Credit Unions, Like America, Should be a Melting Pot, Matz Says

VANCOUVER, B.C. -To stay true to the credit union mission, CUs need only adhere to basic American ideals, according to NCUA Board Member Debbie Matz. Stay true to democracy and the “melting pot” and the American Dream, she encouraged. “I feel confident that as long as credit unions stay true to the American ideals embedded in their heritage, they can reach new markets with millions of new members and overcome many of the most important challenges they face today,” Matz said, like slowing membership growth and rising interest rate risk. She explained that America is more of a melting pot now than ever before with the non-white population increasing 60% over the last decade. “This has far-reaching implications for credit unions which have seen membership growth decline to under 2%, despite record increases in potential membership. This is especially surprising at a time when credit union assets have been growing at near double-digit rates,” Matz said. She continued, “This means the vast majority of asset growth is coming from existing members. Although the credit union system is very safe and sound today, as a regulator, I am concerned that credit unions cannot safely sustain this pace far into the future. The reality is, existing members are aging and will not be around forever.” Matz cited statistics that the Latino and Asian communities are expected to grow by more than 75% by the year 2020 and African-Americans by around 30%, while Caucasians will increase less than 10%. Credit unions also need to bolster the image of the U.S. as the `Land of Opportunity,’ Matz said. She encouraged her audience to add underserved areas to their fields of membership and then serve them; save them from predatory lenders who charge triple-digit interest rates and high fees. “They (predatory lenders) are also draining billions of dollars in deposits and loans that could be flowing into your credit unions,” Matz emphasized. To reach these members, some services credit unions should consider offering include small loans and risk-based loans. “If you don’t make loans to C or D borrowers, you are forcing them out your doors – and into the doors of predatory lenders,” Matz said. “And you are missing an opportunity to show new members that when they need affordable financial services, credit unions are the best value in America. “Risk-based lending will not only bring new members to your door; it will put these members on firmer financial footing – so in the future they will have opportunities to borrow at lower rates.” These actions can help credit union members reach their American Dream of homeownership, which builds wealth. “For credit unions, the challenge is to offer affordable mortgages that will make this dream a reality for more members,” Matz told her audience. “But although nearly 70% of credit unions offer mortgages, barely 2% of all mortgages are made by credit unions. This means the vast majority of credit union members are going elsewhere for their mortgages.” Then, once the credit union begins making these mortgages, turn around and sell them but maintain the servicing rights so more loans can be made while maintaining that relationship with the borrowers, she said. [email protected]