosophy where everyone is treated the same, but treated individually ... that you listen to a member’s story, and you consider their sort of full experience and your personal experience with them in giving them a loan. One other aspect of that was there was something called the loan review committee where a panel of three members would review whether SECU should have given somebody a loan in the case of a denial if the member sought that appeal. And sometimes they would override the loan officer. And sometimes they would impose conditions, say ‘do these things and come back to us.’ So it was pretty personalized in that way. And that's something that's gone now.
BS: So what are some of the other ramifications of this vote?
CB: It's not really clear what's going to happen yet — the board is 11 members, so there are three new members who theoretically have a significantly different philosophy from the rest of the board. But it's not yet clear whether they can roll back this lending policy change. Currently, tier-based lending is only applied to auto loans, but it's supposed to be extended to other types of consumer loans starting next month. It's not clear what's going to happen yet.
BS: All right, well, Carli Brosseau from The Assembly. Thank you so much for your coverage of this.
CB: Thank you.