By Ray Birch
LANSING, Mich.—Credit unions need to do more than just offer robust financial counseling to help members brace for trouble that lies ahead—they also need training materials that can be measured while holding members “accountable,” according to one CEO.
That’s the view of Martin Carter, CEO of the $192-million Astera CU, who told CUToday.info he fears trouble is lurking for the personal financial bottom lines of many members. In fact, he said, “I think it could be bad.”
Carter said the surplus of cash many people have managed to build up as a result of the stimulus payments will not be nearly enough for consumers to cope with rising inflation, rising interest rates and a downturn in the economy—a recession he believes could be deeper than many economists are predicting.
“I think people in general could find themselves in trouble quickly with what's happening,” said Carter. “We've got people who are already in trouble who have been struggling for a while, but now you've also got people who have kind of been getting by. And, with what's happened with the increase in gas prices and more, those things that are in your monthly required expenses going way up, this is going to be moving people who have been getting by just above the poverty level to below that line.”
Carter’s comments are part of a CUToday.info series of articles focused on how rapidly changing economic factors, especially fast-rising prices, are changing what many members now need from their credit unions regarding financial education and possibly services.
Go Ask ALICE
Carter pointed to data from United Way’s ALICE (Asset Limited, Income Constrained, Employed) report.
“The report looks at those people who are just above poverty, doing OK, but they're not in the best financial position,” said Carter. “All it would take for them would be one emergency or an economic crisis to put them at or below the poverty level.”
Carter further noted how the data also indicate many otherwise well-to-do Americans are living paycheck to paycheck.
“There are people right now with six-figure incomes who are not doing a good job managing their money,” Carter said. “What is happening in the economy now should be a wake-up call for them, because all of a sudden they're going to be finding out they are spending more than they’re earning every month. Then, they’re starting to do dig themselves into a cycle of deeper debt. Some of them will be smart and they'll know how to budget, and they'll start making sacrifices. But others who may not be paying attention could get into a lot of trouble.”
NCUF Program
Carter, whose CU uses the National Credit Union Foundation’s Financial Well-Being For All program as the basis for its member financial education, advised credit unions “to really focus on financial health and well-being for all. Build that into your culture and build it as an outcomes based, impactful program. Because my experience in this industry, and I've been in it over 40 years, is a lot of people have thrown out financial literacy education and financial education programs without requiring any accountability from their members. You need to have goal setting—train on something and then have some follow-up or accountability.”
Carter emphasized his view now is especially not the time to offer members financial education and not hold them accountable. He said Astera Credit Union begins its financial well-being training by first using the National Financial Health Survey as the benchmark for its work.
“What I've done is made a financial well-being for all cultural to my credit union,” Carter said. “We’ve been training existing staff and new staff with our financial health program letting them also know how important financial health is to our members,” Carter explained.
Astera has a community charter and many of its more than 15,000 members are low-income.
Members Haven’t Recovered
“When the General Motors plants closed down here during the Great Recession, a lot of our members did not recover,” said Carter, whose CDFI-certified credit union has a low-income designation.
Carter said the trouble brewing in members’ household balance sheets is starting to show, and while delinquencies are still low, they are rising returning to pre-pandemic levels.
“During the pandemic our delinquencies and charge-offs were so low that our recoveries were greater than our charge-offs,” he said. “I had never seen that before.”
Many Astera members still have some of their stimulus deposits bolstering their accounts, which surprises Carter. But as CUToday.info reported, CUNA Mutual Group data show CU members savings are at record levels.
‘Totally Baffled’
“I've been totally baffled because I thought when those stimulus dollars came in that they would soon enough be drawn down,” he said. “But it just has not happened. But those funds that are still there will not go far enough, as prices for things that members need for their ongoing needs, such as gas, continue to rise due to inflation. Members will soon get to the point where they have to make some good decisions and sacrifices, because they won't have those savings to fall back on. And that's where a good financial health program comes in.”