Small Credit Unions Serve Those Others Won't

In a letter in the December 8 issue titled “D’Amours Hasn’t Changed; Many Small CUs Haven’t Either”, Chris Lindelof questioned why NCUA Board Member Debbie Matz should be concerned about the declining number of small credit unions. In my 25 years in the credit union movement, I have heard a variety of trade organizations make the same point as Ms. Matz: the existence of small credit unions is, in fact, the basis of the positive perception that many members of Congress have of credit unions in general. I think it is prudent for a federal regulator to remind us of that. While I have spent many years arguing with and criticizing NCUA (and hope to spend a few more years doing this), I’m not inclined to refute all of their data. And in this case, NCUA’s data is based on the increasing number of merged and liquidated credit unions with assets of $10 million or lower at the time their charters were terminated. Lindelof is undoubtedly right that many small credit unions have grown, and thus are no longer small. But that’s not the phenomenon that NCUA statistics show. There is, in fact, a steady decline in the number of small credit unions through mergers and liquidations. It’s hard to dispute that. In the end, what disturbs me most is Lindelof’s blithe argument that recently chartered credit unions “are the only credit unions with an excuse for being small.” It’s a wrong-headed bias. Half of the members of the National Federation of Community Development Credit Unions are institutions with $1.5 million or less, and perhaps 1,000 members. Some have served their members for as long as 50 years. It’s true that many of these institutions cannot offer a full line of retail products. But to blame them for serving a tight common bond, for providing personal attention that would probably be unavailable anyplace else (except perhaps the local predatory lender), for incorporating character and intimate knowledge of the borrower into their lending decisions – that takes us to places where I don’t think we want to go. It means denying the roots of the credit union movement. But forget the philosophy. If, as I believe to be true, many small credit unions serve market niches and populations that are unappealing to other credit unions, the demise of these small institutions may mean that: (a) the individuals left behind may fall prey to unscrupulous lenders (or maybe even banks); or (b) the surviving credit unions must assume the burden of serving these small-balance, “unprofitable” members. I hope they will. My observations over the last two decades suggest this will not always happen. I can agree with Lindelof that many large credit unions do an outstanding job of serving their members. Ms. Matz has made this point as well. At numerous public gatherings of credit unions that Ms. Matz has spoken at or convened, I have heard her celebrate the accomplishments of large credit unions, including those greater than $1 billion in assets, in serving underserved communities. I see her efforts encouraging credit unions of all asset sizes to reach new members who need affordable financial services the most. Along with our many small members, the NFCDCU has a growing number of members with more than $50 – $100 million in assets – no longer “small” by the usual definitions. What’s more, in the last year, we’ve been joined by dozens of “Community Development Partners” – including some of the largest “mainstream” credit unions with a professed and demonstrated commitment to serving low-income people and communities. Not only do we welcome them: we regard them as absolutely essential to our strategy of bringing credit union services to more low-income people. Through our alliances with them, we believe they will both enhance the viability of small credit unions, and broaden their own outreach to low-income populations. Cliff Rosenthal Executive Director National Federation of Community Development CUs New York