Credit unions' 2020 challenge: Getting past 2019's reputational hit

One of the biggest challenges credit unions face in 2020 could be overcoming repeated hits to the industry’s reputation that began in fall 2018 and carried through 2019.

For an industry often referred to as “the best kept secret in banking,” credit unions received plenty of major news coverage last year – and most of it wasn’t flattering. Less than a month into 2019, a high-profile story in the Washington Post highlighted questionable expense reimbursements for Mark McWatters, then the chairman of the National Credit Union Administration. Just months before McWatters had been the subject of another Post story and taken together there were questions about how such high-profile articles made the industry look. Then during the summer the New York Times published a two-part feature on taxi medallion lending that cast credit unions and NCUA in a bad light. A recent Wall Street Journal piece also suggested the industry may have lost its folksy, service-centered nature as a result of such significant growth over the past decade.

“Remember the old TV vernacular – if it bleeds it leads,” said Geoff Bacino, a credit union consultant and former NCUA board member. “Feel-good stories are never what people are going to want to talk about. They’re not going to want to talk about successful lending programs, numbers beating numbers from the year before or if credit unions are again America’s favorite financial institution.”

Reputational issues are always top of mind for many credit union leaders, but they’re especially concerning in the wake of a recent consumer satisfaction survey that found banks topping CUs for the first time ever, if only by a narrow margin.

Still, there may be good news. Some sources suggested that most consumers are unlikely to remember these stories, if they noticed them at all.

“My sense is that for a lot of people their reality is local, which is to say if it doesn’t affect me and my account – the credit union whose name I know, the local newspapers I see – then I doubt there will be that much of a connection,” said Cliff Rosenthal, a credit union expert and former CEO of the group today known as Inclusiv. “As a New Yorker I subscribe to the New York Times, so I think a front-page story in the Times is big news, but if you’re in southwest Missouri or something like that, I doubt those stories get the same kind of dissemination.”

Even if consumers overlook or ignore these stories, Rosenthal and others said they are likely being noticed by those within the industry – particularly credit union professionals with entry- and mid-level positions.

“I would think senior-level managers would be worried,” said Rosenthal. “It’s one thing when some of these scandals hit small credit unions that nobody much cares about, but … when you see brand name institutions like Marriott getting tarnished, if I’m a senior manager of the credit union, I’d try to reassure my staff that if they’ve gotten some of this news, we have controls here that his is never going to happen. I think it puts additional demands for damage control or potential damage control on managers.”

The bigger threat may be how these stories play in Washington.

“Even some people I think are in the credit union-friendly congressional offices are now starting to ask about things,” such as whether larger credit unions are philosophically different than smaller ones, said John McKechnie, a credit union consultant and former NCUA and CUNA staffer. “That’s a troubling trend. People who advocate for credit unions have to be very quick to point out that credit unions are still the same, irrespective of size, and we can’t let that argument sink in if credit unions are going to continue to be successful.”

Bacino echoed that sentiment.

“You’ve always got to worry about what a member of Congress will do, because you can find a member of Congress who is predisposed to not supporting credit unions who uses [these types of stories] as their point of ‘This is what we’ve got to look out for,’” he said. “We have more supporters than detractors, but it is always a concern because people can seize on it and say ‘Here’s why they should be taxed.’”

So how can CUs – individually and at an industry level – get back on track in 2020? Sources say the industry must continue to advocate for itself with state and federal lawmakers, along with heavily promoting each institution’s good works, both in terms of member service and philanthropy.

“The core mission of credit unions I think is still sufficiently compelling enough that people will take efforts to preserve the integrity and historic sense of mission,” said Rosenthal.