Credit Union Exam Solutions Presents With Flying Colors

Treichel: Hey everyone, this
is Mark Treichel with another

episode of With Flying Colors.

I'm excited today to be here with
David Reed of Reed Jolly, the law firm.

David, how you doing today?

David Reed: I'm doing great, Mark.

It's a pleasure for being here.

Thanks for having me.

Treichel: You got it.

Yeah.

And you're on my mailing list and
we follow each other on LinkedIn

and I, I shoot a lot of different
things out in both directions and

we had a good little dialogue going
on the other day about, about loan

quality and it it, it triggered,
Hey, let's get you on the podcast.

And, I first met you back when you
helped NCUA with some strategic planning

under the Matt's administration.

I think that was back when Dave
Marquis was executive director and

I was regional director, but, and
that's when I got to know you and

all that and enjoyed that back then.

And I've enjoyed following
you since, but, so a lot of my

listeners may know who you are.

Some of them may not, if you could
maybe give me a little bit of your

background, that would be great.

David Reed: Absolutely.

I hope nobody holds this against
me, but I'm an attorney by trade.

But I always introduced myself
as a recovering general counsel.

I entered the credit union world By
working with credit union here, I'd been

practicing for probably about 10 years
and I was hired here in Northern Virginia.

And my initial job title, which fits well
into what we're talking about today was in

house counsel slash collections manager.

And I had been at a firm in D.

C.,

I had been doing a lot of civil
litigation, a lot of different collections

stuff at the state and federal level our
twins at the time who they're pushing

30 now, at the time they were probably
three years old or so, and the D.

C.

world of law just, it's not a good
place if you're you Working in DC with

a family in the outskirts of Virginia.

So I looked for an in house gig
and I went in with the credit union

give a shout out to Apple Federal
Credit Union in Fairfax, Virginia.

Great credit union.

And Larry Kelly, the CEO hired me
because they were having issues

in their collections department.

And I sometimes joke that they said they
were having a fire in their collections

department, but I think that's because
they had fired the prior manager.

They were looking as they were growing
to bring on an attorney anyway, but

this was a great doorway to do it.

And I started with the promise that,
hey, as you learn the business, because

I had never worked in or around a
financial institution, as you learn the

business, your responsibilities will grow.

So for the first.

Probably 18 months.

I was a frontline manager.

I wasn't in the I wasn't a director.

I wasn't in the C suite.

I was the collections manager.

So I learned the credit union world
from the collections department.

And as I began to put processes
into place work on some training,

change some key personnel.

I then was able to hire
a collections manager.

I became general counsel.

A couple of years later, I became
VP of general counsel as part

of the senior executive team.

And then I think probably
a year or so before we met.

I I left a very friendly parting of ways.

We work with Apple still now, and I formed
my own little entity, and that's Reed and

Jolly, and exclusively work with credit
unions all across all across the country.

I've also.

I had the blessing of being a credit
union volunteer for about a decade.

I was a member of a supervisory committee
of another federally chartered credit

union served the last six years.

As chairman of the supervisory committee.

So I am seeing this this marketplace the
cooperative financial services marketplace

from a lot of different angles.

But the one commonality that I've had
throughout is an appreciation of loan

quality and the role that the, collections
plays not only within the credit unit

operations, but also, let's face it.

The A of Campbell's is
asset quality, right?

So it's it's a very important
concept and the spotlight's

getting shown on that again.

Treichel: It sure is.

And yeah, that's what kind of
triggered our conversation.

By the way, another shout out
to Apple Federal Credit Union.

They have a wonderful first
responders first time home buyers

program that my daughter and her
husband were able to participate in.

Oh, wonderful.

That's great.

David Reed: They have they have always
been, I think, on the cutting edge of

community based financial services.

Treichel: You got it.

You got it.

But yeah, so the recent
issue, a letter to.

credit unions came out and I
always do a podcast on that.

It was always since I left NCUA, it's
the one communication from NCUA that

I look forward to most every year.

