The leader of a prominent consumer group is calling upon regulators to do more to encourage credit unions to help members rather than just sell products.
Steve Brobeck, who has been the executive director of the Consumer Federation of America since 1980, acknowledged to attendees at the recent NASCUS annual conference here that credit unions do a better job than banks in protecting member interests, but expressed concern they aren't rewarded for doing so.
It is the responsibility of regulators to ensure credit unions continue to meet the needs of their members, said Brobeck.
He said the Consumer Federation of America has been working with CUNA to identify credit unions to develop model programs.
According to Brobeck, the American middle class for decades has built wealth by making monthly mortgage payments and building home equity. The recent wave of refinancing and second mortgages has drained much of that equity, he suggested.
He also decried what he termed the "pernicious" policy of requiring only 2% of credit card debt to be paid each month. "This is the leading cause of American bankruptcy," he said. "Consumers accumulate debt until it is well into five figures because they underestimate the amount of their debt."
"Regulators should encourage credit unions not to focus on selling products, but to meet consumers' financial needs. Credit unions should promote personal wealth products, such as first mortgages, and they should sponsor financial education programs."
Brobeck said one development in the credit union movement has left him feeling somewhat uneasy: a number of credit unions have switched from the National Credit Union Share Insurance Fund to private deposit insurance.
He suggested that the primary insurer of those deposits, which is American Share Insurance, Dublin, Ohio, has not adequately spread risk, he warned, and one failure could harm the reputation of credit unions.
The Consumer Federation of America has also been examining CU conversions to mutual savings banks, he said. While the CFA does not oppose mutualization, it is aware of the risks.
"We are opposed to mutualization that does not serve the best interest of members, or is not clearly discussed and voted on by members," he said.
