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Difficult Times at Our Credit Union (archive.org)
174 points by monort on Nov 25, 2015 | hide | past | favorite | 151 comments

The related NYT article is at https://news.ycombinator.com/item?id=10626210. The latter thread had many comments but we merged them here.

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer satisfaction. And credit unions have been around a long time, so we know the model works.

What's stopping credit unions from being competitive against traditional banks are the regulatory hurdles. For instance, all credit unions' members must have some common affiliation, such as a small geographic area, or a common employer or alma mater. So you can't just create a credit union that competes with the likes of Capital One 360 or other online banks, even though it would be beneficial for that to happen, because the law says it can't be open to just anyone.

Although credit unions are perhaps the most successful and widespread example of cooperative businesses in the U.S., we Americans have not really embraced cooperatives, and that's a shame. Look at the U.K., where one of the most popular grocery chains is a co-op, or at Mondragon in Spain. Wouldn't it be awesome to have something like Walmart, but entirely member-owned? Instead of all those profits going to a relatively few wealthy shareholders, they'd go back to the members in the form of lower prices.

Technology has made it easier to gather like-minded people to start cooperatives. I would love to see a Kickstarter-like service take it to the next level.

These "regulatory hurdles" that prevent credit unions from competing with banks were not created in a vacuum, they were created by the banks. No amount of Kickstarting will solve the problem of our political system's fetish for financial domination. The cause is obvious: as a for-profit institution, a bank has the money to lobby for preferable laws, let alone the laws they write themselves. If people began switching from banks to credit unions en masse, the banks would probably calculate that it would be cheaper and easier to manipulate the regulatory environment to inhibit credit unions than to compete on honest terms.

The fact is, as long as the financial system controls the political system, regulation will favor the banks. The only way for this system to be fixed starts at the ballot box.

This is true. There was a scandal here in the Netherlands the other week where ING had literally written a law giving big banks huge tax breaks.

The Finance minister basically rubber stamped it.


The "banks writing the laws" narrative is misplaced in this context. Credit unions are tax-exempt. If you remove the mutuality restrictions applicable to them, they would not be "compet[ing] on honest terms" with commercial banks--they would have a major competitive advantage on the basis of their tax status.

What major advantage exactly does being tax-exempt offer a Credit Union? A bank pays taxes on profits, sure, but a credit union doesn't have profits, so they still wouldn't pay much income tax (no income to tax) even if they weren't tax exempt! They may have to pay more property tax (not sure if they are exempt from that or not) or other taxes, but surely a well ran credit union would not have a significant tax burden if it were not tax exempt. (Paper work might be an issue... but banks and credit unions alike have to do plenty of that anyway!)

> A bank pays taxes on profits, sure, but a credit union doesn't have profits

A credit union doesn't have "profits" because it is tax-exempt. Like banks they can, and do, run surpluses, which they return to members in the form of above-market interest rates on deposits or as dividends. If they lost tax-exempt status, they would have to pay taxes on the surplus before returning it to members, like banks do on profits before returning it to shareholders.

> A credit union doesn't have "profits" because it is tax-exempt. They can, and do, run surpluses, which they return to members in the form of above-market interest rates on deposits or as dividends.

Interest paid is tax deductible for banks, and dividends paid to demand deposit accounts (the way most credit unions distribute them) are deductible for mutual savings banks (the banks most similar credit unions without tax exempt status), so this tax treatment isn't as special as it seems.

Credit unions are returning most of their profits to their members through dividends (interest), so they shouldn't have a very high net income; so tax exempt status has a low financial impact. (Some of the profit is reserved as a buffer against future losses, and would need yo be taxed for an equal playing field)

What costs more to a small institution? Tax or regulatory compliance?

Banks have to deal with more or less the same regulatory compliance requirements.

Banks are rarely small institutions - even the smaller ones will have dozens of people employed whose sole job is to handle regulatory compliance (UK finance perspective here)

So what? Difficulty with regulatory compliance is intrinsic to being a small entity. That doesn't mean the regulations are stacked in favor of banks.

So "tough luck if you're the little guy" basically? Seems a little unfair no?

Sure, it's unfair. But your argument for loosening regulations can't just be "It's too hard for small businesses." I'm sure things like health and safety violations are a burden for small businesses, but they don't get to opt out because solely because they are small.

If you can make the argument that specific regulations offer no benefit other than to protect larger businesses that's one thing. But "It's hard" isn't convincing enough to me.

So? Should Linux Torvalds have been required to charge money for his code because it might drive crappy Unix vendors out of business?

> The only way for this system to be fixed starts at the ballot box.

Where are you going to find politicians to vote for who cannot be influenced by money? Not on your ballot, because the one-party-with-two-wings has effectively made it illegal to run a campaign as an alternative. Greens and Libertarians are kept from the debates, kept from the ballot with restrictive measures, and certainly aren't owning the machines that "count" the ballots and determine the elections. (The election fraud from 2000 has never gone away, it just stopped being headline news. It happens in a recent past political election one of the presidential candidates called my house on election night to report their observance of the fraud- in some cases the absolute number of votes they got went down as more votes were counted. A mathematical impossibility.)

This is how our political system wants us to feel: ineffectual and powerless. Don't bother voting because none of the options are good. The system can't be fixed so you shouldn't even bother. You end up falling into the trap they set for you.

I refuse to give up on democracy, just as I refuse to give up on America.

The USA is not a democracy, it's a representative republic.

That's the fundamental difference which means that you can't simply go to the ballot box to fix something. You can go to the ballot box to support people who you believe share your values. Sometimes it works, oftentimes it doesn't.

Unfortunately, it's unlikely that the USA will ever become a real democracy, so we have to make the best of the system we currently have.

> The USA is not a democracy, it's a representative republic.

The US (by Constitutional form) is both a (representative) democracy and a (federal, and democratic) republic.

> Unfortunately, it's unlikely that the USA will ever become a real democracy

You seem to be using "real democracy" to mean "direct democracy", buy direct democracy is no more real than representative democracy. (And there's a good case to be made that the problems the US has with being an effective democracy are curable while remaining a representative democracy, and that the problems lie largely in the particular electoral system.)

We could create a new system. Why is that never thought to be an option . . . people do do that.

> the banks would probably calculate that it would be cheaper and easier to manipulate the regulatory environment to inhibit credit unions than to compete on honest terms

Would? No such calculation is necessary because banks are a state-maintained cartel everywhere - the opportunity for fleecing the masses with those sneaky & outrageous charges is just too delightful to pass up.

If people actually had a cheaper and better alternative, no one would keep paying those outrageous charges, and that's why the credit union 'had to be' "regulated"[1] to death.

Ever wonder why all banks charge roughly the same fees?

[1] "Regulation" is quite a double-speakey word. If you regulate an electric current, you make sure it isn't too strong, and that's where the word gets its positive connotation.

But when a government "regulates" anything, it's basically just coercion. "No, you can't offer people this beneficial service. You can't charge less for transfers. You can't give your customers debit cards" and so on.