And this year, I don't know, it was 22,
23 percent of the verbiage in that letter.

The highest percentage of any topic that
I can ever recall was specifically devoted

to loan quality and asset quality and.

David Reed: It was

Treichel: right.

So they're really focusing in on that.

And I want to praise them sometimes.

I beat them up.

I've changed teams.

I beat them up when I
think they need to be,

But I graduated.

Yeah, I graduated.

Yeah we, I praise them
when I think praise is due.

And there was a year that.

A couple of years back where
they had 12 priorities.

And I, as I like to say, if everything's
a priority, nothing's a priority.

That's exactly right.

If we focus

David Reed: on everything,

Treichel: if we're going to be

David Reed: number one at everything,

Treichel: So they've honed it in,
they've got it down to four or five

priorities, but, and they devoted a
lot of time to asset quality and that's

because delinquency trends are up.

Ironically, if you look at the numbers
today, back to 15, 20 years ago, what

we thought was high delinquency today.

is different than what we thought was
high delinquency back in the day, right?

Those are creating some pressures
for credit unions and you do some,

and so you've seen some things with
your clients, with your discussions.

I know you do training as well.

I've seen you doing,
with some photos of you.

I think standing on one
leg doing some balance.

Yeah.

And anyway, so that balancing
act of collecting the loans,

making the loans and all that.

Talk about what it is that you're seeing
out there with your clients or your

credit union discussions on loan quality,
delinquency collections, et cetera.

David Reed: Absolutely.

First of all, just echo
everything you just said.

I was I am always pleased when the NCUA
pulls back the curtain, which they do

with the supervisory priorities and say
it from our perspective, which let's

face it is a pretty good perspective.

This is what we're seeing.

And I believe this is the
second consecutive year that

credit risk is up there.

But it's the first time
with a rocket, not that we.

Put too much emphasis on what order
it's in, but like you said, the vast

majority, certainly the plurality of
that letter was focused on credit risk.

And it's a concern to a great
many of our clients out there.

I'm very blessed to be able to
practice with with a great credit

unit attorney, Bruce Jolly.

And we have clients all across the
country, and I have been doing an

increasing amount of work going
back to the delinquency control,

collections portfolio management,
risk management, which is the label

that everything is going on now.

And When you read the language of the
NCUA letter 25 CU 01, first one out

of the box, but they talk about the
delinquency, particularly in credit cards

and used car loans, and they harken back
on credit cards to make their point.

They said it's the highest level
Since 2010 and just as a quick

side note the world shifted
on collections in 2010, right?

So when I first started in the
90s in the credit union world,

and I, like I said, I left at 07.

So I left, just right before
the world, collapsed mortgage

backed securities and all that.

But if you would have asked me,
Probably even as I was out the door if

you would have asked me, is there any
way that real estate could dominate

delinquencies either by numbers or
a percentage or be the major concern

from either an operational perspective
or from a regulatory perspective.

I would have said, of
course not, of course not.

I can remember, as we were shifting
through different allowance for

loan and lease loss methodologies,
arguing for greater reserves.

For a growing real estate portfolio.

And I can remember arguing with the
examiners, talk about the irony.

They're like no, you're
reserving too much.

I'm like, listen, we're growing,
30 percent portfolio every year.

They're like, yeah, but historical
loss perspective and, all the

things then what happened?

Boom, the big short happened
and that changed everything.

And that kind of started.

A different focus on collections
with the modification policies,

don't extend and pretend.

But I only say that I focus on that
because from my perspective it's as

if that's the last time that anybody
really focused on collections.

They talk about it.

But it's like smiling and nodding and
looking at the key performance ratios.

But as far as training and staffing
and technology and process, there

hasn't been a lot of work put into
that by A great many credit units.

The second thing that they mentioned in
the supervisory priorities was in used

cars and they made a special point.

And this is, and you know how it is
when the supervisory priorities or any

letters to credit units are created.

This thing went through 12 drafts,
14 different subcommittees read it,

but they made a special point that
said, if you look at the delinquency

by portfolio, which is important.

