MELBOURNE, Fla. — As if the challenges of integrating a large, failed credit union weren't sufficient, Space Coast CU continues to deal with member service and public relations issues nearly three years after its 2009 acquisition of Eastern Financial Florida CU.
But Space Coast believes it has put effective programs in place for improving many of the issues it has been forced to deal with.
In recent weeks and months Space Coast has been the subject of negative local and national media attention regarding member complaints. But the credit union insists the press is not all deserved, particularly with many of the reports failing to delve into the causes, which the CU says stem from the acquisition of the troubled EFFCU.
What's driving the media focus on the $3.1-billion credit union is a study of complaints filed with regulators against financial institutions in Florida from 2008 through 2011. Ken Thomas, a Miami-based independent financial institution consultant and economist, authored the report that showed that Space Coast received 57 complaints in 2010 and 48 complaints in 2011. While those totals are far below complaint leader Bank of America, which received 227 and 168 complaints respectively, Thomas insisted Space Coast's complaint totals are actually worse.
"Bank of America easily had the largest number of complaints, but they also have the greatest market share," said Thomas.
BofA claimed 19.1% of the Florida market midyear 2011, compared with Space Coast's 0.6% share. "In Space Coast's case (their complaints) were five times over their marketshare, which indicates a disproportionate level of complaints," Thomas suggested.
Thomas' study includes a "Bank Complaint Index"-the higher the percentage the poorer the service levels. Bank of America in 2011 received a Complaint Index rating of 0.7%, while Space Coast's number was 6.5%. The next closest FI on Thomas' Complaint Index was JP Morgan Chase, at 2.3%.
Space Coast, however, believes Thomas' study does not accurately portray the service SCCU is delivering to its members, nor circumstances surrounding the complaints. Touching on all the negative media attention the report has generated, Meredith Gibson, SVP-marketing for Space Coast, said, "We are disappointed when we see something that seems mischaracterized. After all of the work we have done, and continue to do, it is disappointing for someone who is supposed to be an expert to take one outlier, ignore the rest of the obvious outliers, and draw such a simplistic conclusion that causes damage to our reputation."
A Trio of Challenges
The member complaints, according to Space Coast, are the result of acquiring a big $1.6-billion credit union slightly larger than itself with a troubled lending portfolio, conducting a "massive" system conversion, in addition to a change in its member rewards structure in 2011.
Gibson said that while the complaints received in 2010 were disappointing, they were not unanticipated. "We are suddenly twice as large as we were and have brought in a credit union whose only similarities are that it's about as big as we are. We differed on how we delivered service, our pricing, and products. These new members from the 70-year-old Eastern Financial were dealing with an entirely new way of doing things."
Space Coast is headquartered approximately 175 miles north of Eastern Financial's former headquarters.
The data conversion, completed on April 30, 2010, was expected to temporarily diminish service levels throughout the operations, said Gibson. "For about six months following the conversion the complaints largely pertained to the levels of availability and timely service, which by our own measure were very bad."
Complaints Being Addressed
Many of the service delivery issues causing complaints have been addressed as system issues have been resolved, and as former Eastern members become accustomed to the new CU. Staff, too, brought over from the failed Miami credit union that has its origins as the credit unions for employees of Eastern Airlines, have learned Space Coast operations and procedures and gained greater knowledge of SCCU products. Despite these improvements, Gibson acknowledged that when bringing in a big credit union that "things don't settle down completely in just one year."
Today, Space Coast's member service is headed in the right direction, asserted Gibson. "During 2011 we were finally able to begin focusing on recovering the levels of service to our members and were successful at doing so in most areas. For instance, our call center connect times improved from 42% of our calls answered within 60 seconds in 2010 to responding to 91% of our calls within 30 seconds last year."
Branch satisfaction surveys in 2011 indicated 86% of SCCU offices are performing well, opposed to 51% a year earlier. In late 2011, Space Coast also spun off six branches and 16,000 members to MidFlorida CU.
What continues to cause complaints, however, are extremely high levels of mortgage delinquency (SSCU's overall loan delinquency rate was 3.30% as of December 2011). Gibson said it is working with Fannie and Freddie to assist members needing modifications.
Gibson indicated that a significant source of complaints, too, is the update to its Member Rewards Program, a participation-based pricing structure that had been in place at SCCU since 1997. "The former EFFCU members had been exempted from most of the pricing implications of this program since the conversion. In fact we brought them in at the highest level of rewards. When we normalized their pricing with the launch of the updated program, predictably, that became a source of complaints."
According to Gibson, every complaint is reviewed by CEO Doug Samuels and is assigned to the proper employees to address. A "lead" is assigned along with a due date to ensure accountability and timely resolution.
Identifying Process
"For every complaint we receive we classify whether the complaint was based on some kind of process problem," said Gibson. "Even before the merger took place, we were focused on ensuring our employees were given good processes and workflows to work with, and this is an area that requires constant attention. When we undertook the merger, much of the process refinement focus was put to the side in order to stabilize the operation of the combined organization. During 2011, we were able to resume our work to address workflow problems and inefficiencies."
Gibson noted that the CU's problem resolution process still needs improving. "We can do better at resolving problems when they occur."
Separately, Space Coast has also made headlines with its suit of five Wall Street banks and two rating agencies regarding its $100-million claim related to a failed investment the banks sold to Eastern Financial. Recently a federal magistrate ordered Space Coast to a non-binding mediation session with the parties in the suit. Gibson declined comment.