> The only way for this system to be fixed starts at the ballot box.

Do you think politicians all over the world don't know that every single person on earth would rather not get fleeced with outrageous fees?

They all do, of course, and as evidenced by banks still raping us six ways from Sunday, they don't care.

Take any societal problem you see. Is there real evidence to show that they care? Whatever they tell you to get elected doesn't count, by the way. How often do politicians keep their promises?

Why would you think the solution to any problem would start at the ballot box?

It starts before the ballot box, winning over voters. And that takes money.

It realistically starts and stops at the Supreme Court. Unless they change their "money is free speech" decision, the US stays with a free market political system.

You know they pretty much always break their promises, and you understand that your vote doesn't bind them in any way.

You see things getting worse each year..

So do you not understand that voting doesn't actually solve anything?

Obviously, winning people over into participating in a pointless ritual doesn't help either, nor do the bribes a politician takes to fund the publicity necessary to win people over by lying to them.

Think about it.

1. Banks are not state-maintained. You can argue that 'too big to fail' means government support for them, but support is not control.

2. Banks charge roughly the same fees for the same reason grocery stores charge roughly the same prices - competition.

3. Coercion is a straw man when considering government activity. Anything you don't like becomes coercive. I don't like that my roommate wakes up before me and disturbs my sleep - coercion! I like having subsidized education but not paying taxes - coercion! I like feeling safe with protected borders and the greatest fighting force ever assembled but not paying taxes or protecting people who don't look like me - coercion!

4. There is never a single solution, no silver bullet to resolve complex societal problems. I sympathize a bit with you here - what is the point of progressive reform when the system will adapt? Nothing structural will change, but will only shift. But at the same time, shouting down calls for representative change serve nobody either.

I also resent your use of 'rape' in that context.

> Banks are not state-maintained. You can argue that 'too big to fail' means government support for them, but support is not control.

That wasn't my claim. I said banks are a state-maintained cartel everywhere, and that implies preventing competition.

One way to prevent competition is to make sure the cartel banks can't fail. It's difficult to compete with a business that gets handed unlimited amounts of other people's money when it's about to go bankrupt.

> Banks charge roughly the same fees for the same reason grocery stores charge roughly the same prices - competition.

Do you sincerely think banks couldn't charge less for their services? :) Because that's what it would take for competition to have resulted in the current price level, as anyone on HN should be able to understand.

I'll stop here now because I suspect you're not being honest.

I bank with SF Fire Credit Union. They offer services to any SF resident. They gave me a line of credit, offer mortgages, online banking, free checking and saving, reimbursement for ATM fees. In other words, there is no reason to prefer Bank of America to them. So why does much of SF still use Darth Vader's bank?

Americans have no one to blame but themselves. When I tell people they should divest their savings from BoA, a bank which was directly responsible for massive fraud that caused the housing bubble, they look at me blank eyed and move on. These people have power because we gave it to them.

I absolutely agree. I can see no reason for an individual to use a big national bank. I've always used small local banks or credit unions (I actually moved my accounts to a credit union when my local bank was acquired by Chase).

This used to be quite easy to do, since you didn't have direct payroll deposit and never had to worry about covering more than your outstanding checks.

Now, with all kinds of automatic transactions most people have, you have to coordinate things a bit more carefully.

>Now, with all kinds of automatic transactions most people have, you have to coordinate things a bit more carefully.

I really hope this isn't the reason large banks have power (inconvenience of switching). With a whimper...

Its kinda a big deal. I have an account with the Credit Union at my university in the Midwest and now I live in Texas. If they had a better online banking presence I would ABSOLUTELY keep my money with them. But their presence on the web is sooo incredibly dated: https://www.uiecu.org/ASP/home.asp. (Its not just the UI and the draconic security measures; I fear that they don't have the right checks in place to prevent online fraud).

Meanwhile, Chase has a nice Android app which gives me instant information about all my transactions. They detect fraudulent transactions immediately. Auto-Pay for bills. Convenience and security wins.

Since this is all anecdotal experience: there was a period of time between jobs when they sneakily charged me $5 per month when I did not make a deposit in my checking account. So I do see the evil aspect is there.

My experience has been that 'larger' credit unions end up looking more bank-like (and even share the same web interfaces these days; probably using the same SAAS provider...), but still without the evil quotient. My current credit union (Golden 1) ran a five million dollar surplus a couple years ago, and just divided it up amongst the savings accounts...

But point being, bigger credit unions are generally a bit more smooth at the edges.

It absolutely is the reason, and was that way even before automatic transfers became common. I have left BoA three times, never having signed up as a customer. Every time I would move to a new bank, NCNB/Nationsbank/Bank of America would buy them and raise the fees. A few customers like me would leave, but enough would stay for the process to be profitable.

Read up on https://en.wikipedia.org/wiki/Hugh_McColl , the Genghis Khan of the US banking industry.

If I move out of SF, what happens?

That's the problem for a lot of people.

Nothing happens, I bet. I'm still with a credit union that was affiliated with an employer I left over 10 years ago. That employer doesn't even exist anymore, but I still bank with that credit union.

Once a member, always a member.

EDIT: I think I misunderstood your point. If you're talking about being close to a branch or whatever, then that's also not necessarily a concern. The closest branch for my CU is 350 miles away. But the Co-op network and the website together cover 100% of my needs.

Indeed. The coop network is great for branch access and ATMs, and like many CUs, mine refunds the fees foreign ATMs charge up to 8 times a month.

You're ignoring a very important part of the story: credit unions, unlike banks, are tax-exempt: http://www.treasury.gov/press-center/press-releases/Document... (see page 2). Those "mutuality" restrictions you note are the trade-off for tax-exempt status. Otherwise, the regulations applicable to credit unions and banks are more or less the same (see pages 1-2).

Honest question: Why can't there just be non-profit banks?

We don't have non-profits deliver most services because they wouldn't be efficient and/or couldn't raise capital from investors. And once investor come in, their profits are taxed. But there's nothing that in-principally stops a charitable organization from opening a non-profit car repair shop which runs with no net profit.

If, for whatever reason, it's feasible for non-profit banks to get started and operate successfully, why would we not allow them? (Please put "because the legislators are bought-off"-type arguments aside. What are the reasons people give?)

Are grocery co-ops limited in membership?

I'm not aware of any law precluding not-for-profit banks. E.g. USAA's banking arm is a quasi not-for-profit bank: http://www.theatlantic.com/business/archive/2012/01/in-the-e....

This is a very useful example, thank you. What exactly is the benefit credit unions derive from satisfying the legal requirement of credit unions, rather than just following the sort of incorporation that USAA uses? Can't they avoid taxes on corporate income by just running with negligible profit?

