A Second Voice for the System: How DCUC Offers Credit Unions a Choice (Part 1)

Speaker A: You're listening to part one of our conversation with Tony Hernandez, President and CEO of the Defense Credit Union Council. In this episode, we'll explore Tony's unique path from the Air Force to leading dcuc, discuss the Council's expanding mission, and unpack the challenges and opportunities facing credit unions. Let's get started.

Speaker B: You have the American Banker Association. You have the National Banker Association. You have the Independent Community Bankers Associate of America. You have the commercial banks, you have the leagues. And there's multiple, I'm sorry, the uh, the state level Bankers Association. You have all these other voices. It never confuses Congress. Banks tend to get what they want. And so why, why do we think there should only be one for credit unions? So I disagree with the, ah, um, with, with, you know, there can be only one.

Speaker C: Welcome to 22 Minutes in Lending, your go to podcast for insights on all things lending from lend, regulatory updates, how to enhance lending efforts, and more. In each episode, Vince Pasillon connects with industry leaders to discuss the latest trends and happenings around the lending industry. Let's dive in to the latest in lending.

Speaker A: Welcome to 22 Minutes of Lending. I'm, um, your host, Vince Pasione, and today I'm excited to be joined by Tony Hernandez, the president CEO of the Defense Credit Union Council. Tony leads the principal trade association dedicated exclusively to credit union serving our nation's military and veterans representing tens of millions of members worldwide. Before joining dcuc, he served a distinguished career in the United States Air Force, retiring as a full colonel and holding multiple senior leadership in command roles. Tony, it is great to have you on the podcast and welcome and thank you for your service.

Speaker B: Thank you, Vince. It's a pleasure being here, uh, you know, just to kind of tell a lot of things of what we're doing, but you know, just a great uh, partnership with, uh, with you guys and you, uh, know, happy to do it.

Speaker A: Well, Tony, most listeners, I'm sure they have met you and seen you speak before. Certainly I have. But how about sort of a quick introduction of your journey from the military over the credit union system? Sure.

Speaker B: You know, I, uh, um, you know, I was a finance officer when I came in the Air Force. They were, the Air Force was, was having a pilot reduction. You know, they were, they were banking pilots. Not the banking that we talk about, but they were taking people that had their wings and putting them in support roles because they didn't have enough airplanes for them to do on. And so, um, I had a pilot slot and I was going to be an Air Force pilot and So I took, I got a degree in finance, corporate finance. And uh, you know when they, when my pilot slot got eliminated they were like what do we do with this guy? So they made me a finance officer. Um, and which, which was fine. I mean uh, um, you know it's very detailed, you know, very uh, you know, think, think of Green Shade, you know, ah, you know, the green shade accountants that, that do this stuff. I am not that guy. I can do it, but that's not my type. And so uh, you know I, I, I, I didn't struggle with it. I mean I got, I made you know I got several distinguished graduate stuff and, and, and progressed through the career field, uh, earned my uh, you know, uh, earned my uh, my master comptroller badge and ended uh, up becoming, it all culminated with me being the CFO or the Director of Finance financial management and comptroller, which is a CFO equivalent. Um, but because I was a comptroller, you know, um, the military banking program falls under the financial management. And so I was familiar with the program but my journey uh, wasn't typical because uh, you know, and I've told the story in many audiences, uh, my wife worked for DCUC for 16 years before I realized that.

Speaker A: Okay, so, so she preceded you there.

