Do credit unions have a role in social justice protests?
After more than a week of protests following George Floyd’s death in police custody, credit unions are questioning to what extent they should be involved in public demonstrations and wider conversations surrounding social justice.
“It’s something I’ve been really struggling with,” said Hank Hubbard, CEO of One Detroit Credit Union. “Our membership is probably 80% African American — our demographics pretty much mirror the demographics of the city of Detroit. I struggle with this because I don’t really want us to be political [and] people have their right to have their own political thoughts. Social justice is a big thing here in Detroit.”
Part of the struggle for Hubbard and many other credit union CEOs — the vast majority of whom are white — is determining what steps to take as an institution, whether that be encouraging a culture that actively takes part in protests and social justice demonstrations, donating to organizations that support equal rights initiatives or setting aside a block of funding to support minority-owned small businesses. Given the divisive nature of conversations around race in the United States, some of those actions could alienate members or potential members, which many CU leaders are hesitant to do.
On top of that, the industry's member base is overwhelmingly white. Roughly two-thirds of consumers who consider a credit union their primary financial institution identify as Caucasian, according to a Credit Union National Association analysis of the Federal Reserve's 2016 Study of Consumer Finance. Whites account for 66% of members, while African Americans make up 17.4%, with Hispanic/Latinx and multiracial consumers making up the remainder.
The irony behind the current hand-wringing is that the industry’s roots at least partly lie in social justice. Credit unions were founded to serve the underserved. While that was largely an economic consideration, race also comes into play.
“From its earliest days, the credit union movement began as a populist movement,” said Cliff Rosenthal, an industry expert and former CEO of the National Federation of Community Development Credit Unions, which is today known as Inclusiv. “Through the 1930s it had those tinges, but the movement in my lifetime has shifted to right-of-center politically.”
While staying above politics is one of the core principles of the cooperative movement, he said, “I think there’s an extremely broad consensus that the act committed on George Floyd goes way beyond politics. It’s a human rights abuse.”
Some bank and credit union leaders also have spoken out in the wake of Floyd’s death and the demonstrations it sparked, but many of those remarks have been general anti-racism statements, stopping short of calling for any real action to solve the problem. One notable exception came earlier this week, when Bank of America pledged to commit $1 billion in coronavirus relief to people of color.
Many sources, however, suggested a blanket anti-racism statement isn’t enough — particularly for credit unions, which have a mandate to serve the underserved — and that any moves like that could be perceived as paying lip service instead of taking action.
“I don’t want to just make a statement because everybody’s making a statement,” said Hubbard. “I would feel silly saying we’re anti-racist and creating a policy, because of course we are. We’re trying to serve the hardest-hit people in Detroit and those come in all colors but mostly it’s African Americans. So for us to make a statement like that almost feels disingenuous because it’s what we do.”
CUs and civil rights
There are some loose connections between credit unions and the fight for civil rights in America. That struggle was closely linked to black churches, and many black churches historically had their own credit unions. But the number of those institutions has dwindled over the years, to the point where the National Credit Union Administration database lists just 34 active church-based credit unions operating today, though the number of CUs with a faith-based field of membership is roughly four times higher.
“The plight of faith-based credit unions — small ones, particularly African American ones — has been largely parallel with the plight of most small credit unions,” said Maurice Smith, CEO of Local Government Credit Union in Raleigh, N.C. “I live in North Carolina; I’ve always lived here. Back in the 1970s there were roughly 20 African American credit unions in this state. And they cropped up with the notion that in our community we need to have a role in public policy, a seat at the table, to ensure services will be provided and make sure there’s a friendly voice on the other side of the desk when we’re pleading our case for financing or financial opportunity.”
Smith said only one black credit union is currently operating in North Carolina today.
Because smaller credit unions tend to serve more limited fields of membership and are so deeply rooted in their communities, there could be an argument that those institutions are uniquely positioned to take a stance on social justice issues since they might have a better understanding of where their membership falls ideologically.
“Smaller credit unions have an opportunity to interact with their members on a more personal level because they’re in their communities by choice,” said Renee Sattiewhite, president and CEO of the African-American Credit Union Coalition.
But, she added, larger credit unions “do what they can when they can when it’s brought to their attention if they’re not already aware…what I love most about some of the [$1 billion-asset and above] credit unions is that they are active and present about their social responsibility.”
Sattiewhite said roughly a quarter of AACUC’s member institutions are above $1 billion in assets, many of which make an ongoing commitment of $25,000 per year to help ensure the organization continues.
Credit unions as an industry donate tens of millions of dollars each year to a variety of philanthropic causes, but those donations rarely go toward social justice initiatives. Smith said that’s an issue his credit union regularly wrestles with, but added, “I’m not convinced that all the community needs is philanthropy and charity…It’s nice to have donations but maybe that’s just a Band-Aid for a symptom. I’m personally not convinced that’s sustainable for the long term.”
Many suggested one of the best ways credit unions can meaningfully contribute toward equal rights is by not only keeping capital flowing to minority-owned businesses, but also by taking steps to ensure new credit unions targeting minority groups are able to successfully get off the ground. The last few years have seen organizers in Kansas City and Minneapolis attempt to launch new CUs for African Americans in those markets but neither has yet been successful.
“Inside and outside the credit union movement there is a lot of wealth that could be invested in providing start-up capital to new institutions and new credit unions in minority communities, or to bulwark and strengthen existing ones,” said Rosenthal. The industry has more than $1 trillion in assets, and he added, “A few tens of millions could make an enormous impact on catalyzing credit unions in black and Latinx communities.”
Still, some more conservative voices in the movement are also likely to say the current moment will eventually fade, and credit unions can do more in the long term by focusing on what they have always done: trying to economically lift up consumers of modest means.
“I don’t like to think of my members as my African American members, I like to think of them as my members who have significant financial needs that nobody else is actively trying to serve,” said One Detroit's Hubbard. “I don’t really like to put people in racial buckets because that makes me uncomfortable, but this time we’re in sort of requires you to do that…I’m often the only white guy in the room and I’m pretty aware of that. I think a lot about race even if I say I don’t like to put my members in that bucket. I don’t really know how to make a difference other than trying to uplift people’s financial and economic status.”