2003 Membership Growth Unimpressive; CUs May Need to Discover Power of Young Adults

MADISON, Wis. – The flurry of last year’s mortgage activity brought on by low interest rates whipped credit unions into a frenzy to keep up with demand. The downside is many credit unions shifted the focus away from attracting new members, said Dave Colby, CUNA Mutual Group’s corporate economist and assistant vice president, contributing to the lowest member numbers in recent time – 84.3 million through November 2003. “This trend is troubling,” Colby said. “At the current rate of expansion, the total membership gain for 2003 will be just over one million, roughly 700,000 below our forecast and 800,000 lower than 2002′s increase.” Colby said credit unions had to “run twice as fast to keep up with demand (for mortgages).” Ironically, 2003 seems to be a contradiction to the vast number of field of membership expansions through community charters and SEG additions, Colby said. Still, 2004 will continue to see record consolidation as the 6,150 credit unions with less than $20 million in assets scramble to provide all the services and products members are asking for. “Small credit unions will continue to seek out mergers” to survive, Colby said. At the end of November 2003, there were 9,750 credit unions. That same month saw a number of merger approvals, which reduced the total by 39. Through the first 11 months of 2003, the credit union count fell by 291 compared to 2002, which saw the demise of 307 credit unions. “December will be a slow month as it was in the previous two years,” Colby said, mainly because credit unions tend to spend money earlier in the year earmarked to attract new members. Colby said an average of 297 credit unions will be lost each year, leading to fewer than 8,850 credit unions by the end of 2006. “Credit unions have traditionally had a strong trend of growth and expansion especially during the H.R. 1151 field of membership debates,” Colby explained. “Many people who had never heard of a credit union joined for the first time” and part of the reason for the decrease in membership may be the dimming of the media spotlight on credit unions. Still, this year’s growth is expected to be fueled by a much-anticipated boost in the economy and a shift from the mortgage lending frenzy to new and used auto loan captures, Colby said. Two segments of the population long considered risky and fickle by most financial standards, are shaping up to be the core groups to court. Credit unions might want to consider targeting young adults ages 16 to 30 and new immigrants, said Bob Hoel, executive director of the Filene Research Institute. “For the first time in their lives, some young adults are buying their first car, their first home, paying off student loans, financing a wedding, getting a credit card,” Hoel said. “Some of them take their money very seriously and they don’t want to be put in a situation to be taken advantage of.” On average, credit unions spend only $4,000 on youth programs and even those with more than $100 million in assets spend $10,500 each year on such programs, according to the Filene report Attracting and Retaining Young Adult Members published in June 2003. Without the borrowing power of younger members, the average credit union stands to lose an estimated $14 million in loans over the next 10 years. At 33 million strong, immigrants are also reshaping society, Hoel said. Nearly 10% identify themselves as self-employed or entrepreneurs opening up the door for business lending opportunities. Approximately 68% of Latinos ages 18 to 24 are “unbanked,” according to Filene. “One thing we’ve seen for sure is if we can get (these groups) to join a credit union, they tend to keep all their financial services there,” Hoel said. [email protected]