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Jeff Olson, president and CEO of the Credit Union Association of the Dakotas, stands in front of the Capitol in Washington in January 2016. The fencing, flags and grandstand were in preparation for the inauguration of President Trump. IMAGE: CUAD

‘Open your eyes to a credit union’: A Q&A with Jeff Olson, president of the Credit Union Association of the Dakotas

Editor’s note: Jeff Olson is president and CEO of Credit Union Association of the Dakotas, which represents credit unions in both states. In addition, Olson now is serving his second term on the American Association of Credit Union Leagues executive board and sits on the Consumer Consideration Committee of the Credit Union National Association board.

In a recent interview, Olson spoke with Prairie Business about credit unions and the challenges they’re facing.

What is a credit union, and how is it different?

We are a financial cooperative, so we’re just like any other cooperative. We are a not-for-profit, not a nonprofit, and I always have to clarify that.

What’s the difference?

The difference is that we’re not a charitable organization. Basically, we are in business to return our profits back to those who own us – so, we are a not-for-profit.

We’re member-owned, and the unique thing about us in comparison to a for-profit bank is that we have no source of secondary investment capital. We make money only on retained earnings – that is, through fees, services and interest on loans.

And so, we’re exempt from federal and state income tax.

That makes us really different, in that we typically can pay higher interest on deposits, and we’re able to provide auto and other consumer loan at better rates than banks can.

But we can only serve people who are in our field of membership. Traditionally, that has meant people who are working in the same industry or for the same company, or living in the same community as other members.

Would most people be eligible for membership in a credit union?

Yes. In the Dakotas, we have probably a dozen or so selective employee credit unions; so, if you are a postal worker, you can join the Postal Workers Federal Credit Union, or if you’re a VA employee or member of some other groups such as certain VFW posts, you can join the Fargo VA Federal Credit Union.

Other credit unions are community-based. That means people who live within a 50-radius of Grand Forks, N.D., can join the Area Community Credit Union, for example. Most consumers, especially those in our region’s larger towns and cities, probably can join a credit union.

And some credit unions are open to any potential member who’s willing to pay a small, one-time donation or membership fee.

Where did credit unions come from?

Our roots come actually from Bavaria and elsewhere in Europe. People there would get together, and if they couldn’t get any credit, they’d pool their resources and pay a membership fee to join the group. Then they’d use those fees to invest in their neighbors or community.

In America, credit unions have been around since 1908. The first got started in Manchester, N.H. Back then, mill workers in the town didn’t have credit; they were going to pawn shops and the like to get credit.

There was a French priest who’d come from Canada, where credit unions already were popular.  So he introduced the idea in the United States. (Editor’s note: That credit union in Manchester was called La Caisse Populaire, or “The People’s Bank.”)

And credit unions try to capture that spirit today?

Absolutely. In most cases, credit unions are smaller, so they know the individuals who come in. And there have been many, many stories of a credit union helping out an individual, a family or a farmer when that person couldn’t get help anywhere else.

It’s really because it was relationship banking. That was one of the things that helped credit unions grow, and that’s why a lot of people really like their credit union. In customer service surveys, credit unions wind up scoring way better than banks year after year.

What are some of the challenges that credit unions face?

Regulations have had a big impact on credit unions, just as they’ve had on community banks. The irony there is when Congress came out with the Financial Regulatory Act in 2010, the purpose was to go after the Wall Street banks, but what they did was harm middle class America with these regulations.

So, we’ve felt that impact here in the Dakotas. When I joined the Credit Union Association 10 years ago, we had 100 credit unions across both states. We’re down to 73. After the financial crisis in 2008 and primarily when the regulations hit in 2010, we’ve had more than 200 new regulations that are basically “one size fits all,” which means the big banks can afford the compliance – they have the personnel – while the smaller institutions were just much harder hit.

Technologies such as mobile banking are another challenge. Fortunately, most credit unions continue to offer very sophisticated services, although some of the much smaller credit unions do struggle to keep up in the technology department.

But the biggest challenges probably are the myths that credit unions face.

What myths are those?

That credit unions are too small, that my money’s not safe, that I can’t join and that they probably don’t have the technology that I need.

So the Credit Union National Association is launching a campaign aimed at dispelling all four of those points.

You’re on a Credit Union National Association committee that’s helping to develop the campaign. What’s going on?

At our national association, this has been an issue for years and years – the problem of boosting awareness about credit unions.

So, that’s the origin of our upcoming national campaign. It's called Open Your Eyes to a Credit Union, and it really debunks those myths about credit unions that I just mentioned.

Moreover, our CEO, Jim Nussle, did this right. He did three years of research involving focus groups, polling and going around the country.  

That means the whole campaign is based on research. Specifically, our research found that while most people know what credit unions are, they don’t think they can join, or they think their local credit unions are too small, can’t provide mobile services and so on.

It’s those myths again. And the fact that the campaign will counter those myths is based on our research, which showed us how widespread the myths are.

What’s next for the campaign?

We are raising $100 million across the country. Credit unions are pledging money on a annual basis for three years.

And it’s being done on a regional basis, so our commitment from the Dakotas is going to be a little over a million dollars. We’re almost to that range right now.

Then, the campaign is going to be primarily targeting younger people – millenials. It’s going to be a digital campaign, so little ads are going to be popping up all over the place. We anticipate this to hit our markets in February.

And there will be a website where everybody can go to, called YourMoneyFurther.com. It’s still under construction, but before long, people who use it will be able to find a credit union that they’ll be eligible to join.

What’s the status of credit unions in the Dakotas?

in North Dakota, credit unions have about 10 percent of the deposits. We actually are a state that does well in credit union marketplace, because the national average is 6 percent of people in the country are doing business with a credit union.

In South Dakota, it’s even less, because South Dakota is a big banking state. So, credit unions there have about 1 percent of the market share in deposits.

Clearly, we’re not taking over the world, but we do think we’re a financial alternative to traditional banking. Moreover, banks and credit unions have co-existed for 100 years in both states. A lot of our members also use a bank, and we may not even be their primary financial institution.

But we do think that we offer a choice, and we think consumers want that choice.