Speaker B: She did. Um, you know, and, and you know how that came about was I was a captain newly assigned to the Pentagon and uh, the office I worked, I was, I started off as a comptroller policy analyst. I ended up um, becoming the comptroller war planner for the entire career field during 9, 11 and then later on I worked uh, I worked uh, standing up, you know, um, strategic command, Northern Command. And I was, I was a policy, I was a, I was a budget analyst for ah, for these new, uh, these new commands. But anyway, uh, the office I started out in, the Air Force banking officer walked down to my cubicle and he said hey, there's this army ah, colonel that just took, took over president CEO of this thing called Defense Credit Union Council. That was already, that was already. And uh, you know already was a retired, retired uh, army colonel and uh, he needed to hire a part time bookkeeper. Well my wife Jennifer was a controller for a Fortune 500 company and uh, you know, part time work. She got the job and uh, you know, and off she went. I didn't, I didn't, I was familiar with it. I met Artie kind of, kind of understood what they did but didn't really, didn't really go to you know do much until the credit union when I was a comptroller Squadron Commander at McChord Air Force Base near Seattle. Um, we had. We had a honorary, uh, commanders. Right. Um, and both of them were from the credit. One was from the credit union, and one was from the bank. And we worked that banking program well. The credit union won the United, uh, States Air Force Distinguished Credit Union of the year for 2005. And so, uh, that award, and we still do it today, is recognized at the DCUC annual conference. So that was my first time going to a DCUC annual conference in uniform, you know, to watch our credit union get recognized. And then I took the pictures. Um, and then what that started is I started, you know, becoming Jennifer's plus one at all the DCUC conferences. And I was always taught by my mentors to, uh, you know, dress up. Every day is your interview, shake hands. And. And, you know, our conferences are all CEOs and directors. So these are the people that I definitely want to make sure they know my name whenever I get ready to retire. And when that day came, um, DCUC created a, uh, a chief, uh, operating officer position, and I applied for it and got it. Um, here's the. Here's a rub, Vince. Uh, and I tell this, you know, um, you know, because I'm still living and breathing today. Um, when I started at dcuc, Jennifer, uh, could no longer work at DCUC because she was my wife, and I'm the number two guy there. And so I asked Artie, I said, uh, well, I get it, you know, but who. Who gets to tell Jennifer? He goes, sounds like a good job for the coo.

Speaker A: So did you.

Speaker B: Did you. Oh, that sounds harsh. I mean, did you give a good

Speaker A: severance package at least?

Speaker B: Well. Well, now. Now she gets, uh, to. Now she gets to travel with me, so it worked out pretty good. But I'll tell you, that was a long drive home. And it wasn't. You know, it wasn't like the Apprentice where I go, you're fired. You know, it was more like, sweetheart, you know, dear, can we sit down? Can you put the frying pan down?

Speaker A: No loaded weapons in the house, I hope. There you go. That's great.

Speaker B: And then a year later, I became the CEO. And then everything else that's happened ever since then. So I've been the CEO for, uh, for eight years. Eight and a half years. Going online.

Speaker A: So we. We met probably five. I think it was five gacs ago. Yeah, I think Jennifer was with you at that GAC when we first started our conversation, and you told me about the mission. And my recollection is probably about 180 defense related credit unions and prob. Over close to 50 million members. Um, so pretty big and asset wise, probably you know, over $500 billion in assets. Did I miss anything about the membership base and the way you look at your members?

Speaker B: Yeah. When you, when you met me we were still a pure um, military, uh, um, niche uh, trade association. You know when I became the CEO in 2017 that's when we separated from CUNA. In fact DCUC, Defense Credit Union Council. We were a Kuna Council in 1960.

Speaker A: I didn't realize that part of the story.

Speaker D: Yeah.

Speaker B: And that's why we kept the name because it's part of our history and people wreck, you know, um, people can remember that and relate to it. Um, but we were a niche organization, um, you know, council and when, and then we separated which made us our own independent trade association. And it was about the time when I met you about five years ago when we were asked by uh, um, the veteran, uh, the Department of Veteran affairs to help the military banks with what they call the Veteran Benefit Banking Program. And that was something we had talked about for a while because you know each National Defense Authorization act specifies a fiscal year end strengths for the military. And you add up the Army, Navy, Air Force and Marine Corps, now Space force. It's about 1.2 million members of the military in uniform on active duty. Um, and so uh, um, that's, that was the size of the market or who we were serving. But when you look at the veteran market, it's 18 million veterans. Exactly every zip code. And because they're in every zip code and we, and we got this from the VA it stands to reason that there's at least one veteran in every single credit union across the United States. And so the DCUC board allowed us to open up the membership um, to all credit unions. And that's you know, started off a little slow and then over the last two years we've really taken off. So now we're about 225 member credit unions, um, about uh, about 45 million members. And then the 500 million that uh, or 500 billion in assets, the uh, collective assets, collective memberships, you know where we're at and we're looking to add a whole lot more. Our goals are to, are to grow to a third of the industry and then half of the industry and then you know, uh, who know, you know, who knows where we go from there. So we're getting very big very fast. Plus the industry, the Industry's coming down too, right? All the consolidations. Um, so we'll, we'll meet them. Bring it pretty, pretty close.

Speaker A: Ty, I want to take it back a little bit because I thought this comment about the council was interesting. I never, I did not. As I said, I didn't realize that you were a council in Da Cuna and there are. So was that something you initiated? They initiated to sort of separate it out.

