The Ends of Possibilities

UMassFive College Credit Union formed in 1967 when about 20 employees at UMass Amherst came together and chipped in $5 to start a credit union. The credit union petitioned the state and federal government for a charter, which they received. Over the past 50 years they’ve grown dramatically in size, with over 36,000 members and about $460 million in assets. They serve staff, faculty, and students from the five colleges in addition to a select group of organizations in Western and Central Massachusetts.

UMassFive is a “full-service financial institution” (Reske, 2017), providing checking and savings accounts, loans, mortgages, and other services to members. Members are required to put at least $5 into a savings account and receive a share of the company. As a cooperative institution, the members are the owners of UMassFive. The owners have the ability to vote on/run for the Board of Directors, a group of 9 member-volunteers who are in good standing. The Board of Directors attends training sessions and sets the strategic plan for UMassFive while ensuring that the union is fiscally sound. The Board hires a CEO, who is a paid employee that hires their own vice presidents and employees. The CEO and vice presidents work in many different areas of UMassFive but all have to answer to the Board.

UMassFive’s primary goal is “to make a difference in the financial lives” of their members. Because the members are owners rather than customers, UMassFive is obligated to look out for the members and provide good services and better rates on deposits. In contrast with for-profit banks, who “have investors that are looking for profit…. We are far more member-centric. Everything we do, we believe we do it because our members are looking for that” according to Jon Reske, VP of Marketing. For example, Reske discussed common occurrence at UMassFive where a member sells a car and asks for a loan to buy a new one. UMassFive will look at the bill of sale for that car and look up the typical resale value of that type of car. Often times members will get less money than the car is actually worth, and UMassFive will call the dealership and ask for a fair price, saving the member a lot of money.

UMassFive’s approach creates a totally different power dynamic from that of a for-profit bank. In a for-profit bank, the bank holds all of the cards in that they can seek to maximize gains from their customers regardless of its impacts on the customer. This is particularly significant in the finance industry, which controls so much of the wealth in the country yet is so convoluted and difficult to navigate for the average person, giving banks the power to coax its customers into questionable loans. At a credit union, however, the lending is being done to the owners of the union, who have collective power to hire and fire the CEO. This leads to a totally different relationship where the credit union has to serve the members in order to survive, meaning it’s much less likely that members will be shorted or duped. UMassFive is incentivized to maximize the financial well-being of its members, balancing the power between the members and the VPs doing the lending.

A cooperative financial model, should it expand, could provide financial stability and equity in everyone’s lives. Without any outside stockholders looking for profits, cooperative financial institutions have no reason to make risky investments in things like corporate bonds and hedge funds. This would drastically reduce the chances of a global financial crisis such as the Great Recession, which had a devastating impact on the working class. A cooperative model would make the financial world more transparent and less corrupt because members would be able to hold financial institutions accountable. Further, with powerful financial institutions working to actively benefit the average person, more people would have opportunities to start businesses or get loans for their other needs without the risk of being exploited by the currently all-powerful finance industry.