EDIT: So I'm reading through your link above. They mention the obvious way that nominally for-profit corporations could run at zero-profit by returning all excess funds in the form of interest to depositors:

> In contrast, mutual corporations are owned by their depositors, and the equity of a mutual corporation is derived solely from retained earnings. Because depositors are the owners, payments to depositors can include both interest and an equity return to depositors in their role as owners. While depository institutions are generally permitted to deduct interest paid on deposits, mutual thrifts are also allowed a deduction for amounts paid or credited to their depositors as dividends on their accounts, including amounts that represent an equity return, if such amounts may be withdrawn on demand subject only to customary notice of intention to withdraw.

Why don't credit unions just become non-profit and do this?

> Honest question: Why can't there just be non-profit banks?

There can be. If you mean, why can't there be "tax-exempt non-profit banks", the reason is because the tax code doesn't allow it (though no-capital-stock member-owned banks seem to be effectively untaxed, except on transactions subsidized by federal assistance to such banks, if they actually distribute their operating surplus to demand deposit accounts of the members.)

> We don't have non-profits deliver most services because they wouldn't be efficient and/or couldn't raise capital from investors.

If you are referring to "tax exempt non-profits", we don't have them deliver most services because there are limited categories in tax law of tax-exempt non-profits.

I must be unaware of an important distinction here. Non-profits don't pay taxes, so non-profit banks are automatically tax-exempt, right? (Put aside issues of tax-exempt status of donations to non-profits; credit unions don't take donations.)

Maybe here's another way to formulate my question: why can't a credit union operate as a for-profit bank, but just structure their company so that it's committed to never earning a profit and hence never paying much taxes? (It's perfectly legal for corporations to pursue ends besides maximizing shareholder value, so long as they are publicly disclosed, popular misconceptions notwithstanding.) In other words, why do credit unions bother to satisfy the legal requirements of being credit unions?

> Non-profits don't pay taxes, so non-profit banks are automatically tax-exempt, right?

Tax-exempt non-profits are a subset of organizations not organized for profit. To be tax-exempt, an organization must not only be not-organized-for-profit, it must also meet the qualifications of one of an enumerated list of categories of tax-exempt non-profits in the Internal Revenue Code.

> Maybe here's another way to formulate my question: why can't a credit union operate as a for-profit bank

Because then it would be a "bank" and not a "credit union".

> but just structure their company so that it's committed to never earning a profit and hence never paying much taxes?

An organization structured like that is a mutual savings bank; as the return of surpluses via demand accounts (the same way a credit union typically returns surpluses) is tax deductible for them, as discussed upthread, it is quite possible to have a bank (rather than a credit union) that returns surpluses to members like a credit union and is effectively untaxed (it looks like a mutual savings bank that didn't retain surplus profits would be untaxed except on things for which it received federal subsidies as a mutual savings bank.)

> Why do credit unions bother to satisfy the legal requirements of being credit unions?

Because the legal requirements for starting a bank are pretty hard, too (whether legitimately to protect people from bad banks, or as protectionism through regulatory capture by incumbents, whatever, the barriers are there), so while the rules are slightly different for credit unions, you don't actually make your job easier by trying to start a bank-to-operate-like-a-credit-union.

>> Why do credit unions bother to satisfy the legal requirements of being credit unions?

> Because the legal requirements for starting a bank are pretty hard, too

So then the point of being a credit union, ultimately, is just to avoid the legal requirements of starting a bank? And it really has little to do with tax-exempt status? Elsewhere in this thread people have said the opposite. rayiner, above:

> You're ignoring a very important part of the story: credit unions, unlike banks, are tax-exempt: http://www.treasury.gov/press-center/press-releases/Document.... (see page 2). Those "mutuality" restrictions you note are the trade-off for tax-exempt status. Otherwise, the regulations applicable to credit unions and banks are more or less the same (see pages 1-2).")

Why put those arguments aside when it seems like that is the primary reason why non-profit banks can not exist?

It's a logically separate issue. One discussion at a time.

Is USAA considered a bank or credit union? Either way, they're easily the best financial institution in the US. They are amongst the most tech savvy because they only have a branch in San Antonio, yet their customers are deployed around the world. For those that don't know, USAA was originally setup only for military personnel and their families. Military families get screwed on credit and insurance because they are frequently moving. Their insurance rates were sky high, despite military bases being relatively low crime. So USAA stated offering insurance as a response. It's also non profit as they send you a rebate check every year for premiums minus losses.

It's a fantastic company that does great things because they want to help people, not grow huge profits. They were among the first to do ATM fee refunds (use any ATM), they never charged fees for using another ATM, were among the first with scanned check deposits, then smartphone camera deposits.

If you're eligible, you really should be using USAA. I prefer them even to the local SF credit unions.

Edit: I guess they are both a bank and insurance company.

To provide some balance regarding praise of USAA, they also push unnecessary and predatory "overdraft protection" and require an opt-out to binding arbitration. Some of their business practices as of the last three years have been converging with that of the big American retail banks. Some retail banks have made enormous strides in catching up to USAA's great internet and phone banking.

It would be great if someone were to include some information about their executive compensation plan to see how their incentives are aligned in comparison with the large retail banks.

Their insurance rates are very competitive and their customer service is stellar.

There is a branch in Annapolis, Maryland across the street from the Naval Academy. Just as the Washington, DC branch, they don't handle cash but have a full-service ATM outside.

What is the overdraft protection? The only stuff I've seen links a credit card to your checking account, and there is no charge. Or has that changed?

The friendly default is to allow a backup checking or savings account to handle the overdraft.

However, upon creation of new accounts in the past 2-3 years, they offer the predatory BoA-style overdraft protection. It's opt-in, so I imagine very few customers choose it. Still, I was dismayed to see it even being offered. It is completely out of place with the rest of the USAA offerings.

They have a branch here in the DC area also, but the can't handle any money there, and are there for more of a presence to help with financial wealth planning.

Where the laws are more relaxed, credit unions can be competitive. The Desjardins credit union (technically a federation of credit unions) based out in Quebec is a good example, they have 5.8m members and 254B$ of assets. They even have branches in the US, but those are chartered as banks and owned by the federation.

That said, it's hard for a cooperatively structured to be nimble and the bureaucracy and internal politics are legendary.

Banks are known for their nimbleness, lack of bureaucratic red tape, and lack of internal politics?

It's all relative, but yeah, any of the big 5 canadian banks are immensely more nimble than desjardins which is internally structured as a federation of credit unions each of which is technically independent.

The UK is also a slightly dodgy example because the Cooperative Bank managed to implode in spectacular fashion mainly because the board didn't have many people with any idea about finance, and their Chief Executive, who had a politcial background, ended up being arrested after being caught by the papers trying to buy drugs. There are some really good examples of building societies over here, Nationwide seems to consistently do retail banking very well. But they are not a panacea.

It's funny that you mention the UK, which used to have a number of mutual bank-like institutions called 'building societies'. Many of these became banks about 20 years ago, and former members (holders of mortgage or deposit accounts) received windfall cash payments in exchange for their shares.

I don't recall what drove the transformation, but It wouldn't be surprising if those who made the decisions had some upside from either their current or future compensation packages.