So a lot of people say, Oh our
overall percentage is this.

Okay.

What is it in credit card and use
cars and home equity lines of credit?

And we'll probably talk about that
in a few minutes, but it's the

highest delinquency and charge
off ever in used car loans.

Ever.

So what I'm seeing out there is, I'm
not going to be overly dramatic like

the NCOA sometimes but it is a little
bit of the perfect storm, right?

Credit cards, use card loads if
you have economic instability.

I don't know.

Let's pick high inflation, right?

Things like that.

These are two areas where people of,
dare I say, modest means they focus

a lot of their borrowing, right?

And credit cards help them
cover what they're doing.

And what I'm seeing is that many credit
units are getting caught flat footed.

With the rising tide of delinquency,
and as they go to address it they're

addressing it with processes and
technology, or the lack thereof like

they were doing 10 or 15 years ago and
the market has passed them on that.

So I work with a lot of different
credit unions on basically just,

digging out all of the, the layers
and looking at, what the core

mission is of the credit unit, right?

Which is to serve the membership,
the white hat of the financial

services sector, right?

We're owned by the borrower,
which is different.

And then look and see Better
ways, especially to utilize

analytics and technology.

If I had, if I had to say what I'm seeing
missing out there, it's the leveraging

of analytics that are probably being used
within other areas of the credit union,

And leveraging technologies that are being
used by other parts of the credit union.

The, the ability to text, the ability
to engage a borrower, in a chat, if

they get on your bill payment system, if
they get on your mobile app or whatever

technologies that are being used.

By marketing and lending for other
areas, but not being used in collection.

So there's a retooling.

Treichel: You don't reach your
member by leaving leaving it

on their home phone anymore.

I'm answering machine.

Hey, with the credit you do, we'd like to
call you and you've got the things you can

say, the things you can't say, but right.

Very

David Reed: important.

Very important that I talked to you.

Treichel: Yeah I hadn't thought about
the, the text on a loan saying, Hey,

I haven't got, or you need to reach
out about your car loan or whatever.

But yeah, I mean that,
that makes a lot of sense.

So you talk about the inflation, the
perfect storm and there, there's a.

I think it's the used car guy podcast.

It's a guy who's on LinkedIn, but
I followed him a little bit and

more so during the pandemic when,
he'd say used Corollas are going

for 40, 000 or whatever, right?

Okay, this can't end well, right?

So then you get into, okay, this
is the aftermath of cars being

expensive of inflation being
inflation and then people, right?

Life happens, right?

People get divorced.

People pass away spot that their financial
condition changes and we're seeing

a little bit of that kind of bubble
up into some of this data and and at

the same time, then you've got Yeah.

You've got the attack on fees the
nomenclature, junk fees, overdraft

you get, every year to be every
year to be pick a number every year.

It's harder to be 100
million dollar credit.

It's harder to be a 300.

It's harder to be a.

A billion dollar credit, because
there's more competition and

you're getting nibbled away.

David Reed: Yeah,

Treichel: that's right.

Yeah, that's right.

They're coming from
inside the house, right?

Yeah, we met the

David Reed: enemy and they are us right?

Treichel: And then here we are with,
the other thing when you're talking

about going back to the stat 0809.

The 2010 back then it was a lot of the
delinquency is, it was in one of the

states where I'm at the San States.

You had, oh, Nevada.

Yeah.

Now there's a

David Reed: blast from the
past, florida, the states, the

Treichel: sand states, the states
where it was, and so you had the

haves and have nots with real
estate delinquency and I don't.

I'm not seeing that right now
anywhere, but have you seen anything

where there's pockets of, maybe
California with the fires, we're

going to see some issues there.

Oh yeah,

David Reed: just, the natural
disaster aspect, that, that

will play its way through.

NCOA, again, to their credit
immediately has stepped in with

central liquidity funding and another,
flexibility for those credit units.

Now it is.

I guess I would say a couple of things.

The core message is this, this
is the time to prepare, right?

