A Golden Opportunity Awaits Credit Unions
by: Hon. Daniel A. Mica, Principal, The DMA Group
As credit union professionals we know that our charter mandates that we serve all Americans including the well-to-do, the middle income and the underserved. On the other hand, the banks are actively pushing consumers out of traditional bank accounts. Many of these communities, surprisingly including some in higher income brackets, are choosing check cashers, payday lenders and predatory financial services to manage their money. Why aren’t credit unions the alternative for those who make these financially unsound decisions?
Banks fees are hitting an all time high. Consumers are being charged hidden and exorbitant ATM, monthly service and overdraft fees. Pew Charitable Trusts recently released a study on the transparency of these banking fees and found little improvement even with increased scrutiny from existing regulators and the new Consumer Financial Protection Bureau (CFPB). The study scolded credit unions for not always making their fees clear to consumers who are comparison shopping. If the Pew Charitable Trusts has difficulty in finding the benefits of a credit union, how do we expect the average consumer to do the same?
I know credit unions have worked tirelessly and bared their heart and soul trying to get the message out about their benefits and how they differ from banks. Studies such as the one performed by Pew highlight that although we have come a long way in recent times there is still a knowledge gap that needs to be covered with the population at-large. For me, I like to always point out that over several decades credit unions have offered loans at approximately 1% lower rate than banks and have offered CD and savings rates at 1% higher than banks. We don’t need to manufacture benefits, just keep spreading the word about the great work that we have been doing for years and years.
The Federal Deposit Insurance Corp recently reported that the “unbanked” population is now 8.2 percent of all U.S. households. The FDIC said that 17 million adults are currently without a checking or savings account. An additional 51 million adults have bank accounts but also use pawn shops, payday lenders or other financial services.
Credit unions can benefit from educating and recruiting this unbanked population. The veil should be lifted from the bait and switch of high-fee banks pushing consumers into poor financial practices. Walmart just released its Bluebird prepaid card that targets low-income families without traditional bank accounts. The CFPB is ramping up its efforts to ensure that the prepaid market is covered by adequate safeguards and in the meantime credit unions should take action to alert consumers as to which cards offer legitimate benefits and services and those that do not. Recent actions by Walmart and others are game changers and credit unions should be in a position to respond and act.
Reaching out to serve these tens of millions of consumers in need is pure opportunity. Make no mistake about it, a properly run program embracing these potential new members can and will add to the bottom line. It also provides safe and smart solutions for the unbanked and underbanked, ultimately helping consumers, credit union members and the communities in which we all live. For credit unions it is a clear chance to fulfill our mission of people helping people.
About Daniel A. Mica, LLC (The DMA Group)
Dan Mica, former head of the Credit Union National Association (CUNA), established The DMA Group as a means to combine a myriad of experience into a one-stop consultancy. Elected in 1978 to represent Florida’s 11th district in the U.S. House of Representatives, Dan Mica served five terms before beginning what would become more than two decades of work in the world of non-profits and association management.
The DMA Group is a full-service consulting firm, providing the highest level of integrity and service through established practices and decades of experience.
