WASHINGTON — A strange thing is happening in the credit union business: Just when the government is making it easier for people to join the cooperatives, membership growth rates are slowing.
The ranks of credit union customers grew just 1.1% during the first half, to 83.3 million people, according to the National Credit Union Administration. Assets held by credit unions jumped 4.2%, to $635.6 billion, in the first half.
The membership figures are off from 1.9% last year and 2.8% from 2000.
Experts, including credit union advocates, are divided on the causes of the slowdown.
Dr. Tun Wai, chief economist and director of research at the National Association of Federal Credit Unions, said the cooperatives’ enrollment is down in both ends of the age spectrum.
“The younger population won’t use credit unions as their primary financial institution,” he said. And as the population ages, he said, the “tendency is to move to another place and retire. So they discontinue their membership. This trend will continue.”
But Mike Schenk, vice president of economics and statistics at the Credit Union National Association, the industry’s largest trade group, predicted growth will pick up again. “I suspect it’s a short-term aberration,” he said.
Mr. Schenk said the low interest rates of recent years made saving less appealing and kept potential members away. Attractive financing offers by the automotive industry were another factor, he said, because car loans are a key source of new members.
The slackening of growth is a curious development considering the industry’s regulator, the National Credit Union Administration, has been making it easier for credit unions to accept new members.
In March 2003 the agency approved a sweeping overhaul of its field of membership rules that made it easier for credit unions to convert to community charters. That allowed institutions to accept members on the basis of location rather than narrower affiliation such as working for a specific employer or attending a particular church.
The banking industry complained the NCUA had gone too far, and worried that credit unions would add hundreds of thousands of new members by opening up their membership to, say, everyone living in Cook County, Ill., or New York’s Long Island.
In May 2003 the American Bankers Association and its Utah affiliate sued the NCUA, challenging its approval of a field of membership covering more than half the state for a community credit union in Tooele, Utah.
That case is still pending.
Community charters eventually may deliver new members, but they have yet to do so, said Jay Johnson, an executive vice president at the Washington research firm Callahan & Associates Inc. “With the expansion of the charter, there is a lot of potential for growth, but it’s not translating.”
That may be true industrywide, but some credit unions have had success with the new charters. BECU is a good example. Formerly the Boeing Employees Credit Union, BECU expanded its charter in August 2002 to accept any Washington State resident. Membership grew 9.7% in the 12 months that ended June 30, and 7.7% in previous 12-month period.
Still, Marc Healy, director of member services, said, “When we opened up the charter we didn’t have an ‘Oh my gosh the doors have opened and there’s a flood of people joining us’ reaction.”
Though overall membership growth is declining, banking industry representatives said the largest credit unions are growing faster than the industry average.
“The growth and the action in the credit union industry is with the big, aggressive credit unions,” said Jim Chessen, the ABA’s chief economist. “Traditional credit unions that are trying to serve people of small means are being killed by the big guys who just want to compete with banks.”
In fact, the membership of the 10 largest credit unions by asset size grew by an average of 7.5% over the 12 months that ended June 30, according to Callahan.
The 10 largest credit unions claim 7.6% of all credit union members, up from 6.3% five years ago, Callahan statistics show. It is a growing share, but the 10 largest cooperatives still have less than 10% of the industry’s total membership.
