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Wisconsin CU League News Release - 10/13/09
Slow economic recovery ahead, but credit unions’ traits will help financial sectorTheir 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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