Speaker B: So what happened? There were, there were a lot of credit unions on military bases that had problems with the Pentagon, you know, with uh, with regulations. Because military credit unions on base fall under the, you know, it's, it's the, it's the DOD financial management regulation. And there's, you know, there's only one bank and one credit union. And enforcing that because everybody wanted to be on base, that you could only have one of each. Um, you know, how you can solicit, how you can interact with the military, you know, different programs. So it's almost like a, like, like another regulator. And in 1963 they were still forming the policies and so, uh, um, at the time there was 400 military bases and about 400 member DCUC or defense credit unions. And so they formed this council, um, to band together so that they could go in, um, collectively into the Pentagon and uh, advocate for better regulations or clearer guidance and clearer regulations.

Speaker D: This is Kara Van Word, Chief Lending Officer at Viridian credit union. Since 2016, we've been working with Lendke and joined the membership student lending CUSO to help provide student loan solutions to our members. As the current CUSO board chair, I'm proud of the CUSO LendKey partnership as this has allowed Veridian to help over 12,000 of our credit union members finance their education and improve their financial health. LendKey's streamlined processes simplifies the lending experience, making it easier for our members to access the financial support they need.

Speaker A: Now Tony, as you, as you sort of expand the mission of uh, DCUC, how does the core. I think they're like 128 or 130 defense related credit affiliated credit unions. How do they react to it? Is it good news for them that your mission is now a bit broader, representing the broader community? Or do they feel like, well, wait a minute, there are some very specific needs we don't address.

Speaker B: We're not abandoning what we're doing, the things we do for, uh, for military and veteran communities, because that's a nonpartisan issue. You walk into a Democrat office on Capitol Hill, Nation love their veterans walk into a Republican they love their veterans or an independent. You know, we, uh, we get a lot of meetings that others can't because of who we represent and we partner with a lot of organizations and by the time this thing aired, the letter will be up there. But we just, uh, we're looking to sign a joint letter with the American Legion on veteran business member lending because they see that as important for, for their, their membership as well. Um, and so, you know, Mordo hasn't dropped, dropped yet, but we look to deliver that to Congress on member business lending, so we won't give that up. What, uh, what, what, what they see now is as we taken on a wider, uh, aperture and our advocacy efforts, and we advocate for industry wide with a veteran flavor because that gets us in the door. And so, uh, um, now that we've taken on a wider advocacy role, we're very active and we're fast, quick and efficient. And we've been getting results because of who we are and who we represent. Um, now we're giving credit unions a choice. Do I continue to pay for, you know, 50 staffers and, you know, all this other stuff, or do I pay for DC UC and turn the money to build their own credit union, hire their own governmental affairs person or, or, uh, build out their AI team? And so now we're offering them a real choice in the industry.

Speaker A: Well, you're going down the path. My next question. So, you know, we just saw not too long ago, right, Two trade associations, national trade associations merge. Everyone's like, pal, long time coming. This is great. Now all we have is one organization represent, representing credit unions nationally and, and on the Hill. And now here comes dcuc and you're expanding the mission of dcuc. So how does that play? And, and how does, how does America's credit union look at this?

Speaker B: Well, not, not too favorably, you know, your last prize, right? I mean, I mean, I, you know, I think if you want, you know, you definitely want, I hate to use a word, you know, you know, monopoly, right? You want, you know, you don't want any competition, but that's kind of what we're doing is we're providing competition. And you know, in any free market economy, competition is good because it helps the consumer. Right now we give people a choice, um, but we also, uh, give them a second opinion. And we see, you know, for, for the most part, we see the same things that America's credit union, where we can collaborate, we will. And I think that's important. And I think it's good for us to add our Voice and our credibility and our um, our um, our reputation on Capitol Hill. Um, but sometimes we see things differently. You know, I have, have a difference. We have a different perspective. And uh, sometimes that's healthy in trying to um, trying to triangulate, you know, what an industry position is. And so that's more how I see our role. Not so much, you know, as, as, as opposing what the other, you know, what, what the leagues or what America's credit unions or other national trade associations are doing, but offering another choice. And I think you get a healthier, uh, um, I think you get a healthier position the more we can challenge folks or find that you uh, know, find that uh, that, that sweet spot. You have the American Banker association, you have the National Banker association, you have the independent Community Bankers Associate America. You have the commercial banks, you have the leagues. And there's multiple. You have, I'm sorry, the uh, the, the state level Bankers Association. You have all these other voices. It never confuses Congress. Banks tend to get what they want. And so why, why do we think there should only be one for credit union? So I disagree with the uh, um, with, with you know, there can be only one, you know, kind of a, kind of a highlander. Ah. Um, yeah, competition. You know, we're 10% of the cost of uh, of what was or what, what America's credit unions right now. And then you add on the lead. So it's not cost prohibitive. Um, you know, especially for the smaller. You're talking a couple hundred bucks, you know, when you get down to that level. Um, and so they get that choice, they get actionable information from us. Um, what we're trying to do since I become CEO is really focus on member value. And so we're a tenth of the price. We're twice the value. Right. And we're proving it. And so if you, you know our, our goal is, is that kind of a loss leader. Right. Um, a credit union see all the stuff DCUC is doing and we're only a fraction of the price. What's in it for them is uh, they get that 90% to put back into their credit union.