You need to look at
your internal processes.

You need to refigure those.

You need to give some amount of an
extra emphasis on collections as

opposed to collections always being
at the end of the parade, getting

the old computers and when all the
highlights come out of new, new software

or new upgrades and core processing.

There's all these stuff for
marketing and lending and I.

T.

And security and cars,
nothing ever for collections.

And we need to flip that a little bit.

But it is nowhere like where we were
in oh nine or 10, which is good.

People talk about is there a bubble
coming up, and that's always important

for us to think about, but there's so many
tools in place now for shock testing and

concentration testing and all of that.

Treichel: Yeah, I agree.

I agree.

The agency's in a better position as
far as the training that they've given

their staff, the expectations on ALM.

Shocking the portfolio, the NEV test,
they've, the industry at NCUA has

collectively raised the bar with that.

I would agree on that.

Hey, one thing I've talked about a lot and
I've seen in my credit union conversations

when someone is dealing with NCUA relative
to their exam is we're seeing a lot of

corporate governance being raised as you
get an exam report you got, last year you

were a two this year, a three last year,
or you were a one this year, you're a two.

But you have document resolutions
and examiner findings.

They tend to be linking those back to
corporate governance from what I'm seeing.

Are you, have you experienced any of that
in your conversations with oh my gosh.

David Reed: A absolutely.

So I do a lot of, again, a great amount
of my time is spent in the training area

and I had the opportunity to host to emcee
the supervisory committee and internal

audit conference the big one this year.

And corporate governance
is front and center.

It has been for a long time, right?

The general direction and control
of a credit unit is handled

by the board of directors.

Examination teams have always looked
at board minutes to a certain extent.

But as as the financial services,
the cooperative financial

services marketplace continues to
evolve and become more complex.

I think there's a more there's an enhanced
approach to make sure that it's not just

the management team that's keeping up
with what's going on in the world, right?

Because one of the things that we're
seeing in collections is sometimes

what I think examiners have seen
in the boardroom, which is this

is always the way we've done it.

Let's face it.

The reason that 701.

4 came out, I can remember somebody
telling me that the concern

amongst examiners amongst the,
the NCA was that the major that

the major exercise aboard power.

And then this is, of course, in the
aftermath of, the real estate, collapse.

Because I think 701.

4 came out in either 07 or 08.

It was they were same time period.

But they said that the big exercise
aboard, governance was double thumbs up.

And that's just that's not enough, right?

Day to day operations are
handled by management.

But the risk appetite And a general
understanding of where the credit union

is going has to be handled by the board.

So I'm seeing a lot more emphasis in that.

And part of it is that you see
that struggle in, in our outside

role as outside general counsel to
credit unions all over the place,

we've seen that struggle with a
board that is well overactive.

And sometimes a board that's
like an absentee landlord.

Oh, hey, if you think
that's right, that's fine.

What's for dessert?

So there's a lot more emphasis on that.

But really, I tell people again,
take a deep breath on governance.

What they're talking about is all the
machinery that runs the credit unit.

How does the board operate?

When you look at compliance management
system, it starts with the, the

board and the senior management team.

What's the level of communication?

Is the board, does the board
understand what's going on?

And yeah, we're seeing that more and
more being able to show that the board

is receiving information something
more than just a line item on the CFO's

report, that they understand what's
going on in the portfolio, what efforts

are being made if I was speaking to a
collections exclusive group, I'd say, I

would always say, don't, Collections is
not about delinquency and charge off.

That, that is a measurement of the
health of the loan portfolio, right?

We're about making contact with
the members and working through

a pretty simple formula, right?

And that formula is, what's going on
with the member, married up to what

tools the credit unit has, and that
gives us the best chance of success.

So we want to share success stories
with the board, as, as well.

But going back to what you're saying,
I've worked with a, number of creditors.

So give me a call.

