5.1 Our goal

We aim to provide our member owners with outstanding service, value for money, and to treat them with dignity and respect.

5.2 Our approach and commitments

5.2.1 Member profile GRI 2.7

As at 30 June 2007, there were 107,302 members and a total of 111,001 account holders at mecu. Our members come to us from various vocations including our traditional education, energy and utilities, Government, and science sectors.

The geographic spread of our members remains largely unchanged from the same period in 2006. Victoria has seen a slight increase in members (just over 1%). This small spike can be attributed to the merger with St Patrick’s Mentone Co-operative Credit Society Limited that occurred in November 2006, where the vast majority of converted members were Melbourne based.

Figure 5a: Geographic distribution of mecu’s members

As at 30 June 2007:

• 51.6 % of account holders were aged between 25 and 54, followed by the 55 to 64-year-old age bracket who form 19.9% of mecu’s membership.
• The average age of mecu’s membership was 44 years.

Our members, like the Australian population, are ageing, which presents challenges in determining what their needs will be in the future and the impact it will have on banking.

With an ageing membership base, it is envisaged that in the future the demand for investments and financial planning will increase in proportion to the demand for lending. This has prompted us to consider a strategy to attract and retain a larger youth market as the foundation for a future where the demand for deposit and loan products is more balanced.

5.2.2 Social inclusion

A critical component of social inclusion is the need for good access to routine banking facilities. The absence of these facilities is known as ‘financial exclusion’. Financial services organisations are able play a role in tackling financial exclusion through the provision of basic banking facilities and insurance products.

We disclose the profile of our account holders on two key attributes – deposit accounts and loans – according to the Experian’s MOSAIC classification of Australian households.

A comparison with the Australian population taken from 2006 census data indicates that we have lower number of account holders in the MOSAIC group ‘Community Challenged’ than is represented in the community. ‘Community Challenged’ is defined as living in ‘disadvantaged peripheral urban and country neighbourhoods’. Within Australia, 18.3% of the community is classified as ‘Community Challenged’ whereas 12.03% of our members in 2006/07 are classified as ‘Community Challenged’. This is slightly less than last year’s 13.7%. The reduction could be as a result of mecu targeting its products and services to the more ‘socially aware’ demographic who generally tend to have higher incomes. (According to Roy Morgan – Socially Aware© refers to a pattern of responses offered by people who are community minded and socially active.). The reduction in proportion of members who are categorised as ‘Community Challenged’ is not due to a reduction in the number of new members who fit this category, rather, it is due to the growth in other groups of members and the attrition of existing members categorised as Community Challenged.

mecu is neither trying to increase nor decrease the percentage of community challenged members within its profile but rather will endeavour to work on enhancing the economic wellbeing of all mecu members and their families.

mecu also continues its involvement in the Dream Start 1 in 10 pilot project developed by VicUrban (the Victorian Government’s new urban development agency) where one in ten houses developed by VicUrban, will be offered at 25% less than the market value to those who are identified as low income earners. mecu helped establish the financial criteria for the scheme and is one of four financial institutions selected to help to assess the eligibility of the applications and provide financing when appropriate. The Dream Start project was launched in February of 2007.

5.2.3 Value to members PR5

At mecu we are committed to providing value to members. Key indicators for this include member satisfaction, product usage, member retention rate, member contribution and member benefit dividend.

5.2.3a Member satisfaction

Commitment 2005/2006	Progress
Maintain members’ satisfaction at above 90%.

As with previous years, member satisfaction was determined by a mail survey that was conducted (by internal sources) among our members. Approximately ten thousand members were selected for the survey. 1,937 were returned resulting in a response rate of 19.36%. This is about 4 percentage points down on last year’s responses.

Figure 5b, indicates our ‘net satisfied’ with mecu’s delivery of products and services was maintained at above 90%.

Figure 5b: Member ‘net satisfaction’ and ‘net dissatisfaction’

Figure 5c: Top 10 attributes members associate with mecu

*please note that 2006 percentage figures were amended slightly after it was discovered there were some calculation errors. However, the amendments did not affect or change the 2006 rankings.

5.2.3b Member activity

Other key performance indicators relating to the strength of member relationships include product usage, member retention rate and member contribution.

