Still Glad No One Defined 'Modest Means'
So you have been in the industry for years and think you know credit unions? Have you heard of this: Credit unions should only serve people who are impoverished, destitute, unemployed or on welfare. That's directly from the Federal Credit Union Act--NOT! But if you have been following the saga of banker attacks on who credit unions were chartered to serve, that silly line wouldn't seem so silly.
There is so much made about credit unions being chartered to serve those of "modest means." It's become the basis for all other banker attacks. Bankers say credit unions have become too expansive and are offering too many bank-like services. If credit unions were only serving those of modest means, they wouldn't be expansive and wouldn't be offering more bank-like services. (Does that mean people of modest means can never rise out of their modest means class to where they would need more services like member business lending? That's an argument for another day.)
Some in the credit union world have even discussed defining modest means to beat the bankers to the punch. That would be a very bad move, especially after seeing the long-awaited results of NCUA's data collection pilot.
Kudos to NCUA and its framing of the data collection report. The agency put its statistical findings in context, and that context is most importantly that credit unions can serve only those within their field of membership. As the report points out, 80% of credit unions still serve members based on a common bond of occupation or association. Despite the rise of community charters, the common bond still rules, and that common bond has led to the demographic makeup of members: working, middle-class Americans. That's who credit unions are serving, and we all know it. That doesn't mean they don't reach out to the underserved, but the common bond history still shapes the demographics. It will change as community charters grow. As the study found, community charters are doing a better job of reaching out to the underserved because a common bond doesn't restrict them. That was nice brick laying by NCUA for future changes.
The report also properly points out that bankers are so concerned about credit unions helping the underserved that they took it upon themselves to limit all federal credit unions, except multiple common bond credit unions, from adding underserved areas. Bankers are clearly looking out for the welfare of the underserved, yeah right. Before the ink was even dry on NCUA's data collection report, CUNA announced that it would be pursuing a legislative initiative to allow all federal credit union charter types to add underserved areas. That would simply right a wrong that was done to credit unions and CUNA is right to waste no time in announcing its intent. The banker backlash isn't going to be any less if they wait until next year, so why not? The key though will be how it is incorporated as a bill, standalone or with CURIA, etc. I still think CURIA is a long shot with the current member business lending provision.
Back to the study. It found that credit unions serve 60% of those with median family incomes under $60,000, 82% of those with $75,000 or less, and 96% of those with $100,000 or less. Is it me or do these numbers not say much? You can throw a dart in a packed movie theatre (a dart might be bad) and I'm sure just about everyone you hit would be under $100,000. The bottom line is most credit union members fall within the $30,000 to $100,000 income range. What does that mean? Members are employed, working-class people.
When the Federal Credit Union Act was written, as the report highlights, most citizens were blue-collar workers. It was a time when manufacturing ruled the day and those "modest means" jobs dominated, certainly not the case in today's America. The bankers want credit unions to be regulated based on the economy in 1934. Give me a break. Today, many families have two parents working in white-collar jobs in offices to make ends meet. Are they not "modest means" because they aren't impoverished? You can easily make the argument that $60,000 is indeed "modest means" when considering the costs to raise a family today.
This is why I steadfastly believe no matter how many of these studies come out, to start defining modest means is senseless. It will only box credit unions into some very low-income level that wouldn't equate to what "modest means" meant back in 1934. Why do I harp on defining modest means? Because I know that there are credit union leaders who are still talking about defining it, and if they do so they play right into the bankers' hands. As far as bankers are concerned, my silly line--Credit unions should only serve people who are impoverished, destitute, unemployed or on welfare--isn't silly at all. --Comments? E-mail firstname.lastname@example.org