And the board chair will say yeah, the
the examiner in charge made a comment that

our delinquency delinquencies have been
going up, every month for the last six

months, and they were very disappointed
that there was no discussion recorded in

the board minutes about loan quality and
about collection efforts and the things

like that, that everything was about
new business lines and new technology.

And they're like, they asked me
what I thought about collections

and I said I don't think about
collections, which guess what?

That's the wrong answer, right?

Treichel: Yeah, there's a definite
what's in the board minutes.

What's missing from the board minutes?

Are there trends?

Another board minute is, we haven't
talked about possibly be wanting to

merge another credit union into ours
and our strategic plan for 5 years.

And then this year, we're applying
to merge 3 credit unions and because

the opportunity came up and you may
push, say, hey, this didn't seem to

be like it was part of your plan.

Suddenly, it's all your plan.

How does that make sense with the
risk appetite and everything else?

Yeah, there's definitely, a lot
of focus on those type of things.

Hey, one thing you said too, about
providing outside OGC assistance to, to,

to credit unions a buzzword out there.

And I think probably attorneys were
way ahead of the game on this as far as

how they operate in that environment.

But the fractional CFO, the fractional.

You know that the word fractional
and services is out there in the

world and it's starting to pick up
in credit unions, but really the OG

having an outside general counsel has
been a fractional service forever.

Have there been any changes?

Any thoughts relative to that?

Just that statement I made?

The fraction.

David Reed: So first of all,
yeah, you're absolutely right with

the fractional and I get that.

I used to love to work with the Office
of Small Credit Unions and things

like that and talk about how they
could build up economies of scale

with three or four credit unions,
let's say, yeah, below $50 million.

And they would go out and they would
hire an IT person or things like that.

And that makes sense.

But if you're a larger, more
complex credit unit and you're,

you're fractionalizing this or that
it can become a bit problematic.

Fortunately in the legal services,
we are I hope I'm not going to get,

too much feedback, negative feedback
on the, but we're a commodity you

could use us on a cafeteria plan a lot
easier than you could use it or CFO.

And I'm not arguing
against fractional again.

I think that has a role, but if
somebody is, classic example, right?

Marijuana related businesses.

To the extent that I'm ever on travel
and let's say you're sitting, sitting

someplace having a cool, refreshing
beverage, having, your Caesar salad and

the weary traveler next to you ask what
it is that you do, if I am going to

engage in my two responses are number
one I'm a Chip and Dale's dancer,

Treichel: right?

Exactly.

That's you could, yeah, that,
and you can pull that off.

David Reed: They look at me and they
usually have a little bit of a confused

look and I go I'm on disability.

Treichel: The other thing that I

David Reed: say that always will either
get them laughing or in the conversation.

I said, Oh I help clients
bank marijuana money.

But the that that concept, if
somebody's interested in doing

that, I've been, I can't even count
the number of of executive teams

or boards that bring me and said,
okay, let's just talk about this.

Tell us about risk.

Tell us about what you're seeing.

Tell us about, what we
need to think about.

Once that project is
done, they're yay or nay.

Now I can just be used
as needed and I go away.

So I think we were a little ahead of
the game of that, it's interesting.

On that on that note that when the N.

C.

U.

A.,

when you read, and again, I want to
say it's four paragraphs, but like you

say, it's a quarter of what they wrote.

And as they always do the whole purpose
of the supervisory priorities is, hey, we

think these are risks to credit unions.

Yes.

So we're telling all of our
people boots on the ground.

We're saying, Hey, this is a risk.

And, I jokingly say this if I'm
teaching compliance or if I'm teaching

governors or whatever, I said, All
right if your examination team has been

told this is an area of risk, do you
think that they're going to make an

administrative record of those items?

Treichel: Yeah, pretty good chat.

Pretty good chance that some of your
conversation or material amount of

your conversation is on asset quality
is on credit risk during you better be

David Reed: prepared.

Treichel: You better
because they're giving

David Reed: you a guidebook, but
they talk about of the things that

they're going to look at, they
talk about, loan underwriting,

they talk about risk management,
allowance for loan and lease loss.