• As at 30 June 2007, 76.66% of members held 3 or more products compared to 79.12% last year. The drop can be attributed to an increase in membership numbers which has the effect of reducing penetration results.
• Over the past year 2,481 members resigned their membership, which excludes memberships that were dormant or closed to facilitate using another membership. This represents a retention rate of 97.76%, which is slightly lower than last year’s result of 98.50%. The drop can be attributed to a higher rate of closures as a result of members consolidating their banking at competitor financial institutions.
• Average value per member is $18,915. This is an increase of 8.76% on 2006’s $17,389 result, indicative of strong performance in both the loan and deposit portfolios. The result was also impacted by the acceptance of full membership by previously joint shareholders which increased the number of members being factored into the calculation of the average.

Figure 5d: Member support

5.2.3c Member benefit dividend

Commitment 2005/2006	Progress
Provide a pre-tax internal member benefit dividend equivalent to 10% of capital.

At mecu, we aim to deliver superior levels of member value compared to Australia’s 4 major banks. Each year, we employ an independent financial services research group, Cannex, to determine how much members save in total by choosing to bank with us.

In 2006/07, Cannex determined the figure to be $16,773,348.67. This is a 5.24% increase compared to last year's result. This means each mecu memberis on average$151.10 per annum better offby banking with mecu than by banking with the 4 major banks. This was determined by comparing the pricing on mecudeposits, loans and transactions to that of the average pricing offered by the 4 majors. The Cannex valuation equates to a pre-tax internal member benefit dividend returned to our members in the form of competitive interest rates and fees.

5.2.4 Engaging mecu members

Commitment 2005/2006	Progress
EPA Victoria to assist mecu in providing sustainability information to members relevant to the products they purchase at the time of inquiry.     EPA Victoria to assist mecu to work with other organisations to obtain and further disseminate sustainability information. Have ‘third party’ publications on display in service centres and available via mecu’s website.	(not going forward as we found there was a limited need for EPA Vic to provide this information) (not going forward as we found there was a limited need for EPA Vic to provide this information)

mecu’s internal sustainability group, Footprints, concentrates on developing and implementing energy, travel, water and waste reduction action plans across the organisation. To help lessen mecu’s footprint, ‘themed months’ around energy, travel, water and waste reduction are introduced throughout the year. A new theme was also introduced in 2007: ‘Wellbeing’ months. The implementation of these themed months also includes making sustainability information available to our members via our service centres, newsletters and internet. EPA Victoria assisted where appropriate.

Some information available to members through out the year included:

• Travel WISE months - May/Jun/Jul. Footprints provided fuel use reducing Eco-Driving training sessions to staff across the organisation. ‘mecu Sustainable Driving Tips’ were made available on the intranet for staff members to access. EPA Victoria provided some booklets around eco Driving. These were made available for our members (via our service centres) to access during our travel months.
• Energy months - Sept/Oct/Nov. Global Warming posters and booklets (supplied by Sustainability Victoria) were displayed in service centres and energy efficiency tips were published on the Internet for perusal by our members. Our staff members also undertook an Energy Challenge where each department was responsible for reducing their energy consumption to achieve mecu’s goal of funding its purchase of Green Energy from the cost savings made from the energy efficiency achieved (partly) through the challenge.
• ‘Sustainable Santa’ (Waste Wise) months - Nov/Dec/Jan. Posters around minimising waste pre and post Christmas time were developed and displayed at all our service centres. Our staff members were given a ‘refresher’ course in waste avoidance and disposal by the Footprints committee. Articles were also published on the mecu website. EPA Victoria provided some collateral relating to waste minimisation.
• Water wise months - Feb/Mar/AprDisplays with information regarding water consumption were made available. All Service Centres also had water reduction facilities and equipment on display for our members.
• Wellbeing months at mecu - May/Jun/JulThe Footprints committee also devised a companywide ‘Stepathalonathon Challenge’ for staff members. Staff formed teams of up to 6 members and were given a pedometer each to count steps they took as individuals. The team with the highest amount of steps taken would win the competition, a prize and the golden sneaker trophy. We had approximately 75% of our staff participate in the challenge. Collectively, participants of the mecu Stepathalonathon accumulated a total of 10,583,272 steps (give or take a few!). This initiative was aimed to heighten staff awareness around their individual fitness levels, encourage them to exercise and to promote mecu staff interaction and team building. Because of its success, the Stepathalonathon will become an annual event.
   
