NAFCU Discusses Underserved, Conversions With The Fed

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In its annual meeting with the Federal Reserve Board of Governors, NAFCU talked up how credit unions are reaching out to more low- to moderate-income households.

"We talked about how historically, credit unions served people of modest means because those were the people who were coming to them," explained NAFCU Economist Jeff Taylor. "But today, it's not like if a credit union goes into an underserved community people will just show up on their doorstep. They have to proactively reach out to these groups. Serving people of modest means has become more challenging, but credit unions are doing just that."

NAFCU also discussed another hot credit union topic: conversions to bank charters.

"Essentially, we presented to them what our board policy is, which is that we aren't against conversions, we're just concerned about the lack of transparency."

To increase that "transparency," NAFCU would like to see some sort of special meeting held prior to the voting, to ensure members have an opportunity to ask questions about the conversion in a public forum.

NAFCU is also suggesting that board and management of a converting credit union are unable to see any financial benefit for 10 years, and that the conversion voting rules require at least 20% of members participate in the vote.

Other topics included what types of loans are showing growth in the credit union community.

Member business loans, for example, are showing good growth but still represent a small percentage of the portfolio, Taylor noted.

NAFCU told the Fed that although loan growth is outpacing deposit growth, credit union liquidity has plenty of back-up in the form of the corporate credit union system.

The trade association also reported to the Fed that credit unions are generally pleased with the services they are receiving from the Fed.

"It's clear that the Fed is really starting to learn a lot more about credit unions," he added. "We are seeing more knowledge about credit unions starting to percolate throughout the Fed system. It's definitely better than it was five years ago when I first started attending these meetings."

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