And I always jokingly tell people,
I said, I'm not worried about

anybody's modification policy ever
because you have one because they've

been looking at it for 15 years.

And everybody has the same challenges
as far as, when Cecil came to town and

all of that, but they also make sure
that they talk about two other things.

Yeah.

third party risk, right?

Because collections is filled
with third parties, right?

Collection agencies, collection
law firms, repossession companies

people that they use for foreclosure
skip tracers, all of that.

But then they also, again, within
credit risk, Made a special shout

out to board reporting, right?

So anytime you see board reporting,
that's governance, right?

That is governance.

What is your goal?

What is your board
thinking about that now?

And it's okay if the board says,
Hey, this is a trend, right?

We talked about, financial
literacy when that came out.

That was really the big impact of 701.

4 in the entry rules and regulations
was that that paragraph three on.

Having a general working understanding
of accounting and finance, but it's

not only what the number is right
now, it's what the trends are.

And so it's okay for them to go
to management and say, all right

what are you doing about this?

It's not okay.

Don't worry about it.

Treichel: Yeah.

I didn't pick up that
board reporting reference.

That's very powerful words.

Cause I, what I picked, one of
the things that my team and I

had did a podcast on the letter.

And we talked about the fact that we
were anticipating at some juncture

corporate governance in and of itself
will be a topic in one of these letters,

particularly because that's what we'd be.

but that's a hat reporting.

So if there's has gone up, if
your coll is problematic and

that's impact, you can bet your

If they don't like what they're
saying, the chances of there being

a document resolution on corporate
governance has gone up because of that.

So that's a, that's an excellent point.

You made 1 other point about the 3rd
party, the reference to the 3rd party.

It gives me a good opportunity to.

To cross sell my other podcast, which
is credit union regulatory guidance,

which is in a an audio book styled AI
built program where I go through NCOAs.

NCOAs or OCCs or CFPBs, whoever,
any guidance that I think credit

unions might like to listen to, I
put it in the audio book style and

I just redid the third party letter.

I think it came out today or yesterday.

The day we're, the day we're
recording this, where you can listen

to the full guidance NCUA has on
third parties and it's, it, there's

a lot of good information there.

It's an older letter but those
core principles remain the same.

And there's also, by the way, if
you're looking to beef up your third

party due diligence, there's really
good guidance from FDIC out there,

while NCA doesn't rely on that.

It's it's very exhaustive and I
guarantee you if you could, if you

read through the third party due
diligence and the governance that FDIC

requires, if you go through that and
go, yeah, our program looks really good.

You're going to, you're going to pass your
exam with flying colors without a doubt.

David Reed: And first of all, I
love that because like you, I'm a

true practitioner of this, right?

Which means I'm a little
bit of a geek, right?

And you have to look at what's going on.

And, I just did a a webinar.

for the credit unit webinar network.

Shout out to that.

And it was on the compliance outlook.

What's coming up and of course
it talks about elections have

consequences and all of that.

But the week before I did it,
supervisory priorities came out.

Travis Hill at FDIC gives his his
bombshell statement on Friday.

This is a new direction at FDIC.

OCC had already put out in the
fall their their compliance

outlook for fiscal year 2025.

And of course, FDIC has a great
publication what's it called?

Risk Review.

I think which is a really good market.

And then, of course, Federal
Reserve has their compliance

outlook and things like that.

And we need to look at all of that.

And guess what?

I hope everybody's buckled in.

But credit risk is being touted at
OCC, at FDIC, and let's remind OCC,

National Banks, FDIC works with the
state on non Federal Reserve member

community banks, and then Federal
Reserve works hand in hand with the

state on community banks that are also
members of the Federal Reserve System.

And this is a this is a marketplace
trend because it's an economy trend.

The deal is and where I have been
spending a lot of my time, literally

over the last year or so, is that there
are unfortunately a lot of credit unions

that, that they are operating with,
this is always the way we've done it.

And guess what if old school collections
has two moving parts, that's it.

Just two.

And it's the ability to pay
and the willingness to pay.