In part the de-mutualisation was driven by the short term gains that could be realised if it happened (at the expense of the long term customers). This led to people signing up as customers, purely so they could vote for this to happen and receive a windfall, so you're right, though it sounds like you thought it was a small number of decision makers at the top, rather than an insurgency of outsiders taking advantage of the co-operative model's democratic structure.

Yes, I'm curious to know whether the votes were initiated by insiders (executives or long-standing members) or by 'activist carpetbaggers'. AFAIK carpetbaggers' activity was just opening an account and, when the time came, casting a vote.

A lot of the transformation was caused by those who moved to building societies with the intention of changing them to banks and cashing in on the windfall. They were known as carpetbaggers: https://en.wikipedia.org/wiki/Carpetbagger#United_Kingdom

Thanks for mentioning Mondragon, more people need to know about the world's largest federation of co-ops:


Could someone just create Worldwide Credit Union and just require living on Earth to be the affiliation?

I've always wondered if credit unions were a viable vehicle for progressive thinking in the financial world but it appears, no?

Are companies still using Utah-based "industrial loan corporations"? That used to be an interesting vehicle for providing banking services.

18 months is about reasonable for a CU. You can open one for under 100k, licenses, access to SWIFT, ability to issue FDIC insured loans at a huge spread. It's no surprise he's getting audited. He's dealing in a contentious ...commodity?currency? (I think the IRS deemed it as currency.) Either way, given the negative publicity that surrounded bitcoin during its emergence (passports and guns for sale? I mean I'm fairly libertarian, but transacting in that currency is just baiting some employee fresh out of law school looking to make his name memorable enough to win when he runs for the junior senator seat a few years down the line.) Combine that with the fact that new businesses tend to get audited far more often than your average MNC who has rigorous accounting journaling procedures in place to ensure they're compliant with the law, thus making him a double-easy target. The NCUA will not give you a heads up if they're going to perform an audit any more than the IRS would.

The archive.org is an important project. This dude seems like a genuinely nice guy who's trying to go out of his way to help the little guy. In fact, I try to bank exclusively with the little guy (check my posting history re: that schpeal). "Mr. Modell and Mr. Kahle said the red flags raised by the N.C.U.A. examiners had been over small discrepancies and record-keeping issues — and often turned out to be factually wrong." I'm going to guess their risk analysis procedure just flagged his institution with 'red flags' as such: "new financial institution, potential violations here, here, and there." Those small discrepancies are important. You're a monetary institition in charge of what's often the only safety net someone has. Even if the 'small discrepancies' were minor, the risk analysis software seemed to do a good job because they caught the oversight. Small or not, I'd be upset if my interest bearing account wasn't paid to the cent, because it would shatter my trust. Their job is to move money around on time and with a very high degree of regulated precision. (In this hypothetical case, of course) the institution failed to comply with are admittedly sometimes onorous minutia.

On a more positive note, you Silicon Valley buds should all group together and open a credit union. I wasn't joking when I said the initial expense is around 100k followed by a few ten k each year. Here[1] you can do it for 50k if you're effectively online only. Credit is so cheap right now, assuming you can issue out mortgages in the fractional method banks can do (e.g., hold a dollar for every ~10 (or around abouts) you lend out in traditionally safe paper like mortgages), it wouldn't take much for you guys to save a _ton_ of money by charging 0% overhead minus the opex of the CU itself.

Also, re: the 'commonality' it can be anything really. Most famously you have any former member of the US armed forces, their spouses, and their ROOMMATES (if they're active duty IIRC) can join. Its been a long time since I looked at the specifics but the 'common ground' you share can be very vague like "yeah we all hold HAM radio licenses" would be a genuine justification.

[1] http://www.ncua.gov/Resources/Documents/CUDev/AcrobatDocumen..., page 7.

> where one of the most popular grocery chains is a co-op

Their parent groups also runs a bank, electrical retailer, funeral directors, travel agents and solicitors.

Well the bank.. less so now, as the co-op management screwed up so badly

How obscure can the common affiliation be? Does "dislike of hidden charges" count? :)

I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in this political environment.

Banks don't charge outrageous surcharges and fees to be evil. They do it because providing banking services, especially to small accounts is expensive. In 2011 an average checking account cost $349 for a bank to maintain [0]. Anytime there is an attempt at more transparent pricing or discouraging small customers there is a huge backlash for the public and regulatory bodies like financial protection bureau. Bank of America tried charging a $5 monthly debit fee for accounts less than $5k, 2011 only to drop it shortly after hundreds of thousands of petitions came in opposing the idea. Thr consumer protection agencies would have probably shut that down anyway by fiat.

I understand why a credit union is appealing to some but I personally don't care whether my services are provided by a for profit company. I give my business to the organization that can provide me the best value. Walmart shareholders can keep their 5% pretax margin.

[0] http://www.americanbanker.com/issues/176_238/checking-accoun...

Edit: I get it, it appears as though I'm defending the big banks. I just think an explanation as to the high fees is better than blind populist response of claiming the banks are somehow evil. Or the response that any organization that earns a profit is evil.

> In 2011 an average checking account cost $349 for a bank to maintain

From the article:

"The single biggest cost, Israel says, is the cost of bank branches and ATMs. Another 20% is spent on back-office functions, including maintaining call centers and payment operations."

It seems like this is all about bad workflows and customer service... which are technical issues, not inherent business needs. There are probably technical solutions to these problems that would drive the cost per customer down dramatically. Perhaps going forward, there will be more incentive to innovate on this front.

...or maybe there's enough regulation out there that it doesn't really matter.

Sure, you could run a bank with no branches and no support phone number.

There are several online banks in Europe that don't have branches.

Banks don't charge outrageous surcharges and fees to be evil.

Yes they do. It's very common for commercial banks to intentionally order transactions which cause an overage such that they result in the highest amount of fees possible, and then charge an extra fee because you couldn't cover the overage fee.

If this were simply banks trying to be profitable, why wouldn't they simply raise overage fees and charge them predictably? Is there a regulation which disallows this?

Sorry, I'll stick with keeping my money with an institution that's not legally bound to engage in an adversarial relationship with me.

That $349 figure is misleading. It is comprised almost 100% of fixed costs, like executive salaries and buildings, which do not vary with the number of accounts.

Banks charge fees because they seek to maximise profits. Those fees don't have to relate closely to costs. I'm not saying this is good or bad, just that it is so.

I don't know if you read the website or want to provide some kind of source for the cost breakdown, but my source suggests it's 50% branches and arms, 20% call centers and payment, 20% security and compliance and 10% product development and sales.

I guess you can call those fixed costs. No mention of executive salaries, maybe product development? If they were just fixed costs, and banks were making money off small accounts, why are they discouraging them so much with minimum balances and fees? I cancelled a small account recently and the bank seemed happy to let me go. Not even a question of why I was leaving.

> No mention of executive salaries

From the article you linked: "Overhead costs, including executive salaries along with security and compliance expenses, also account for about 20% of the costs."

I'm not saying that the marginal cost of maintaining an additional account is zero. I'm just saying it's closer to zero than it is to $349/year.

