By Jim Nussle
Ever since St. Mary’s opened its doors in 1908, credit unions have brought collaborative financial services to underserved consumers and the communities they call home. Sure, many of the common practices of an early twentieth century credit union would be out of place in a contemporary branch, but every credit union, whether chartered in 1920 or 2020 remains at its core a collection of people helping people.
It’s that philosophy that has helped our movement grow to serve over 115-million members, and what continues to see credit unions continuously reported as the most favored consumer financial partner in survey after survey. It’s also part of why Congress continues to invest in the credit union tax status—as people helping people, we continue to invest in our members rather than stockpiling profits for faraway investors.
Furthermore, this philosophy drives a large part of our advocacy efforts in Washington and in the states. We recognize that in order to deliver affordable, responsible financial solutions to local communities, it’s important that lawmakers recognize just how different our people-helping-people approach is for consumers, and tailor regulations to protect consumers without impeding our important work.
In the wake of the financial crisis, Congress and federal regulators established several compliance hurdles meant to keep the megabanks from recommitting the egregiously abusive practices that led to the near collapse of America’s financial system. While a critically important mission for sure, policymakers’ broad-sweeping, kneejerk response has effectively equated our not-for-profit practices to the get-rich-or-die-trying approaches of the Wall Street megabanks, with many regulations over the last decade applying to credit unions and banks alike.
Regulatory Costs Costing Members
Unfortunately for credit union members, the $7 billion credit unions spend in staff time, software, and much more to comply with these one-size-fits-all policies means that credit union programs and services suffer. According to the latest research by Cornerstone Advisors, 83% of credit union CEOs report regulatory compliance costs prevent their institutions from effectively improving members’ financial well-being.
Additionally, 60% of respondents report regulatory costs keep their credit union from improving deposit rates, reducing loan interest, and investing in technology for members’ use. At mid-sized and larger institutions, respondents also mentioned that reduced costs would likely also result in the institution investing in branches, something that is all too important as more communities are faced with the harsh reality of dwindling bank access.
Congress ‘Starting to Come Around’
In addition to allowing credit unions to invest their assets in member services—rather than in unnecessary compliance protocols—there’s another way Congress can support consumers, small businesses, and communities across the country. Given our movement’s century-long mission of promoting thrift and providing access to credit for provident purposes, there are some limits on credit union operations that remain in place from the time the nation’s credit unions were helping consumers weather the Great Depression, limitations that have no place in today’s consumer finance landscape.
By updating the federal charter, Congress can allow credit unions to better meet the growing need for local, consumer-first access to a financial institution in rural and working-class communities across the country.
We also see this in our ability—or lack thereof—to serve small business borrowers. Congress is starting to come around to shifting member business lending standards and maturity limits to allow credit unions to better serve veterans, farmers, and minority and student borrowers. Strong advocacy with human stories has helped reinforce for these lawmakers that what seems like a high-minded policy change has tangible impact on the constituents they serve. After all, elected officials are also people helping people.
Better Tailored Regulations
By better tailoring regulations and modernizing credit union governance to make it simpler for consumers to plant their dollars close to home, Congress has an opportunity to demonstrate a commitment to community growth. Local communities are the lifeforce of our country, and credit unions are committed to keeping those communities strong.
Locally grown credit union offerings support families, build consumer trust, and preserve financial diversity. It’s our communities that lose when one-size-fits-all governance forces credit unions to pull back on providing safe and affordable products.
Together we can make an investment in America’s future by bringing credit union governance into the 21stcentury.
Jim Nussle is president/CEO of Credit Union National Association.