And you need 'em both, right?

You need 'em both.

Yep.

Yep.

And and we can help with we can
actually help with both, right?

Willingness in that you wanna
be a member of the credit union.

Use the products and service
ability in this that, the reason

I think a lot of people don't.

speak to the credit unit about
delinquency is the same reason they

don't speak to anybody about delinquency.

They, they don't like the
fact that they are delinquent.

And number two, they fully expect
that the person's going to say, I want

every last dime that's due right now.

Treichel: Yeah.

Yeah.

David Reed: And, I just bought
groceries a little while ago, which

Shout out to my wife, Diane Reed of
CU Doctor for putting the trust in

me to send me out to a grocery store.

But when you're paying close to 7 for a
dozen eggs, that's, that, that's an issue.

Apartment prices keep going up.

Home ownership is an increasingly
distant dream for a lot of people.

And, there's this concept out
there called financial wellness.

And financial wellness goes beyond, Oh,
I'm current on everything right now.

financial wellness is,
can I plan for the future?

Am I comfortable where I am?

And going back to what you said,
one of the things we've always dealt

with but I think we're dealing with
more now is that concept of our

members hitting an unexpected store.

An unexpected expense.

A child gets divorced, loses
work, has to come back in.

A parent has to come back in.

Loss of overtime, a change in
administrations and suddenly whole

departments are being laid off.

And credit unions know this
when they think about it, right?

If you look at your average
member, look at everybody.

Look at all, 100, 000 accounts.

What does that average account look
like over the course of a month?

And for most credit unions, the average
as many, so are the median more above and

below, but I think average is probably
better for this, but, people get paid and

then that, their account goes down to zero
or in many cases below zero, and then it

comes back up and what's in their savings.

Four or five hundred dollars, guess what?

Four or five hundred dollars.

Is it going to pay to get
an arm reset that's broken?

It's not going to pay
for a new transmission.

It's not going to pay.

If your hot water heater blows up.

Treichel: Yeah.

And those are the thing, every time
I go to the store or buy something

on Amazon and I look at the prices,
you get numb to it a little bit,

but when you realize you used to
pay 2 for eggs, and you think about.

How blessed you are
that you're able to do.

Oh, that's the

David Reed: word.

Treichel: But the flip side of
that is how do people do it?

And if they, and if I'm thinking how
do people do it, being in that pressure

cooker of having to do that, of having
to make that car loan, needing that

car to get to work, all those things.

And it's, those are difficult
conversations and you want to

approach them with care, but
you also, you want to have those

conversations so you can educate them.

Yeah.

To do the best while mitigating
the loss to the credit union.

It's a delicate balancing act.

David Reed: And again, and that's one
of the reasons that I do this big fat

balding guy, balances on one leg, right?

Because we do want to make loans.

We do want to grow.

We do want to acquire new members, but
I make reference to this all the time.

The book that I read every day it's
got a lot of great stuff in it, but

one of the things it says is it's
easy to love somebody that loves you.

Even bad people could do that.

The hard part is to love
somebody that hates you.

And what does that have
to do with credit units?

It's easy to love an 820 that
comes in and wants to buy that

late life Harley Davidson.

And now we can cross
sell them on an RV loan.

We can cross sell them on a 50, 000, visa.

But what do we do with the person that
comes back in second time in a year?

They have a 580 credit.

And they want to get another
modification of that loan,

Treichel: right?

David Reed: Because if it comes down
between, being able to pay for their

kids after school program or making
that next payment on the credit

card, we know who's going to win.

Treichel: Sure.

Great.

David Reed: And, so it's, it
is, we have to be proactive.

So yeah, we have to educate.

We have to let everybody know again
that we're in the solution business.

That's why I've been literally
preaching for 20 plus years.

I'm reasonably certain I'm the
person that came up with the

the phrase member solutions.