A corporation at the end of the day has it's owners interests at heart, with a large bank like Bank of America their owners and their customers are separate groups and their interests may be odds. When the customers AND the owners are the same interests tend to align and you are less likely to be in a situation where you feel your bank does not have your best interest at heart.

Can you expand? It's easier now that ever to switch and compare banks. It's fairly competitive. But my original point was that the banks are losing a lot of money on small accounts, so obviously they're not trying to compete for them and merely offer and service those accounts due to pressure of regulators and to earn public good will.

The regulatory burden facing credit unions from the NCUA is not near as bad as what banks face from the FDIC. Right now the FDIC regulators take the stance that your bank is "guilty until proven innocent."

One bank was getting examined to determine if it was engaging in unfair lending practices. The regulators pulled 6 loans at random from the bank's portfolio. 3 loans were to men, 3 to women. Then they looked at the average interest rate on the loans to the men, the 3 on the loans to women. They found a .5% difference between the male and female averages (the men had the lower rate).

The regulators fined the bank several thousand dollars and required it to adopt new processes to ensure that future loans were "fair."

Had the regulators looked closer, they would have noticed that the three random loans to men all went to older men with high credit scores...and each male was in a white collar job (doctor, lawyer, etc.). The loans to women, which were pulled at random, were each to younger women, just starting their careers. These were auto loans to a first time car buyer, etc.

The regulators didn't care about the details and punished the bank anyway. You are guilty until proven innocent, and they don't expend a lot of effort trying to prove you innocent.

In this day and age of big data, a bank or credit union's best bet is to use the power of business intelligence to continually prove that it is lending fairly in the community and climate that it dwells.

Could you provide a source for your anecdote? I find it hard to believe that the FDIC would look at a mere six loans when their own guidelines [1] call for at least eight, and that's with a population of a mere ten loans. For a higher level of precision on any decent loan portfolio the sample size will be at least 50.

Furthermore, having dealt with regulators before, there's always an opportunity to provide written responses with requests for data or an appeal process. Not hard for a bank to argue that a sample size of six isn't representative of their overall lending practices.

[1] (Warning: PDF) https://www.fdic.gov/regulations/compliance/manual/11/XI-10....

It was an anecdote from Bill Goedken at the 2015 CUNA CFO Conference. It was from the session "Mining Gold – New Trends and Discoveries in ‘Big Data’ That Will Help Your Credit Union Compete". I've linked to the slides ([1]) but there was no mention of the anecdote in them.

[1] - http://www.cunacouncils.org/cuna/assets/files/144820_Goedken...

On why this doesn't make sense:

This doesn't make a lot of sense, as sampling post-Enron (not just banks, anyone), should follow a SOX-404 type of methodology (and banks internally, at least in the US, tend to follow this sampling methodology).

On why this does make perfect sense:

What might have really happened is the bank didn't want to push this, as the regulator were holding something else to their head, or might hold something else to their head (which they may also be unaware of) and [the bank] wants to be seen as a cooperative, not uncooperative, institution.

This is extremely likely.

It isn't like a regulatory body can instantly understand a bank's business. They can't come in at a micro-level and try to understand the books (at least, for a larger bank). There's not the organisational understanding level there. So, an uncooperative institution gets hit by fines and warnings against directors.

Small level non-infraction which may blow-up later (related or unrelated), the bank thinks just take the hit and don't fight it. A smaller organisation may really be worried they're not doing something right (but they don't know what) so this gives some time to get things in order. A larger organisation... similar.

This also benefits the regulators (not to push if the bank put up their hands for a minor crime) as it is super easy for a highly complex organisation to obstifucate things later, if they want to, if they see the regulator as somewhat pesky. In this case, the regulator will have to be extremely sure of their case and push things through legal channels often at a country's executive level, and then things also get difficult. For the case of a rural credit cooperative, the regulator may see them as a general social good (as in 'good thing') but needing to be punched on the nose a few times to keep in line. And then there's internal pressure and politics within a regulator of what 'good' actually is.

>a bank or credit union's best bet is to use the power of business intelligence to continually prove that it is lending fairly in the community and climate that it dwells

Completely agree.

It's often a lot cheaper, at least in the Netherlands, to buy an unused banking license than to actually jump through all the hoops to get a new license. Reading this, this regulator seems to have a lot of leeway to propose arbitrary restrictions thus hampering business in the interest of protecting customers. It's hard to do a cost-benefit on this type of customer protection by the regulator.

Related reads:

* Rule of Law in the Regulatory State by John Cochrane [1]

* WebMD versus FTC [2]

[1] http://johnhcochrane.blogspot.nl/2015/08/rule-of-law-in-regu... [2] http://www.scmagazine.com/dismissed-labmd-case-could-impact-...

Whenever people push for more unbound regulation, this is what happens.

The big players can hire another lawyer and get the regulators for a tennis match at that fancy club while the small players drown in paper.

Ah, and also this: ". As an engineer, when I looked at how the transaction systems work, I was shocked to see few technological safeguards. I imagine there is major fraud activity. Ironically, the bankers and regulators need exactly the technologists that they are pushing away."

> The big players can hire another lawyer and get the regulators for a tennis match at that fancy club while the small players drown in paper.

I actually imagine that there's remarkably little of the tennis-match corruption you indicate, but I know that there's quite a lot of the over-lawyered corruption. Even worse, there's a lot of completely well-intentioned regulation whose hidden costs drive up prices, while not really providing much in return (related to the old question, 'ever wonder if taxation without representation would have been cheaper?').

Anyone who's dealt with the federal procurement system has to wonder if a little pocket-lining corruption would be cheaper than dealing with the paperwork intended to prevent & detect corruption; anyone dealing with a heavily-regulated industry has to wonder if the regulations cost more than the fraud, waste and abuse they prevent.

because 2008 made out clear that no oversight works just fine.

those are laws to protect laws placed to protect banks et al long before. the original laws give some state insurance for a very cheap price, which can easily be abused if someone start a bank/union, give lots of loans to a partner and then crash said bank/union. ... which is exactly what the 2008 was about if you stop believing all banks were surprised by the crash...

edit: and yes, they fail mostly at bribes. nobody does business with any government without bribes. maybe he is not such an accomplished banker as he believed if he never got to that part. i know in construction you won't get far without it.

I keep hearing this argument, 'no oversight', and I have yet to see proof of it. Finance remains the most heavily regulated industry, as it has for decades.

Both things are true. Finance is heavily regulated by at least a dozen agencies, but the coverage of those agencies has gaps, and significant overlaps where it's not clear who is supposed to be holding the ball.

To name two examples from the financial meltdown:

- Lending practices at banks are regulated by the Federal Reserve. Lending practices by mortgage brokers financed by i-banks and hedge funds were essentially unregulated. Those are where a lot of the bad loans and securities started.

- Derivatives are normally regulated by the CFTC, but credit default swaps were specifically exempted from that regulation in 2000, on the assumption that other federal regulators would cover the downstream risks under their purview (they did not).

