Talking Compliance and More with Danielle from the Louisiana Credit Union League
Join us as we talk compliance and other things with Danielle, Director of Compliance and Engagement with the Louisiana Credit Union League. Danielle travels the state conducting site visits at our credit unions. She helps with BSA, robbery and security training. She also facilitates planning sessions for the smaller credit unions and proctors exams. She is a FICEP instructor for the Louisiana program. And she has a strong background in compliance.
Can you explain how credit unions got started?
The credit union movement actually began in Germany in the mid-1800s following a devastating potato famine that left many farmers and families literally starving to death. In 1901, Alphonse Desjardins brought credit unions to Canada. And in 1909, with the help of Pierre Jay and Edward Filene, he opened St. Mary's Cooperative Credit Association, which was America's first credit union in New Hampshire.
When we talk about First Pioneers, a lot of what we talk about in the history is that it essentially started out as a savings and loan. You had people that would deposit their savings. And then, therefore, they could loan those dollars out to people that needed it. Was that the case then as well? Was it of that simple?
Yes, it was. And dollar amounts were a lot smaller back then. For instance, when Desjardin opened the credit union in Canada, it was a 10 cent buy-in. So, it was very, very small dollar. Of course, the dollar is worth a lot more today than it was back then as well.
It is truly amazing that credit unions started to fill a need in the community and that people came together, a business or a group of people, said "Okay, we need to meet this need” and we still do that today.
Another thing about credit unions that a lot of people I don't think really understand is that we're actually not for profit. Can you kind of explain a little bit, to help clarify the benefit of being not-for-profit for our members?
If you are a for-profit organization, you're constantly looking for what can I do to make more money, to bring more money in. And the not-for-profit organizations such as credit unions, they still have the need to bring money in to meet basic needs. Things like your operating expenses, keeping the lights on, paying your salaries, and things like that, but the rest of it goes back to the members in the form of better interest rates on loans, better interest rates on savings accounts, which pay out better dividends for the members. And then being able to continually add new products and services to the lineup of what they offer to their members in order to make their members lives easier from a financial standpoint.
So instead of profits going back to corporate owners at a bank, credit unions look at this very differently, which I guess leads me to my next question. Can you explain a little bit about how a credit union works in that who owns it? Because I'm not sure people get that part about a credit union.
Yes, so with financial institutions such as banks, shareholders own the bank. A lot of that profit goes to the shareholders. They're being paid. The directors are paid. And with a credit union, the members themselves own the credit union. So when someone opens an account at the credit union, they're actually buying a share of that credit union. And all of the decisions that the board, in a credit union's case is a set of volunteers, are for the members benefits, the owner's benefits. Again, in better interest rates, better savings and just making sure that the members have what they need because they're the owners of the credit union.
It's interesting because language of a share account can confuse some people. The share account is their share of ownership but it is also their savings account. And I love that you get a voice in how things happen.
Absolutely. Even the board of directors they're volunteers, but they're all elected. Holding a share at the credit union, that member actually has a vote in what happens as far as the growth of the credit union. And they do that by voting on the board of directors. And those people that they elect are in charge of making those decisions.
And those kinds of decisions, aren’t necessarily day-to-day operations decisions, right? It's kind of bigger picture decisions.
Yes, it is bigger picture decisions. They hire a CEO, and that CEO is in charge of hiring people beneath them to work the day-to-day operations. The board doesn't really get their hands that deep into things. They are in charge of making those higher-level decisions. They help build and approve policies, but the credit union staff works out the procedures for each one of those policies. It's much bigger picture when you're talking about the decisions that the board makes.
It feels more collaborative, where everyone has a voice in those decisions as to what is truly the best thing moving forward for everyone.
Let's say someone wanted to be on a board at a credit union. Do you know what qualifications they might they need, or who might be able to serve on a board?
In order to serve on a board at a credit union, first and foremost, you have to be a member of the credit union. They actually have to be a member or owner of the credit union themselves. The terms are staggered, so it's two-year terms. If there is a board position open, the credit union will notify the members and then you decide if you wish to run for the position. You contact the nominating committee and let them know and they then direct you on what to do. You can also run for re-election. Then at the annual meeting, everyone that's running will be presented to the membership that's at the annual meeting, and then they vote. And just like any other election, the votes are counted, and whoever gets the most votes wins.
