Wisconsin CU League News Release - 01/18/10

Credit unions saw largest membership growth in a decade in 2009, report says

Members saved $200 million, got help to stay afloat because depositors - not stockholders – are the owners

Pewaukee, Wis. – Credit unions, not-for-profit financial institutions owned by their 2.2 million member-owners, saved state residents almost $200 million on a full range of financial services during 2009 and grew their membership by 2.39% in the 12 months ending September, 2009 – an increase that’s more than double the rate of state population growth and nearly double the average rate of membership growth over the past decade. That’s according to the new 2009 Annual Report for Wisconsin Credit Unions by The Wisconsin Credit Union League.

While for-profit banks’ asset and loan levels declined during the year, according to the Credit Union National Association, not-for-profit credit unions saw growth in both those areas, 9% and 5.3% respectively. That came as no surprise to League President & CEO Brett Thompson, who said that credit unions topped surveys in 2009 rating consumer trust despite rampant cynicism about the financial industry. He attributes that to credit unions’ unique member-ownership structure with no outside investors. “Credit unions stepped up to help struggling consumers in ways other lenders wouldn’t, precisely because their role is to help people, not chase profits,” he said in the report.

“Members flocked to credit unions to refinance high-cost mortgages obtained elsewhere, consolidate debt, sort out budget issues or seek help when faced with a job loss or health problem,” added League Board Chair Kevin Hauser, CEO of Westby Co-op Credit Union, in the report. He added that small business owners increasingly turned to credit unions for loans as other lenders cut back. “Many (entrepreneurs) had either been turned away by for-profit banks or – despite having significant equity, assets and stellar credit histories – had bank lines of credit inexplicably withdrawn, threatening job losses and even the viability of otherwise sound enterprises.”

The annual report details successes of credit unions’ REAL Solutions initiative, which emphasizes the delivery of services to members and communities without regard for profit. Highlights included the fact that credit unions:

• Offer better deals on basic financial services like savings accounts, checking, car loans personal loans, home equity loans, money markets and IRAs. A chart in the report details the almost $200 million in annual savings.

• Offer small loans at lower rates – a preferred alternative to payday lenders. Nearly all Wisconsin credit unions offer loans below 36% APR – the rate at which lawmakers have considered imposing a rate cap – and grant loans of just $500 or less. Credit unions’ short-term loans also protect members from escalating debt. For example, their loans may include education or counseling, require savings, offer more than two weeks for repayment and limit rollovers to encourage timely repayment and improved creditworthiness for borrowers.

• Business loans that for-profit lenders deem “too small.” Credit unions grant loans other institutions deem “too unprofitable.” The average credit union business loan in Wisconsin is just under $140,000. Yet credit unions’ loss experience is just one-seventh that of Wisconsin banks. 

• Safe, affordable mortgages. Credit unions didn’t create the mortgage mess. In fact, credit unions have refinanced other lenders’ mortgages to prevent foreclosures. They’ve also set aside $43.8 million to HLPR (“helper”) loans, which cap rates to minimize payment shocks and keep borrowers in their homes. Credit unions also outperform other lenders in mortgages to low-income and minority borrowers. In 2008 – the latest year for data – credit unions approved 71.8% of mortgage requests for low-income borrowers (compared to other lenders’ 53.5%) and 73.9% of mortgage requests for minority borrowers (compared to other lenders’ 46.2%)

• Outreach to new Americans.  Services include translations about loans and other services, lower-cost wire transfers and participation in events designed to help new Americans establish a financial foothold, seek employment and participate in our nation’s tax system.

• Free financial education & counseling. For members, credit unions offer free workshops on topics ranging from credit reports to homebuying and more. For Wisconsin schools, credit unions provide free teaching materials on personal finance that supports state teaching standards, interactive learning about money matters as part of “reality” simulations, sponsorship of teachers’ personal finance education at summer workshops, and investments in 85 in-school credit union branches, run by students, that don’t generate profits but teach young people the value of saving. Students have saved more than $1.6 million in their school branch accounts.

• Community support and outreach. Credit unions save Wisconsin tax filers $16 million annually by offering free tax preparation and filing assistance – a fast, no-cost alternative to the costly “refund anticipation loans” offered by paid tax preparation firms. Credit unions also partner with counties to offer low-interest loans that help single parents obtain affordable used cars or childcare so they can access or maintain employment. They also encourage members to use EdVest – the state’s 529 college savings plan – to save for future educational needs. Credit unions also and join hundreds of agencies, businesses and nonprofits each October in teaching Wisconsin citizens money matters as part of Money Smart Week Wisconsin.

“Wisconsin credit unions won their third Governor’s Financial Literacy Award in four years in 2009,” Thompson added. “We’re proud that credit unions not only remain financially strong, but that the work they are doing is so well respected and valued by the people of our state.”

View the entire 2009 Annual Report for Wisconsin Credit Unions at www.theleague.coop/annualreport or contact The League for a hard copy.