Underserved, Under Documented?
Several well-publicized calls upon credit unions in recent weeks to provide evidence they are really serving underserved and low-income markets has highlighted a glaring shortcoming: no one seems to have the data.
In Congressional hearings two weeks ago scrutinizing the credit union tax exemption, House Ways & Means Committee Chairman Bill Thomas (R-CA) repeatedly asked for data to support credit union contentions the tax exemption is deserved and that credit unions remain true to their "mission" of serving people of modest means.
Just days later former CUNA Chairman and Texas league CEO Dick Ensweiler urged lenders to gather such data and use it to support credit union claims.
And then last week NCUA Chairman JoAnn Johnson urged credit unions to do a better job of "telling your story," adding that "America's credit unions' compassionate mission of service of 'people helping people' should be told in a more valiant and vigorous manner," (see related story, page 1).
But who has those numbers?
"It isn't out there," NAFCU Economist Dr. Tun Wai said matter of factly. "I think the Congress has raised some interesting points."
All around America's credit union community, executives and analysts expressed to The Credit Union Journal virtual agreement over several basic points:
* The definition of what comprises "modest means" is imprecise.
* It is uncertain what data CUs should collect.
* It is also uncertain how that data should be collected.
* It is unknown if there is any existing method of data collection to jump start this process.
* Small credit unions, which serve some of these very same low-income and underserved communities, likely don't have the resources to collect and measure the data.
Steps Being Taken
Following the congressional challenge to credit unions, some steps are being taken to begin collecting the data Congress demanded.
Wai said credit unions will have to get down to the level of the individual member to assess data about who is being served best and in what manner.
He suggested that FFIEC's Home Mortgage Disclosure Act (HMDA) reports could serve as a starting point in this process as the reports list home purchases, improvements and lines of credit plus loan type and amount, project location, ethnicity, race, sex and income of the member.
Wai predicted that when the data is eventually collected it will "prove without a doubt" that CUs have been serving their members in the best way they're capable of and have always done so.
"I'm very optimistic that it will prove the point," Wai said.
North Carolina CU League President John Radebaugh echoed Wai's stance on modest means data and the best methods for supporting credit union claims.
Radebaugh said the North Carolina league is making a strong effort to collect data in time for CUNA's GAC in Washington in February of 2006.
For right now, he's asking larger North Carolina CUs and community CUs to help design a program that asks: Who? How much? How well? "We don't know. We don't have the answer to those questions," he said. "We're really in the initial steps of that. We don't have a mechanism to prove that."
Radebaugh said the question of who is of "modest means" is a particularly vexing one. He noted that the term doesn't necessarily imply someone who has a low income or who is simply poor, observing that many emergency, fire and police members could be defined as modest means in many parts of the country.
"Someone that's trying to raise a family. That's who we serve," he said.
Radebaugh said North Carolina's credit union members saved $336 million over what they would have paid had they done business solely as bank customers. But again, someone needs to be validating that claim with hard data.
"It's going to be a challenge. Who are those people saving the money? I wish someone would call me and say 'Here's how you do this'," he said with a laugh.
Looking To Massachusetts
One person who believes he has some answers is Harvard University Employees CU President Gene Foley, who has had to comply with what is essentially a state level Community Reinvestment Act in Massachusetts that requires the compliance with provisions that lending is being provided across the economic spectrum.
Foley similarly mentioned using HMDA data as a starting place for reports and recommended assigning a point person with the requisite skills to handle the project much like a full-time compliance officer.
"This is another layer of regulation, which nobody enjoys," Foley said. "It hasn't been a problem for us."
In North Carolina, State Employees Credit Union SVP of Loan Administration Phil Greer also takes the position that credit unions have always, and will continue, to serve people of modest means.
Greer said State Employees CU has several existing programs helping lower income members, such as car loan programs for borrowers with spotty credit, and a checking account program that charges a fee of $1 per month.
"I think it's relatively easy to take a survey of fees on the deposit side," he said. "I think the solution is doing more tracking, knowing now that it is more important."
Mortgages As An Example
Greer noted that in State Employees' own first mortgage program, 49% of mortgages made were to members at or below the state's median income and that the credit union does have the data to support that experience.
Texas CU League President Richard Ensweiler, who has just ended his term as chairman of CUNA, also said he was considering just how to prove to Congress that credit unions are doing more than making claims of service to low-income markets.
Ensweiler said every credit union wants to avoid more regulation, but the big task will be getting people to track, assemble and report the proper data.
"Leagues can make suggestions but that's about it. How you put your arms around it, I don't know," he said. "But there's nothing that says you have to do it next week."
Ensweiler said the Texas CU League will stress the issue at all its upcoming conferences and meetings.
"We accept the challenge that we have to provide a better America to justify what we do," he said.