  Meditation, Healthy eating days and promotion of Health Insurance also occurred during these months.

5.2.5 Compliance, member privacy, complaints and sensitive issues
 
PR4 PR7 PR8 PR9 INS3

• Compliance
   
  All staff at mecu are responsible for compliance with policies, procedures, applicable laws and regulations.
   
  mecu has had no incidence of non-compliance with any law or regulatory code of conduct where the complaint was upheld, required reporting to ASIC and/or resulted in court action.

• Member privacy
   
  mecu recognises that members are concerned about how their personal information will be used. mecu is committed to the Privacy Act 1988 (Cwth) and the National Privacy Principles. mecu has Privacy Policies, which provide a clear and concise outline of how and when personal information is collected, stored and distributed by mecu.
   
  A Privacy Officer is designated to review complaints concerning possible breaches of privacy relating to the personal information held by mecu in respect of a customer. If the complainant is not satisfied with the outcome of the review, the member can refer their complaint to The Office of the Federal Privacy Commissioner.
   
  There were two instances of members receiving documents not intended for them. All affected members were notified of the breaches. mecu identified and rectified an issue with some staff mailing processes to prevent similar future mistakes from occurring.
   
  A complaint was made in November 2005 regarding personal information. Senior management were accused of accessing personal information without the consent of the member when responding to the complainant about comments the member made publicly regarding mecu. The complaint was lodged with the Privacy Commissioner. After negotiation, the member was satisfied with the response provided by mecu.
   
  mecu monitors and keeps a register of all written and verbal complaints received from members. Complaints are tabled and statistics are reported to the Board of Directors on a monthly basis. A Complaint and Dispute Resolution Guide for Members is available on request. The guide explains the process available for the resolution of complaints.
   
  If a complaint cannot be resolved under mecu’s internal process, members can have access (free-of-charge) to external dispute resolution by an independent registered scheme. The schemes available are:

• Credit Union Dispute Resolution Centre (CUDRC)
• Insurance Ombudsman Service (IOS); or
• Private Health Insurance Ombudsman (PHIO).

Figure 5e: A summary of the main areas of complaint

In 2006/07 four members accessed the Credit Union Dispute Resolution Centre (CUDRC). CUDRC concluded in two cases that mecu’s actions were appropriate, one member had lodged a dispute prior to contacting mecu, which was resolved by negotiation and one was determined to be outside the CUDRC’s Terms of Reference.

There has been a considerable decrease in the number of complaints received from members since 2005/06.The complaints received during 2006/07 were concerning a range of various issues rather than any specific or particularly sensitive matter.

5.2.6 Member deposits

At mecu we recognise that our responsibilities include considering where we invest our members’ money. Approximately 82% of all member deposits are lent to members.

Approximately 71.5% of loans are mortgage secured (residential and investment loans), 21.3% are unsecured personal loans, 3.5% are unsecured revolving credit facilities (overdrafts and credit cards) and 3.7% is secured commercial lending.

The remaining 18% of member deposits and our accumulated cash reserves are invested across a range of cash securities – Term Deposits, Bank Bills and Negotiable Certificates of Deposit. We do not undertake direct investment in companies, other than our subsidiary companies and as a shareholder of Cuscal (a provider of wholesale and transactional banking services) and Data Action (a supplier of core banking and network facilities). Both Cuscal and Data Action are wholly owned by Australian credit unions.

A small proportion of our accumulated cash reserves are invested in other credit unions’ subordinated debt, in Australian residential mortgage-backed securities and Bank floating rate notes.

A formal ethical lending and investment policy was adopted by the Board on 23 February 2006 and is reviewed annually.

The policy outlines mecu’s key lending and investment issues relating to ethics and corporate responsibility, and details how mecu will ensure standards are maintained. This includes not lending money or investing funds in activities that would be economically, environmentally and socially irresponsible. There are no monetary thresholds in regard to the application of this policy.

5.2.7 Member financial education and advice

We recognise that it is important that our members and potential members understand how to best manage their finances. To assist our members with this, we undertake a number of educational activities including the provision of general advice, seminars, and the distribution of consumer education booklets and written communications.

Our members are also offered ongoing education, advice and service by referral to a specialist financial planning service: Outlook Financial Services.