Wisconsin CU League News Release - 10/13/09
Slow economic recovery ahead, but credit unions’ traits will help financial sector
Their 2.2 million members find that credit unions’ member-ownership makes for help during tough times
Pewaukee, Wis. - While many financial institutions have struggled this year, Wisconsin credit unions remain strong and their unique traits as not-for-profit, member-owned institutions provide continued stability for the 2.2 million people in Wisconsin who are using them to weather some still-challenging circumstances.
Credit unions say these financial times have made help from credit unions critical to borrowers whose member-ownership of their financial institution has made it easier to seek help because of a job loss or illness. For example, credit unions work individually with members to consolidate debt or alter terms on loans during a loss of income.
“Credit unions saw some of their largest membership growth during the Great Depression of the 1930s,” says Brett Thompson, President & CEO of the Wisconsin Credit Union League, the Pewaukee-based trade association. “Now, during the Great Recession, credit unions are consolidating members’ debts at better rates, preventing foreclosures, offering secured loans or credit cards to help members build their creditworthiness, and offering small loans of just $500 or even $100 that are a lower-cost alternative than going to payday lenders. In these tough times, credit unions shine.”
And more people are discovering credit unions, Thompson says, because they have had to refinance an exotic mortgage obtained elsewhere or their small business was denied credit by for-profit banks restricting credit.
“92 million Americans have a great reason to celebrate International Credit Union Month in October because credit unions remain strong and are such a valuable resource during tough times,” Thompson adds.
He explains that credit unions are different from the financials that caused the economic crisis because – as financial institutions that have no stockholders and instead price their services in favor of members – they have acted safely, responsibly and in consumers’ best interest. And our economy should benefit because of their:
• Local funding– Credit unions fund loans primarily through deposits. They don’t depend on capital markets like banks and finance companies do.
• Local control – Because credit unions make decisions locally, more factors that benefit borrowers can be considered. That’s grown in importance during these economic times, especially for small businesses. At least one study found that less than a third of small businesses can obtain needed loans.
• Cooperative ownership – Credit unions’ member ownership makes it difficult for any outside group to exert influence on strategic decisions. Depositors elect the board from among the membership, and the board, in turn, ensures members’ needs are met.
• Affordability – Because they’re looking to return value to their member owners, credit unions offer some of the best pricing on financial services. In Wisconsin, for example, interest payments on a new car loan for 60 months from a credit union would be $830 less than from a bank. When accounting for usage of a broad range of services, Wisconsin credit unions provide an average benefit of $195 per member household per year over banks. For Wisconsin credit union members in 2008, this has translated to $208 million on lower loan rates, higher savings rates and lower and fewer fees.
• Strong capital – Credit union losses have been managed from within the system, and Wisconsin credit unions’ capital ratio of 10.07% exceeds the 7% regulators consider “well capitalized.”
• Lower risk – Incentives applied in the investment banking industry only fueled the mortgage meltdown. But because the cooperative structure does not reward excessive risk-taking, Wisconsin credit unions’ delinquency rate has remained stable, at a mere 1.7%.
•Consumer trust – Credit unions rank high in independent surveys for consumer trust. Forrester Research’s 2009 poll, for example, saw credit unions receive top ratings from 68% of consumers – beating U.S. banks, investment firms and insurers.
• Unique purpose – Credit unions’ purpose is to serve members, not make profits.
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