> Finance remains the most heavily regulated industry, as it has for decades.

I'm not trying to be pedantic if you were just speaking in hyperbole, but I'm curious on the methodology for determining that.

> nobody does business with any government without bribes. maybe he is not such an accomplished banker as he believed if he never got to that part.

I personally consider banking and government in general to be fairly corrupt, but do you have any evidence that literal bribery is common?

Handing a bag of cash to someone isn't the way corruption at this level works. That happens with low level people, who trip up and get caught.

It's more a combination of favors, revolving door employment and consideration for friends and family.

I have checking and savings accounts at the Internet Credit Union but I don't use them.

- I'm in NYC. ATMs that don't take a surcharge are few and far between. There are two near my house, at a McDonald's and a bodega. According to the locator, only one ATM in all of Manhattan takes check deposits. An iPhone app called CU24 ATMs can find them (be sure to switch the filter to "surcharge-free ATMs" because by default it shows all ATMs), which is nice.

- Online banking is done through a website called It's Me 247 (https://obc.itsme247.com/237/). It's frustrating to use — to log in you enter your account number, password, and the answer to a security question (it can't remember your browser). There are no mobile apps, and it doesn't work with Mint. There is a mobile site, but like the desktop site you have to log in with your account number, password, and a security question every time you use it.

- Their main website is actively broken on my phone (it's locked to 1x zoom and you can't scroll horizontally) due to an incorrectly-used <meta> tag. Jordan himself wrote back to my email after a few days to say that he was working on mobile support, but the website was never fixed. (This was >1 year ago.)

- I can't direct deposit into my savings account because it shares an account number with my checking account.

- There's no way to pay bills or send checks online.

- I called to order checks when I signed up. I never heard back and never got any checks.

In the end, I was never able to switch from Chase, which has clearly-marked ATMs all over the city (most of which accept checks) and a nice mobile app. If I were going to use another bank, it'd probably be Simple, which prides itself on being easy to use.

I wanted to love the IAFCU but day-to-day banking was too frustrating.

On the other hand, I had no idea they had all of these regulatory difficulties, and their mission to provide banking to the under-served sounds an order of magnitude more important than keeping people like me happy.

This kind of stuff is why I'm with Bank of America. I tried switching to First Tech Credit Union (besides being a CU they also have chip-and-pin credit cards that work well in Europe). Their website is just terrible. The last straw was when I found out I can't pay my First Tech credit card with anything but a First Tech checking or savings account.

I wasn't able to use Simple either, as I'm married and even after all these years they don't support joint accounts: https://www.simple.com/help/articles/account-info/shared-acc...

I switched from Chase to Charles Schwab Bank. Decent mobile app, can take pictures of checks to deposit them, can use any ATM without fear of surcharges, I've got checks should I need to use them, great customer service, and works with the online budget management software.

Probably a lose leader to the investment products, which you don't have to use, but I'm extremely happy.

I am a member of a credit union and support them whole-heartedly.

And I think it's great that we scrutinize new wanna-be banks and make sure they aren't a pump-and-dump fraud scheme. Because in the absence of such regulation, something like 100.0% of new banks would be pump-and-dump fraud schemes.

Which one is more likely, assuming you know nothing about Kahle: that Kahle is trying to make an honest buck serving an underserved market, or that he's trying to copy what this guy is doing:


"People are falling over themselves to sign up."

If you aren't prepared to get your ass ridden by regulators, you aren't prepared to be a bank. You aren't good enough to offer banking services to the public.

Am I missing something? They say they have "$1 million in donations spent ... and $1 million in the bank to back any bad loans". For a bank/CU this sounds like pocket change. Later they say they have "almost unlimited capital". What gives?

That's my first reaction as well; NCUA is first, foremost and entirely concerned with solvency and capital adequacy requirements, so it's no surprise that they weren't jazzed about a tiny CU taking on high-risk and expensive products. I haven't done a CAMEL score on them (and haven't touched CU finances for several years so I'm reaching back into my memories here), but you can get their financial performance and analysis data at [1], charter number 24846.

These guys obviously had the best of intentions and a real desire to make a better world. I wish they could have found a way to clear that path, but I don't think that a CU was the right institutional form.

[1] http://fpr.ncua.gov/OnlineFPR.aspx?cu_number=24846

I'm sympathetic to his concerns, and I applaud him for putting his money where his mouth is. Some comments:

> an under-documented local Rutgers student...We sought an exception from the NCUA, but they said no.

I don't know why he would expect to lend money to an illegal alien, nor why he expects the government to let him deal with someone whose very presence is a violation of the law. I should be surprised that a state university admits someone who has not been admitted to the state which owns that university, but I'm not.

> We were stunned to find we were the first full service credit union chartered in New Jersey since the NCUA was formed 1970.

I'm not all that surprised: New England is a particularly corrupt and regulation-bound part of the country. It's amazing to me that anyone would do business there or California.

I'm not surprised, although I am saddened, at the failure of their Bitcoin effort. I'm fairly certain than NCUA was concerned about the possibility of money laundering (never mind that it shouldn't be a crime, nor should it be something the regulatory system cares about: it is and it does, and that has consequences).

> I see a system as unhealthy if regulators put 200 to 300 institutions out of business every year for decades on end while only allowing a few to start.

Are those 200-300 healthy or not? Are the ones allowed healthy? Are the ones disallowed unhealthy?

This is the problem with regulation: it's in the regulators' interest to be as strict as possible, because any failure will be harshly punished (in the press, in the civil service, and in the courts), while success has no reward.

Kahle has had an unpleasant introduction to the real world. Regulation has costs, typically hidden from idealists; they are revealed to him, because he tried to do something new.

>>I don't know why he would expect to lend money to an illegal alien, nor why he expects the government to let him deal with someone whose very presence is a violation of the law.

This type of banking is a specialization that is referred to as "low documentation" by bankers. It exists in areas with large migrant worker communities like California and Washington.

It is innovative and profiable, but extremely difficult in the post 2008 regulatory climate. I know bankers who work in this industry. The commentary I have heard is that the regulatory burdens are severe.

If you don't have the endurance for being incorrectly threatened with fines and crimes which you have to successfully prove wrong, you won't survive.

It sounds like gambling with stakes that exceed my risk tolerance.

New Jersey isn't New England, and I resent the insult to New England.

Not sure this is an aside or not, but I see a lot of big bank versus credit union in the comments, and that's just not really the case here in my opinion. I work for a large regional bank and I see a lot of similarities in this story to my own company, especially in the number of audits being requested and the rules they are having to follow (Bitcoin for one). I'll agree that a large part of the rules we have in place are self inflicted: some we asked for and some we caused in the aftermath of the financial crisis. These constant audits we've been faced with since the 2008 time period just chew up enormous amounts of time that we could better spend with innovattion and making the customer experience better overall. It's really unfortunate that his idea of creating a financial institution with real innovation is being stopped by bureaucracy that is probably 80℅ unnecessary regulation.

