ORLANDO, Fla. - Low-wealth households, big time opportunity.
That was the message of Lois Kitsch, national program manager for the National Credit Union Foundation’s REAL Solutions, who told Credit Union Journal’s Grow Show that the opportunity is there for credit unions to help grow their own operations while helping a demographic that needs it.
Kitsch, who spoke about “How Serving Low-Wealth Households Leads to Growth and Greater Value,” defined what is considered “low wealth” to the credit union movement–underbanked families, young families, immigrants and low-wage families. Most turn to payday lenders and the like, she said.
“We think 20% of credit union members go to payday lenders, and 30 million Americans today use check-cashers,” Kitsch said.
The most productive way to ensure that CU members use their credit union for these services instead of turning elsewhere is train the tellers, according to Kitsch, as tellers are directly in touch with members. Yet that’s often where credit union’s decline to invest, she observed. “Most of the people spending the most time with your members are the ones with the least training.”
As for payday lenders, they do not see themselves as predators, Kitsch noted, and truly believe they are helping people. But when members pay payday lenders their high fees, it doesn’t leave much for savings, she noted.
“The savings rate in America is less than 0%,” Kitsch said. “We need to encourage people to save.”
That’s especially critical with younger members, she stressed. “Sixty-five percent of college students need student loans,” Kitsch said. She pointed to the experience of University of Wisconsin Credit Union, where 60% percent of members who became members in college remain members after two years.
After college, young adults still need their credit union, Kitsch said, as they will when they are getting married, having children and buying their first home.
The other group CUs should be reaching out to is immigrants, Kitsch said, noting that this is the fast growing population in the United States, is relatively young, and largely unbanked. Even immigrants who are undocumented can be served. As long as they do not earn interest, the credit union doesn’t need to report any data to the IRS.