As opposed to the collections department
collections, you're not going to get

many people to come to your pizza party
If you're the collections department,

but member solutions and Look at those
analytics that we're using to make pre

approved offers of credit to market
to new areas I was getting ready to

hold my text phone on the word audio
you know my telephone, but if I get

a text message from my credit union
saying fraud alert I look at it.

Treichel: If

David Reed: I get a text message from
another one of my I'll say trusted

vendors I take a look at that.

And, if the collections team is not
being proactive, if they're not utilizing

analytics that they already have all
the data points they have, especially

if they're the, primary financial
institution to whatever that means, the,

in the days of neobank and near banks.

But if we're not using all of that
to try to be proactive, People

wake up one day and they're not
able to pay and they go silent.

And that's the biggest thing are, the
people that go hardcore delinquency,

especially on credit cards and use cars
and things like that, really on anything.

They just don't know what to do next,

Treichel: right?

David Reed: They don't know who to trust.

And there's a lot of people out
there shouting at him, right?

Pawn shops.

Treichel: Sure.

David Reed: Any number of places.

And I always, tell people if you
want to know how important, your

collections function is look at
it as a rescue mission, right?

Because next time you're driving down
the street and look at all the other

people that want to work with your
members that are in that lower level.

Check cashing, title lending,
we buy ugly homes, credit

doctors, bankruptcy attorneys.

So we need to up our game.

We need to use all the tools that
are available and try to help them.

Plus it helps our bottom line, right?

People forget charge offs.

Come right out of income, right?

Treichel: Out of income, right off
your net worth, and NCUA is there with

their bean counting pencil to make sure
that you're still well capitalized.

So David, this has been great.

Has there been any final
thoughts as we wrap up today?

And then beyond any final thoughts,
if someone wants to get in touch

with you, after you give your final
thoughts, give your contact information

in case anybody would like to reach
out and continue this dialogue.

David Reed: Absolutely.

So yeah, threefold.

Number one that the collections function
should not be judged primarily by

charge off and delinquency, right?

Because one of the other things
that the NCOA pointed out in the

supervisory priority letters is,
and I'm trying to think of what word

they used, they used one of those
good good regulatory speak words.

They didn't say that loan growth was down.

They said it had been moderated,
but simple ratio as loan growth

goes down, delinquencies and charge
offs go off because guess what?

It's a ratio,

Treichel: right?

David Reed: We need to look at
the dollars that are moving and

the members that are being helped.

So that's what number two again,
be proactive, take a tour,

look and see how you're doing.

How you're contacting members in all
the other departments, texting chatting,

teams meetings, whatever it is, all of
those ways that everybody else in lending

and card services and marketing and I.

T.

And even B.

S.

A.

They get, are anti money, anti terrorist
financing, they get all the good toys.

We'll see if we could leverage that.

And the final thing is again, this is
a great time just to kick the tires

and to see how you're doing things
right to, to make sure it matches

not only the challenge of what's
going on in the marketplace, but

also meeting all the opportunities
that a credit unit has again, to

utilize all of those different tools.

Treichel: And then if someone
wants to reach out and reach you,

I know I see you on LinkedIn,
I've got your email and phone.

But how could someone best reach you?

The

David Reed: best way is by far,
gonna be by email address which

is gonna beDavid@reedandjolly.com.

That's R-E-E-D-A-N-D.

J.

O.

L.

L.

Y.

dot com.

And are my telephone number?

703 675 9578.

But as email is by far the best.

Even if I'm traveling, which I
do extensively, I'm able to check

that a lot of times, whereas
phone calls are a little bit less.

And I'd love to help
people in any way I can.

I'm passionate about credit unions.

And I'd like to think that I bring value
in my in my maybe less than routine

opinions on the member solutions area.

Treichel: Very good.

This has been a lot of fun and I'll
put your email in my show notes and

David, I want to thank you for being
here today to share your wisdom

with me and with my listeners.

David Reed: Great.

Thanks so much for having me.

Treichel: You got it.

And listeners, I want to
thank you for listening.

As always, I hope you'll
listen again soon.

This is Mark Treichel signing
off with Flying Colors.