Would you say the customer experience was that much better before the regulations in 2008? Cause that hasn't been my experience personally.

Why was this "a new kind" of credit union? It seems like it was an ordinary credit union that briefly toyed with the idea of BitCoin.

The article doesn't go into much detail, but since they wanted to 'help non-profit workers and the poor' my guess is that they wanted to offer loans to high risk people and the regulators said "NOPE!"

Can I say that this is all actually my fault? My company was the first Bitcoin company offered services by IAFCU. I made the mistake of speaking to a reporter at WIRED about it. Within hours regulators had the noose set. Had I not opened my mouth, IAFCU could have built up enough strength to tackle its opponents.

The polices and structures in this country are not oriented toward mutual benefit or utility, they are oriented toward entrenched interests.

Banks don't like competition or new ideas. Regulators have an easier time attacking small potatoes than for example JP Morgan, which can generally do whatever they want.

J.P. Morgan Adds $2.6 Billion to Its $25 Billion Plus Tally of Recent Settlements


There is a more nuanced story here. Blaming NCUA for the decline in small credit unions doesn't really tell the story.

Credit unions generally weren't underwriters of mortgages -- they were small savings institutions serving a community that wrote mostly small consumer loans with easier underwriting standards.

Nowadays, getting consumer financing is pretty trivial. So I don't need a CU to underwrite Christmas.

Also, the definition of "community" is watered down as to be meaningless. The credit union that I'm a member of is open to anyone living in like 9 counties in my area and is the 4th largest bank in terms of assets in the region.

So why would I join or start the "BigCo Helpdesk employees CU" when I can get most of the customer benefits and more services from a bigger CU?

I think the expectations here that these guys would suddenly appear and be writing mortgages in a short period of time is an unrealistic goal, and probably damaged their credibility with the regulators. The same regulators are easy scapegoats because they can't talk back.

Can someone explain what was the idea to serve the under-served that archive.org should do this?

I was a member a spent some time talking with one of the ladies running the credit union -- they set up shop in an area where there were socio-economically depressed communities, and were soliciting members from those underserved communities (if i remember correctly)

EDIT: Nothing necessarily to do with archive.org, except that Brewster is a great guy and he happens to really dislike banks, so he looped in a friend involve in the banking sector

just someone who has a great idea to help the world having another one.

It would probably be a good thing to keep archive.org and this credit union thing separate. Right now this could easily be taken as things not going well financially for archive.org.

I'm puzzled by the name too. How was the Credit Union funded? I'm assuming no archive.org money went into it--?

The system is so broken it's not even funny.

It's not broken at all.

It's running exactly the way the entrenched players want it to run, squashing competition with heavy-handed regulators and killing innovation at pretty much every turn.

Looks around to see if anybody will catch the joke, does it anyway.

The Aristocrats!


The numbers speak for themselves, a sharp decline in the number of credit unions for every year since NCUA was formed. It's hard to imagine that this wasn't the intention.

I posted a similar reply in the other CU thread, sorry for the repetition.

You can only draw that conclusion if you put on blinders and look at it one-dimensionally. Lots of things happened around the same time that NCUA was founded. Visa had turned into a member-licensing system, and consumer credit was become much easier to get. Computerization started happening and made banking operations more scalable.

The bread and butter of credit unions were small, workplace communities that offered savings and small loans. Most didn't even offer checking accounts. In the days when many blue-collar workers with variable wages were unable to get bank credit, they offered a accessible way to get small personal and secured loans and save. My father in law was a fireman, and there was a department credit union. The firehouse captains would come around with a boot and envelope on payday to collect deposits. New folks on the job would get loans for uniforms and boots in advance of reimbursement by the department. To 18 year old firemen in the 1960s, no consumer credit was available.

Now, consumer credit is trivial to obtain, so that market is drying up.

You also have to look at small credit union operations. When they started diversifying into stuff like auto-loans, many began to fail because they weren't equipped to handle the more sophisticated business model. They were, after all member owned cooperatives doing small loans. NCUA ended up holding the bag for those lost deposits, and tightened up standards, which in turn led to more CU shutdowns and mergers.

A very similar story applies to the former bedrock of american banking -- the small savings & loan. As their business because commoditized and the commercial banks consolidated, their oxygen got cut off.

Brewster and Jordan are good folks; idealistic and willing to put their money and time where their mouth(s) are.

As far as I can tell, the reality is pretty much as they describe: there is negative appetite for new banking institutions of any sort in America.

This is a top-down perspective from regulatory and law enforcement -- large centralized banks make enforcement (legal and regulatory) much easier.

I'm sure that of the 5,000+ changes requested by the NCUA most were bullshit. But, there are many, many standards that modern banks adhere to -- and groups like the NCUA do tier out responsibility to credit unions based on their size, and how 'bank-like' their operations are. A small credit union is just going to look 'amateurish' to these examiners, and they have a fundamental duty to make sure that depositors are safe.

What Brewster and Jordan seem to have discovered, and I think this is an important thing to know, is that the burden imposed means that it's impossible to bootstrap a financial institution like this in the current environment, even if there are millions of dollars of funding available.

This is super sad.

The number of US credit unions thrown around is a fairly misleading. The majority of decreases in this number are mergers, not CUs being "shut down". A more useful number may be the total number of US credit union members over the same period of time.

The credit union that disappears form the official count usually doesn't see much more than a name change, and adding new services & members. This usually results in better service for both original CUs members; a combination of branch locations, ATMs, and services from both of the original CUs.

I've also never heard of "force them to merge their assets into bigger credit unions". Would be very interesting to hear more specifics about this, if it actually means something more than 'hassle them so much that they find a larger CU to merge into, on their own, just to escape'.

The bureaucracy seems to be just a Façade to prevent competition (and consequently innovation).

I'm not an economist but the more and more I read up on the matter following the cracks that showed up after the crisis of '07-'08, the more disillusioned I become.

There was a lot of optimism regarding Bitcoin being a deflationary currency affecting change from outside the system but it's going down the same route. The big players (Conbase/Circle) in this field are just being absorbed by the existing system and will loose their outsider advantage.

This is probably more often the case than not. Regulation is drafted to protect entrenched players and establish permanent streams of income. Most organizations really don't like having a dynamic environment that could make them obsolete on short time scales.

Before the 1980's mortgage lending was limited to the credit unions and other member owned institutions like S&Ls. This regulation had been put in place after the Great Depression of 1929, in order to limit speculation in housing. This regulation had largely worked, and housing prices were largely flat in that era. Regan deregulated the banks and this led directly to the failures in the S&L's later in the 80's. It also led to the wild boom & bust cycles we have seen in the housing markets.

George Orwell noted in 1984 that to really control a population, you control their language - eliminate the words that describe the behaviors and views you disagree with.

Economically, businesses provide "words", degrees of freedom that people exercise when they spend or act. Banking is ugly because there are some "words" we don't want people to use, like derivatives, or over-leveraging. But the banks themselves then use this safety mechanism to eliminate or weaken the words that would threaten them, like cooperative banks.

