What NCUA Can Do For CUs, And CUs For Members

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As vice chair of the NCUA board, my review of this past year makes me enthusiastic about our future. Though there were many accomplishments, there are two in particular that stand out for me: our revised rule on Member Business Lending and our update to the Chartering and Field of Membership rules.

The Member Business Lending (MBL) rule sets the foundation for credit unions to expand opportunities for themselves and their membership. These changes were essential for opening the doors for small business owners across the country. Small businesses will have services sometimes unavailable in the past, administered through a not-for-profit environment. Jobs will be created and our local economies will be strengthened. Members, long served by their credit unions for their personal financial needs, will be able to have their business needs met as well.

Options for growth and diversification for credit unions within its field of membership were accomplished through the update to the field of membership rules. This update strengthens the dual chartering system by ensuring a viable federal charter. Looking forward, we have some wonderful opportunities to continue our vision for the future.

Having recently been honored by my appointment to serve on the Federal Financial Literacy and Education Commission signed into law by President Bush, I will be able to highlight and share the innovative programs that the credit union community is using to advance financial literacy. I will be asking you to share your ideas, so that they may be included in our effort. The new Commission's goal is to promote financial education and improve the financial literacy of all Americans.

As part of the NCUA's Access Across America initiative, we are encouraging credit union participation in developing financial literacy programs that instill the values of having a solid financial foundation for all Americans. The needs are great in this arena. Accessing the American dream of financial self-sufficiency is not based on obtaining a loan or buying a new car, but rather on the very basics of financial education-knowing how to balance a checkbook, budgeting, or investing for retirement.

Financial education fosters financial stability for individuals and for entire communities. The more people know about credit and financial services, the more likely they are to increase savings, become homeowners, and improve their financial health and well-being. Providing members with the tools with which to make financial choices stems from educating individuals on what those choices are-and more importantly what those choices mean to them.

The critical nature of this is seen in the personal savings rate of Americans which last year dropped to 2% of disposable income. This is half of the average personal savings rate of 4% over the last decade, and down substantially from the 7.7% savings rate in 1992. In 2001, teenagers spent more then $172 billion and more then 20% have credit cards. Individuals under the age of 25 are the fastest growing group filing for bankruptcy.

Clearly, education will help guide these individuals into sound decisions. Today, millions of people across the United States are outside the financial mainstream. The so-called "unbanked"-with little or no banking experience-are often newly arrived immigrants, minorities and those with low to moderate incomes. Because they lack a basic understanding of how money works in our society -and therefore the tools necessary to save and manage money-they are deprived of achieving the American dream and financial independence. Promoting the financial education of our underserved strengthens our society as a whole.

Credit unions have been aware of this need and answering the call for years. Edward Filene said, "There is no permanent remedy for our economic and social ills other than better thinking, which must come through better education." Starting financial education early is key to building a lifetime of great habits.

I challenge credit unions to take a look at their educational advocacy and ensure they have plans in place to further the knowledge of their members to make informed choices of the financial products and services which are right for them. Knowledge and communication of financial services through financial education will give members the power to make choices in their lives to strengthen themselves, their families and their communities.

Open communication will continue as one of my priorities. At NCUA you will soon see an updated website that will be easier to use. Also, we'll be launching a new service-an electronic subscription service-that will allow you to receive communication, such as alerts and letters, via electronic means rather than traditional mail services. This service will bring efficiencies of time and expense, and better communication.

Vision is important for us as an agency and for you as credit union leaders. I will continue to work for a regulatory environment founded on safety and soundness, providing earned flexibility. I will work to enhance communication, soliciting feedback on how our regulations are impacting those we regulate. You will be encouraged to plan for future leadership positions, to look for innovative ways to serve your members, and to improve financial literacy opportunities. You need to continue to ask how you can prepare the next generation for the challenges you anticipate.

How can you maintain your trusted relationship with your members and build for future growth? Though the regulator and the regulated may not always agree, I can assure you that your voice will be heard. At the NCUA, safety and soundness is our No. 1 priority. We are here to work with you to ensure you have clear and straight forward information with which to make important decisions. Together, we are stewards of the industry.

JoAnn Johnson is vice chairman of the National Credit Union Administration.

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