Speaker A: Now Tony, any examples of where you, you've actually worked with America's credit union on some of the advocacy issues on the Hill?

Speaker B: Yeah, we work with them. In fact, we're working workers credit unions right now. Um, there was a letter that came out uh, on December 2, um, 21 credit unions, uh, on their over overdraft and non sufficient fund fee policy. And uh, you know, we've uh, we've teamed up. Uh, well, we started working, you know, doing different things and a different way, different way of getting it. But I think, I think it's serving those that are affected and it'll serve the rest of the industry. But one thing we said yesterday is for those that are going to respond, let's have kind of the same general content in it. Because I think that if we can show a, uh, coordination and unity in the same story, that becomes a more powerful, uh, email response.

Speaker A: So I imagine that that carries over to America's credit unions, right? That you've got to coordinate the message, right?

Speaker B: Well, yeah, yeah. So I, uh, you know, so I contacted, uh, Scott Simpson yesterday. That came out in our meeting that we had with 21, and, and uh, we agreed to work that out together. I said, you don't need a DC UC version. You don't need an America's Credit Union. And then each of the leagues, you know, you don't need a different league version either. And so, uh, we're going to work together on that. And that just happened last night, you know, uh, and I think that's going to be really good. Plus, uh, um, what we'll be able to capture from this is the next time Congress comes down with something like that, I think we're going to have a very good response strategy. You know, um, one of the things that we've learned in DCUC is the minute that it goes public, you know, a letter like that, um, you need to have an op ed ready to go. And the reason why you do that is because if a larger media outlet picks up the story, they're going to go Google it. And wouldn't you rather have a credit union narrative at the top of that Google search rather than waiting a couple days or, or not, not doing anything?

Speaker A: So, talking about getting a bigger voice on the hills, I saw your, your letter to Russell Voight at the CFPB about the creating Advisory Council. You were pretty bold. You actually offered, I think, to pay, I don't know if it was to pay all of the obligations to cover it, but give us a little background on that. The benefit of the cuac, and then, you know, why you went so far as to say, hey, we'd actually pay for this. Sure.

Speaker B: Um, um, one, there isn't a credit union voice. I think the letter also said that, you know, um, there's plenty of former bankers on, you know, in treasury, uh, you know, positions and OCC and on Capitol Hill and advising the different financial services or banking committees. Where's the credit union voice? You know, yeah, we have ncua, but there's only so much that can do. And there was this credit union advisory council under CFPB, you know, that had CEOs that were on it. And so, you know, most, most of those meetings occurred in the virtual world. Right. And so what does it cost to put on a teams meeting, you know, or, um, and using a government site to do it? Nothing. You know, uh, what does it cost us to host that? An hour of our time when we do it, you know, and then administrative, you know, we would, we'd offer to help capture minutes and, and, and do all that stuff. That stuff's easy to do. So, you know, when, uh, when CFPB was hosting it, you know, I don't know if they wanted to fly people in or host it in theirs. I thought it was, I, I didn't think it was a strong argument saying, well, we're going to do away with it because it costs too much.

Speaker A: Yeah.

Speaker B: You know, we're just saying, hey, it doesn't cost much, especially in this day and age, and if you're worried about it, we'll cover it. Um, and, you know, yeah, it was a little bold for us to do that, but who else is doing it in the industry?

Speaker A: Absolutely.

Speaker B: That's what we're doing.

Speaker A: Well, that's all time we have for today. Tony, thank you so much for joining us and thank you as always to our listeners. If you haven't yet, be sure to subscribe to never miss an episode and we'll see you back here at our next 22 minutes in lending. That's the end of part one of our conversation with Tony Hernandez. Stay tuned for part two where we'll hear Tony's perspective on how credit unions respond in times of crisis, adapt to new technologies and support the unique needs of their members.

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