Data On Penetration Still Underserved
NCUA announced that credit unions added more than 27.4 million potential new members in underserved areas across the country last year-but there is still no way to know how many of those people are actually joining a credit union.
That's because no one is tracking this data, and the mere mention of doing so raises harbingers of the much-dreaded Community Reinvestment Act under which banks are required to document similar efforts.
As one Washington observer put it, requiring credit unions to monitor their penetration into underserved areas "smacks of CRA, and any time you bring up CRA, you better watch it."
Still, with credit unions and their trade groups consistently citing efforts to serve the underserved, why isn't anyone tracking penetration rates?
"As far as I know [data on how many people in underserved areas join the CUs that add those areas] don't exist," said CUNA's Mike Schenk. "I imagine they don't track them because it would impose a fairly hefty burden on the institution and would likely cause some to shy away from expanding into these areas in the first place."
NAFCU's Dr. Tun Wai agreed. "If you wanted to collect this information, it would be done through the Call Reports, and if NCUA wanted to implement that, it would have to go through OMB and pass muster with the paperwork reduction rules," he explained. "You have to show that you are putting no undue burden on the credit unions, and it must be part of the regulators' mission of ensuring safety and soundness."
Moreover, using such documentation to counter bank attacks is a risky business, Wai added.
"You have to be careful about using this against banker arguments," he told The Credit Union Journal. "Credit unions must serve their entire membership, not just the lower echelons. It's important to reach out to the underserved, but the underserved aren't the only ones who count, they aren't the only ones credit unions help. Credit unions help all of their members.
"Plus, if we point to credit unions serving the underserved [as a way of countering bank attacks] we don't want to get into a position where then it becomes a mandate that credit unions must have underserved areas and must have a specific penetration rate," Wai continued. "Of course, what banks seem to ignore is the fact that CRA was imposed on them for a reason. And the fact that they can get CRA credit for making a deposit in a credit union ought to tell them something."
Neither NCUA Chairman JoAnn Johnson nor Board Member Debbie Matz was available to comment, but sources said there have been internal discussions at NCUA about this very matter.
The fact that there are no national statistics to look at doesn't mean that individual credit unions aren't, in fact, tracking their penetration rates into these underserved communities, but even if every CU with an underserved area did collect this data and reported it to NCUA, it might not tell an accurate story of CU performance in underserved areas, Wai cautioned.
"People move in and out of neighborhoods, and areas change over time-and the whole point of a credit union moving into an underserved area is to help it change for the better," he observed. "As people move and neighborhoods change, it would be hard to measure this."
Moreover, credit unions haven't been able to add underserved areas to their fields of membership for very long, yet, and penetration takes time. "We know that a very mature credit union would probably have about a 30% penetration rate into its field of membership, and that would only be after many, many years of marketing to that field of membership. Credit unions have only been able to add underserved areas for a few years, so it's really too early to tell."
That may be so, but it will continue to be impossible to tell if no one is tracking this data.
One thing NCUA is quick to point out is that although it doesn't monitor penetration rates into these underserved areas, there is at least one indication that credit unions must be aggressively reaching out to these areas once they add them to their FOMs: credit unions that have adopted underserved areas are growing their membership 123% faster than the national average.