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Every American has the right to participate in the United States’ prosperity and enjoy the benefits of financial security. Unfortunately, far too many are now caught in a “culture of indebtedness.” The symptoms include a negative national savings rate, in spite of being in the fifth year of a recovery; the popularity of overdraft payment programs; and the growth of payday lenders from fewer than 1,000 stores to more than 25,000 in 2006. How can we rekindle the “culture of savings” that built America’s middle class? However we do it, it must be a balanced approach that includes regulatory changes and financial literacy.

This past week, New Mexico passed a law to limit how payday lenders operate and, sadly, New Mexico credit unions helped write this bill. As credit unions, we object to the banking industry writing our laws, so why should we tell payday lenders how to operate? Payday lenders claim overdraft protection is more expensive than their short-term loans; do we want them writing legislation to limit the use of overdraft protection? I believe any legislation should be aimed at clear disclosures to consumers, rather than limiting their access by placing unrealistic restrictions on lenders. After all, prohibition did not stop people from drinking alcohol! New Mexico citizens who can’t live with the new law will just cross state lines or use the Internet to meet their needs. Financial literacy is a major crisis in our country. We credit unions should be in the forefront of rekindling the importance of savings–not only for the benefit of members, but for the survival of our industry. If you take a look at credit unions’ demographics, you’ll see the average age of members is most likely over 45. But if you drill down a little more, I bet you find that approximately 80% of your deposit base belongs to members over 60. This should be keeping you up at night! If a financial literacy program is begun in elementary school, which includes teaching the importance of saving for what you want, I believe we can replace the culture of indebtedness with a culture of savings in just one generation. Meanwhile, we also can be working to change the attitudes of our adult members.

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