Ex-Banker Milazzo Says the Pressures in CUs and Banks Much Different From CEO Perspective

WASHINGTON-NAFCU Treasurer and CEO of Campus Federal Credit Union John Milazzo has a dirty little secret: his career aspiration was to be a community banker. After working at a number of banks through the mid 1980s, Milazzo was faced with the choice of director of marketing at a bank or the CEO of Campus Federal Credit Union. “I really felt that the credit union, from a career possibility, was much better for me.[I]t was more inline with my ambition to become a community bank president,” Milazzo explained. He added, “I’ve always liked the opportunity of being able to be in a position to help people and to know the people I was helping.” It really had nothing to do with the credit union values, Milazzo admitted. “I’ve learned through the experience that credit unions are quite different from banks,” he said. He added that the credit unions made a bigger deal about the “reformed banker” than his bank colleagues ever did. The transition was not that big a deal for him. “It’s a little bit looser world, if you will, in the credit union arena from the standpoint of the pressures I had in the credit union world were more self-imposed as opposed to the ones I had in the commercial banking world.” In part, it was the difference in who he was serving, but the position also changed. “It was really more of a leadership position I felt and more of a direct responsibility than I had.coming from the banks,” he said. Milazzo said he would be “less likely” to go to a bank now, but “never say never.” Given the choice between a bank and a credit union, “knowing what I know today,” he would choose the credit union. “I see the motivation being totally different than the motivation I saw in the commercial world, where the stockholder was the crown prince and everything you did was to appease the stockholder,” he explained. “Here your stockholder’s obviously your members and you do the same thing but the motive is a little bit different; it’s more of a communal ownership as opposed to something that’s really for a profit motive.” Obviously, he is happy where he has landed. When asked about his dream job, Milazzo said, “I don’t think that I’m not in it now to be very honest.” Over his nearly 20 years in credit unions, Milazzo said regulations have increased a great deal, particularly since Sept. 11. “We’re just seeing a lot of challenges that we didn’t experience 20 years ago. So, yes, it has grown, and I would expect it would continue to grow,” he predicted. “There’ll be a need for it to continue to grow. I just think sometimes that the amount of work that is required to accomplish what is being asked is probably overkill.” That is why Milazzo felt it was important to get involved in NAFCU. “It gives me the opportunity not only to represent credit unions, but specifically my credit union. It gives me a lot of opportunities to illustrate how certain things that happen in Washington, for instance, impact the credit union and my members,” Milazzo said. “It’s given me a perspective that hopefully I’ve been able to help my credit union from and likewise my perspective as a credit union CEO hopefully has helped NAFCU, NCUA and others in the shaping of some of the regulations that they have come out with.” The Fair and Accurate Credit Transactions Act (FACT Act) is an instance where government has gone overboard, Milazzo satated. “One of the things that should be noted is that bankers tend to always accuse the credit union industry of having it soft, that we don’t have to apply to the same rules and regulations that they do,” he noted. “When you look at the FACT Act.that bankers’ claim is false.” One particularly burdensome provision for Campus Federal is the risk-based pricing notices required for members who do not obtain the lowest possible loan rate. Making credit reports and other information compiled in making the loan decision is burdensome and costly. Campus Federal has used risk-based lending for years, Milazzo said. “Our philosophy here is that, contrary to the thought that all members are created equal, we realize that some members have.really worked themselves to a position to where they really ought to get a little bit better break on their loans…” he said. “And we do that to encourage them and other people to establish and to maintain that type of credit history where they pay their obligations and it’s reflected positively and favorably on their credit reports.” Milazzo said, “I think when you get to these risk-based pricing notices, you’re adding another layer of regulation that again is somewhat burdensome and it causes more difficulty for credit unions and other financial institutions for that matter to adhere to.” Campus Federal involves itself in upcoming regulations. Their compliance officer looks at how it is going to affect them internally. The credit union is sure to take advantage of comment periods and they also forward their comments to NAFCU.As more specifics come out Campus Federal meets with vendors. “That is one of the parts that is probably the most expensive and most overlooked is getting with your vendors to make sure your vendors.actually incorporate those changes so that you’re in compliance when those dates that they become effective hit.” Milazzo does not have much faith in the FACT Act accomplishing its goals. “I think that anything that comes out of Washington is well-intended, I really do. I think most often though it’s overkill.Oftentimes, the input of the people who are affected the most by it is not really taken into full consideration and, unfortunately, it oftentimes creates a schism between the legislators and the people who have to enact that legislation and that communication line just seems to break down. “That’s why it’s so important for us to have advocacy in Washington with institutions like NAFCU. We need some people to run some interference for us so that we in the field will at least have some opportunity to make sure our concerns are heard.” [email protected]