I don't think people realize, again, just how easy it might be to serve in that capacity. And of course, we're so grateful to the people that give of their time and come to our meetings and help us make these decisions and help us grow as a credit union, because without them, we really couldn't do that. There's a commitment to it, obviously, but we are so grateful for all of our board members and what they do for us.
You mentioned people attending an annual meeting. I know for some new members they may not really realize what this is and the purpose it holds for the credit union. You think you can touch on that just briefly maybe and explain kind of why we do that?
Absolutely. First and foremost, annual meeting is a requirement of the National Credit Union Association and the Federal Credit Union Act. But for the membership, it's a very important thing for them to attend because it allows them to, if there's an election, to vote and to have their voice heard. And two, it also allows them the opportunity to find out what's going on in their credit union. Things like their financial report. There's an annual report that's required at every annual meeting. So it breaks down the financial status of the credit union. And it's really important because members are owners. So you want to know how your business is running, right? You want to know how well it's doing.
So next I wanted to talk a little bit about deposits and kind of how your money is protected at a credit union. I think people know about things like the FDIC, or at least they've seen it probably at their bank, their financial institution, but it's very similar at a credit union, but I'm not sure that people realize that we do have that. We do have ways of ensuring their money. Can you touch on that a little bit?
The National Credit Union Association is in charge of the National Credit Union Share Insurance Fund. And just like FDIC for banks, the NCUA insures your accounts for up to $250,000. And what that insurance does, is in the just off chance that something happens to the credit union and it becomes insolvent and fails, the insurance fund is there to make sure that your funds are not just, they don't just go away. You've got an insurance policy on the funds. And there are a few different ways to increase that dollar amount. That's a much longer conversation, so. But there are ways to increase that $250,000 coverage.
If someone needs that information we suggest they visit the credit union and they can give them advice as to how they can do things to help make sure their money is protected.
Yes. And there's actually what they call a share insurance calculator that is located within NCUA's website or you can just Google Credit Union Share Insurance Fund Calculator and it allows you to play with different scenarios of this is how much money I have. I
Of course, we never want to think of any financial institution failing, but on the off chance that it happens, you do want to make sure that the money you have there is completely 100% covered.
Are there any other things that are regulated that help protect the members that you could share with them?
The Consumer Financial Protection Bureau has a lot of different things in place. There are regulations that cover everything from your debit card to your savings and checking accounts to your loans. Everything is protected, even the way that they pull your credit or report your loans to the credit bureaus. Everything is regulated, everything. So I think that that would give everyone that's a member of any credit union or any financial institution, for that matter, just some peace of mind to know that we are not out there just doing things because we want to do them. We are out there making sure that we follow the rules. And there's big fines to pay if you don't follow those rules.
I want to talk about the league for a minute next. I think people hear about the Credit Union League. We talk about it a lot. But how is it-- you guys essentially advocate for credit unions a lot. But kind of what does that mean? What do you mean you advocate for credit unions?
When a bill is proposed in the state legislature and even on a federal level as well, if a federal law is being proposed some change, we kind of take a look at it. They look for things that are going to affect the credit unions themselves and more so the members of the credit unions. And then they decide, okay, are we for this or are we against us? And if they're for it, we help advocate for whatever change it is to that law.
If we're against it, then we come up with a game plan on how we're going to oppose it and try to get some changes made to it so that it's more credit union and credit union member-friendly than not friendly.
Sometimes we even call on members in a call to action where they are asked to voice their concerns to their legislators to let them know what they really want. And it often works.
Just another example of how important it is to use your voice and state what you need to happen for your own good and to help you be more financially stable. And we love that the legislators that work with us and are so-- they love the credit union movement and what we're doing, and they understand the importance of it and the fact that they're willing to work with us and help all the people.
We also look at existing laws, and if it's something that we feel like needs to be changed, whether it's on the docket or not, we can have it added.
Thank you so much for coming today. I learned some new things as well, so I think it's going to really be helpful to our listeners. Like I said, sometimes I think the biggest challenge we have is conveying that message of what a credit union can really do for you and how valuable it can be in your life, in your financial life. And so hopefully, this is going to help people learn a little bit more about what we can really do for them. So thanks very much for coming.