Focus On The 'Underserved' Is Really Misplaced

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In the squabble between the NCUA and the ABA over whether or not community-chartered credit unions should be allowed to add underserved communities to their fields of membership (FOM),the emphasis has been placed on the word "underserved" when the truly important word is "community." By focusing on the community, all people within it are included. Rather than arguing about some arbitrary set of boundaries where there are no credit union services, the focus should be on what credit unions are doing to contribute to the betterment of their communities.

The fundamental difference of opinion between NCUA and the ABA is one of definition. What is meant by the term "underserved" and how does that relate to "people of modest means"? NCUA's definition of "underserved" seems to mean those potential members who reside in a geographic area that has not previously been staked out by one or more credit unions. The bankers have a problem with this definition, and rightfully so. While it is true that all Americans should have the right to access credit union products and services, the term "underserved" should refer to those who can't afford fundamental financial services such as checking, savings, and credit. On the other hand, the term "people of modest means" goes way back to the passage of the Credit Union Act in 1934. Although it wasn't until the middle 1950s that I joined the circus, from what I've read, everyone in the 1930s was of modest means. So we can only assume the term was intended to mean everyone other than the wealthy, the powerbrokers on Wall Street, and the politicians in Washington, D.C.

No matter what term is used, every credit union regardless of its field of membership or charter has an obligation to the community in which its members reside. The credit union's obligation is to seek out opportunities to provide time, energy, and financial resources to support its community. It's one of the credit union principles. A truly cooperative spirited credit union will find ways to help its neighbors in the community without expecting anything in return, even when the neighbors are not technically included in its field of membership. I'm not suggesting credit unions directly serve non-members, I'm suggesting they should seek out local cooperatives and social agencies to brainstorm ideas for collaboration that will result in providing needed resources to their neighbors.

There are plenty of opportunities for collaboration. Consider the fact that more than 40% of Americans are members of cooperatives. Cooperatives impact all aspects of a credit union member's life. Cooperatives have been formed to support farming, electric utilities, preschool childcare and education, legal services, grocery stores, healthcare, dentistry, housing, and many other industries.

Food Co-Ops For Thought

For example, according to the National Cooperative Bank (NCB), Washington, D.C., there are 300 food-store co-ops nationwide. In the next 10 years, it is expected that 500 new food co-ops will be formed. Most of these will be formed through the dedication of an individual or a small group of residents of a particular neighborhood. Some of these neighborhoods are inner city and the residents don't have a convenient place to buy their groceries. A group of people can pool together money to jointly own a co-op, which is run for the benefit of the owners. It shouldn't take the passage of a new regulation for a local credit union to lend a hand. It's a way for cooperatives to work together. It takes at least $200,000 to start a food co-op, depending on the size, according to the NCB. Some of it can be financed by a local credit union or simply help the small group of cooperators with meeting space and financial advice.

One Bank's Story

Credit unions have supported their communities in many different ways, from corporate contributions to local charities to encouraging their employees to volunteer personal time to non-profit organizations and community events. But consider the long-term commitment from the Ipswich Co-Operative Bank in Ipswich, Mass.

The board of directors at Ipswich voted in December to establish a charitable foundation that will guarantee funds to local non-profit organizations for years to come.

Ipswtch has donated more than $50,000 over the past four years to local charities and scholarships. Now the bank will guarantee future contributions. The foundation, through the IRS and the state, will require the bank to donate 5% of its assets annually. Its goal is to have assets of $1 million in the foundation by 2010.

Just because Ipswich has the word bank in its name doesn't mean it isn't committed to co-operative principles. Credit unions are committed to the same principles, so the discussion should focus on: What are credit unions doing to demonstrate their commitment to the principles and values that differentiate them from non-cooperatives?

Most cooperatives don't think about credit unions as being part of the cooperative movement. But those that I've talked with would appreciate an opportunity to work with any credit union that shares a commitment to the cooperative principles and values. Imagine the dynamic network that could exist if credit unions would reach out to these cooperators to work on social issues at the local level. Surely one result of credit unions and cooperatives working together would be an improvement in the quality of life for the truly underserved. Maybe NCUA and the ABA can agree on that!

The trade associations, NCUA, and others are searching for a way to quantify the positive impact credit unions are having in their communities. Anecdotal evidence is plentiful, but legislators and government decision-makers require easy-to-remember statistics that can be updated and presented in effective charts and pie charts.

There are more than 1,500 credit unions nationwide that have written and published their statement of commitment. This statement of commitment is part of CUNA's Project Differentiation that was launched in 1999. If those 1,500 credit unions voluntarily measured their performance on an annual basis against their statement of commitment, they would have the fundamental framework for a credit union movement-wide social audit. These audits could easily be scored and reported in aggregate to provide solid statistics to report to legislators nationally and within each state.

The benefits of a social audit are two-fold:

1. Credit unions will have taken it upon themselves to prove their value without having CRA or other regulatory requirements imposed on them.

2.The social audit will serve as the guiding document for strategic and annual business planning.

With enough credit union participation there will be no argument about whether or not credit unions are fulfilling their mission of serving people of modest means, the underserved, or whatever term we can all agree on.

A former CUNA executive, Kevin Lytle is CEO Member Allegiance, LLC, which specializes in the development of member loyalty programs in cooperatives. For info: 608-213-0879 or KLytle-1

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