What was perhaps the “most important election in credit union history” ended Tuesday with an upset.

The members of State Employees’ Credit Union, the second largest such institution in the country, ousted three members of their board of directors. Michael Clements, Barbara Perkins, and Chuck Stone, each of whom opposed a recent shift in the credit union’s lending policy, claimed seats instead. 

Roughly 13,000 members cast votes in the rare contested election, which we reported on in depth last week. 

At the heart of the dispute between the incumbent slate and the challengers was a recent decision to move to tier-based lending, in which members with better credit scores would receive lower rates than members with worse ones.  SECU had long offered all 2.7 million of its members the same rate on loans, a policy that is extremely rare in the financial services industry.

The current board and CEO Leigh Brady said the change was necessary in a fiercely competitive environment, but some former employees and longtime members said the decision was an abandonment of SECU’s core principles and unnecessary given its financial strength.

Both Brady and Jim Blaine, a former SECU CEO who was a major supporter of the challengers’ campaign, said they were surprised by the vote. “I thought it was an impossible task” to elect candidates the current board had not nominated, Blaine said. To Brady, the vote totals indicated that most members weren’t all that interested in weighing in on SECU’s policies.

Rising delinquencies and very low-yielding investments that SECU entered into during the COVID pandemic would make continuing to give all members the same rate “very difficult,” she said. “We modeled that. Let’s give everyone an A rate. Let’s give everyone a B rate. And financially that’s not going to work for this organization.”

Others in the industry were watching the election closely for signs about what it means for the governance of member-owned institutions. On Monday, the board that oversees North Carolina’s credit union regulator voted unanimously to empower a subcommittee to scrutinize SECU’s recent bylaw changes and the decision by now-retired Credit Union Administrator Rose Conner to approve them.

The new subcommittee’s mandate is broader than reviewing SECU’s bylaw revisions, but concerns about those changes, restricting participation at annual meetings and eligibility for board elections, prompted the board to act.

“I want to make sure credit means members and their leaders have a voice, and I’m looking for transparency,” said Commissioner Lafayette Jones, who proposed the review.

It’s not yet clear whether SECU’s board election will lead to the dramatic policy reversals that the challengers sought. Brady said in a speech just before the votes were tabulated that SECU planned to expand its pricing strategy to all types of consumer loans in the coming year.

“The dynamics of the board will change, for sure,” said Brady after the vote. “But I think that in the end, everybody wants what’s best for this organization.”

At least one new board member said she plans to make ending tier-based lending her top priority. “I think we can be successful if the board is open to the message members sent with this vote,” Perkins said.

Vote tally by candidate:

Alice Garland – 5,880
Thomas Parrish – 6,239
Jo Anne Sanford – 5,982
Michael Clements – 6,372
Barbara Perkins – 7,096
Chuck Stone – 6,907

Correction: This story has been updated to reflect the correct number of people who cast ballots.

Carli Brosseau is a reporter at The Assembly. She joined us  from The News & Observer, where she was an investigative reporter. Her work has been honored by the Online News Association and Investigative Reporters and Editors, and published by ProPublica and The New York Times.