In the end, it boils down to Congress. The Executive has a lot to say about it too. Perhaps as technology improves we can install a Panopticon in Wall Street and Washington, reducing the cost and risk of regulatory enforcement. And if they protest we can say: well, what do you have to hide?

Sounds like kind of a nightmare. But on the other hand, a depository bank / credit union is a tough area to try to innovate. It's not like a hedge fund, where all the participants have to be wealthy enough in the first place to take the risk that it goes south. I wish there were a better answer, but I want both innovation and a high degree of safety.

i think the first step here, since they accepted defeat at some level, is to start releasing names of everyone signing those letters or visiting them. giving names that newspapers can go after and get names higher up is always helpful.

I think you missed the issue. It's not about individuals - it's a systemic problem.

Elizabeth Warren needs to see this!


We detached this subthread from https://news.ycombinator.com/item?id=10628060 and marked it off-topic.

Trivializing sexual assault is extremely poor form.

I feel for both sides of this argument. Trvializing something traumatizing that people feel strongly about is not good, but I'm not sure using it in this context is exactly trivializing. The commenter could have said "banks still kill us with fees us six ways from Sunday" and most people would not say they were trivializing murder. Also, I'm not sure when sexual assault became worse than murder, but at some point in the past it did. You can't use rape/sexual assault as hyperbole in many places where you could easily use kill/murder etc. Maybe that's because there are survivors to read/hear the communication and be affected by it (although there are plenty of people affected by loss of a loved one through murder). In any case, I think this disproportionate response with regard to talking about sexual assault when compared to talking about items of a similar or worse level, such as murder, leads to people being confused by what appears to be inconsistent responses on crimes of this caliber.

So, with all that said, I don't think it's all that hard to understand why some people don't understand the problem of using "rape" as slang to mean "taken advantage of" or "coerced" when "murder", "kill", and "dead" are often used with no problem to mean "mad at", "should expect a rough time" or "be careful". Unless you are willing to either additionally condemn all uses of that type of speech, or define why it's very different, reducing the use of "rape" as used here to "trivializing sexual assault" is both inconsistent and unfair.

In case you missed the flagged comment, my case was with the way that comment was presented, in which the parent commenter's request was dismissed as political correctness without any consideration to context. Therefore, trivializing.

I saw it, but I took your comment "trivializing sexual assault" as also applying towards your reasoning for the statement "I also resent your use of 'rape' in that context." and my comment was meant to address both.

Right. I just think rape is talked about too lightly, and when people do so it reflects poorly on them.

Some things simply aren't appropriate to do in a public space, like nose-picking. It's not that they should be forbidden, but it won't win you many friends.

And I understand that stance, I'm trying to point out that if you have that stance, you should also condemn talking lightly about murder (which you might), and if you don't, I think that requires justification, or a reexamination as to why rape is treated differently than murder. It's possible that it may be because of people pushing a (well intentioned) agenda.

My personal view is that there is a misalignment here, and when these terms are used to describe something clearly as a metaphor then they should be treated similarly (or murder should be treated as the worse of the pair). I don't really care whether that means they are both taboo or both acceptable, but treating rape as taboo to use as a metaphor and murder as not is clearly inconsistent, given that murder is undeniably the worse crime.

Continue to trivialize it more by using it to beat everyone around [including randoms on the internet] with your smugness.

I suspect you missed the parent comment before it got flagged.

And I can't wait till people stop being assholes to each other.

If you want to set up a subprime loan shop (which it seems he did) just do it. Don't hide it as a community benefit

It says he didn't want to do that. That "predatory lending" was all he felt the regulators would allow from him.

don't understand this comment. what about current accounts, checking, transfers?

The primary motivation was lending, as mentioned several times in the article.

He mentioned that he didn't want to start a predatory subprime loan shop.

He wanted to offer non-predatory lower interest loans to higher risk clients, in concert with banking services that are difficult to provide to higher risk immigrant clients like checking and savings accounts and debit cards.

But the NCUA wouldn't allow him to set interest rates lower or offer checking/debit accounts.

> But the NCUA wouldn't allow him to set interest rates lower

That indicates that those rates aren't actually predatory at all, but required in order to defend against default.

Which really isn't all that surprising: in the case of payday loans and such, there are many operators, and anyone who could lessen his profit-per-loan could very easily snap up a great number of customers, increasing his net profit. That no-one has done this indicates either collusion or that the rates are fair.

Sorry but this is playing with words.

If you are making loans to high risk clients, this is predatory lending. There's a reason they are high-risk: they are less likely to be able to pay the loans, or have demonstrated prior poor handling of debt. Don't be misled by "low interest" either: the "predatory lenders" in the last housing bubble were not for the most part charging exorbitant interest rates, rather they were lending far too much money to people with almost no qualifications.

If you make credit easy to get for people who can't handle it, they will end up bankrupt and the creditors will end up holding the bag.

Lending to high risk clients, on its own, is not predatory lending. If I'm willing to accept the risk, I could loan $5k to someone with a poor credit history and frequent unemployment at a low interest rate. I have to be somewhat altruistic to do this, and most banks and lenders aren't. I have to be willing to write it off. It sounded like this was the market they wanted to be in. Poor people needing money, instead of getting payday loans or high-interest CC debt, could get low interest loans from this credit union. It's the opposite of predatory.

I'm not sure it's viable or sustainable, but it is a noble goal, at least.

The issue is that you are using your customer deposits to make the loans. When the loans default and they aren't paying a high interest rate to compensate you for the higher default rates, you don't have the money to redeem those deposits at face value, and then the NCUSIF (FDIC for credit unions) will have to step it. The regulators would rather prevent that in the first place.

Right, I understand why they couldn't make the loans (regulators not allowing it). But if someone were to establish themselves in a way that could make the sorts of loans this credit union wanted to, they wouldnot be predatory.

> If you are making loans to high risk clients, this is predatory lending.

What I was specifically replying to. High risk loans are not predatory loans. Predatory loans are high risk, high interest, unfavorable terms (short repayment periods, high-value collateral for low-value loans, aggressive collection tactics, etc.). We have to be clear when we talk about a topic to not mix the terms in a way that skews our discussion from the actual circumstances. That way lies miscommunication and misrepresentation of those involved.

A bank has to be self sustaining, its deposits must cover portions of its debts. It can't work if it is based on the changeable altruism of an individual. As actually even happened in this case, hewasn't prepared to endlessly indemnify the loans, which is something he could do as a private lender.

> loans to higher risk clients,

sub prime lending then?

I was curious so I looked up the definition (well, Wikipedia). Turns out, you're correct. Lending to high risk clients is the key component of subprime lending.

What many people seem to think of is the high interest rates, unfavorable terms and other things which push subprime loans into the predatory loan category. It's entirely possible (though apparently hard here, with the restrictions on rates they could provide) to offer non-predatory subprime loans.

Do you not believe that responsible lending can be a community benefit?

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