Matz: 'You Could Be Blindsided'

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While CUNA's Governmental Affairs Conference was dedicated to delivering a "one-two punch" to the banking industry, NCUA Board Member Debbie Matz urged credit unions not to forget the other heavyweight contenders in the financial services ring: predatory lenders.

"These opponents are trying, and in many cases succeeding, to knock out credit unions," Matz told the GAC audience. "And if these other opponents stay outside your line of vision, you could be blindsided."

That was not to say that Matz dismissed the banker threat entirely, noting, "a threat to the credit union tax exemption is an issue of safety and soundness. So let me assure you, as you fight to defend your tax exemption, I am in your corner."

But the potential for losing sight of CU's other opponents, she said, is also dangerous for the CU community. "Did you know there are more than twice as many predatory lenders than banks and credit unions combined? Tens of thousands of check-cashers, pawnshops and payday loan outlets charge excessive fees to consumers who need quick cash to survive emergencies," she said. "Rent-to-own stores and subprime mortgage lenders lure borrowers into long-term debt at outrageous interest rates that make it almost impossible to keep up with the payments."

Matz pointed out that even as credit unions continue to expand into underserved communities, predatory lenders are the most convenient financial services provider for nearly 100-million residents in underserved communities. Moreover, while banks and CUs compete over people who already have a relationship with an insured financial institution, predatory lenders are going after the immigrant market-people who are unfamiliar and uncomfortable with "traditional" financial institutions and who find it difficult to get a foot in the door at such institutions.

"Recently I heard a heartbreaking story about how a subprime mortgage lender ripped off a Habitat for Humanity borrower," Matz related. "The home came with a 1% mortgage. But a subprime lender, by offering just $1,000 in cash up front, convinced the borrower, a single mother, to refinance-to a rate of 15%. Before long the property was in foreclosure."

Matz also took the opportunity to touch on credit unions' stagnant growth rates-which averages to about 2% a year in membership growth. "This means the vast majority of credit unions' asset growth is coming from existing members," she noted. "Credit unions cannot safely sustain this pace far into the future."

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