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American Consumer Reality Check How Credit Unions Can Help Office of Small Credit Union Initiatives Martha Ninichuk, Deputy Director.

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Presentation on theme: "American Consumer Reality Check How Credit Unions Can Help Office of Small Credit Union Initiatives Martha Ninichuk, Deputy Director."— Presentation transcript:

1 American Consumer Reality Check How Credit Unions Can Help Office of Small Credit Union Initiatives Martha Ninichuk, Deputy Director

2 Credit Unions Can Help

3 Factor In…Recent Economy Credit Unions Can Help Consumers Experiencing Hard Times Public who says they are in the lower or lower-middle classes rose from 25% in 2008 to 40% today. *Jan 2014 survey of 1,504 adults 30 million workers ages of 18 and 64 live on $18,800 per year.

4 Young Adults Credit Unions Can Help Fully 37% of 18- to 29-year-olds are unemployed or out of the workforce, the highest share among this age group in more than three decades 27% of adults, ages 40-59, are the primary financial supporters of a grown child 3 in 10 young adults have lived at home during the economic recovery

5 Increased Underserved Market Credit Unions Can Help United States underbanked financial services are a $78 billion marketplace that encompasses close to two dozen products and services provided to over 68 million consumers. CFSI 2011 Underbanked Report Banked and Unbanked 17 million adults live in unbanked households 51 million adults live in underbanked households

6 Use of Alternative Financial Services Credit Unions Can Help One-quarter of households have used at least one AFS product in the last year 1 in 10 households have used two or more types of AFS products In all, 12 percent of households used AFS products in the last 30 days

7 What are Alternative Financial Services? Credit Unions Can Help Financial services offered outside of the traditional banking system Two general categories: 1.Transactional - Check Cashing, Money Orders, and Bill Payment 2.Credit – Payday Loans, Rapid Anticipation Loans (RAL), Rent to Own, Buy Here Pay Here, Pawn Lending, Auto Title Lending

8 Why Alternative Financial Services? Credit Unions Can Help Transactions are done all at once Costs are transparent and easily understood Know what they will end up with ($)

9 Why Alternative Financial Services? Credit Unions Can Help Find mainstream financial services difficult to manage  No margin of error  NSF Fee more costly than check casher cost  Cannot qualify for credit Poor Money Management Skills Overdraft fees were too high Too convenient to let the financial institution cover my NSFs Paid hundreds of dollars in fees

10 AFS Users Need… Credit Unions Can Help CostLiquidityTransparencyPredictability

11 Credit Unions Can Help Unlimited transactions and free money orders for $5.00 a month.

12 Credit Unions Can Help How Credit Unions Can Assist and Compete

13 Create an Environment Credit Unions Can Help Instill confidence by offering guidance Financial coaches, financial education Teach responsible money management Keep members best interests at heart Look at your fee structure, can you make it easier to understand? How about products? AFS users have to be convinced joining your credit union is in their best interest.

14 Fight the Inconvenience Reason Credit Unions Can Help Inconvenience is the most cited reason for use of non bank check cash providers Mobile Banking Highest usage among: Minorities Younger generations Persons with low income levels 96 percent of the world is connected via cellphone 64% of the unbanked own cell phones

15 Underbanked Use of Cell Phones Credit Unions Can Help 29% used mobile payments in the past 12 months 62% of those who used mobile payments to pay bills = ACCESS

16 Financial Services - Cell Phones Credit Unions Can Help Consumers and Mobile Financial Services Report Board of Governors, Federal Reserve System, March 2012

17 Why Mobile? Credit Unions Can Help

18 Why is Cell Phone Use Attractive Credit Unions Can Help Reduced Transaction costs Saves Time-which they don’t have Easy to understand Greater accessibility to financial products and services OSCUI is holding a Mobile Services Webinar July 9, 2014

19 Transaction Services Credit Unions Can Help ATM Debit Card Prepaid Cards Check Cashing Money Orders Bill Payment eBanking Low barriers with easy access to deposits

20 Credit Unions Can Help Credit

21 Credit Unions Can Help 780 Credit Score 690 Credit Score 20% of today’s population 40% of consumers, difficult to get credit under any terms

22 Lower Interest Rate for Timelines Credit Unions Can Help LIFT Initial interest rate based on credit score On time payments for 12 months secures a reduction in the interest rate for the next year

23 LIFT Credit Unions Can Help Credit Union sets: Annual rate reduction percentage Floor rate on loan Rate change frequency Maximum number of times the rate is allowed to reduce Number of late payments allowed before disqualification Grace period on payments Maximum rate reduction

24 Lift Credit Unions Can Help Automatic notification tool

25 Benefits Credit Unions Can Help Member Tangible rewards for positive payment behaviors No action required for rate reduction- automatic Build up credit score while reducing debt Credit Union Reduced collection efforts and cost Encourages those members routinely late to pay on time Increased member loyalty and referrals

26 Loan Products Credit Unions Can Help Small balance loans Payday Alternative Loans Savings secured VISAs Credit Rebuilder Loans National Credit Union Foundation REAL Solutions

27 Savings Products Credit Unions Can Help Small Saver Products Low barriers to open Incentive to a savings goal Penalty for early withdraw No or Low monthly maintenance fee

28 Savings Products Credit Unions Can Help Reverse Tiered Savings Inverse interest rate structure Higher interest for lower deposit balance accounts Encourages persons of modest means to start saving Usually packaged with direct deposit and checking account National Credit Union Foundation REAL Solutions Savings Products for Low Wealth Households

29 Savings Products Credit Unions Can Help Wealth Builder (Atlanta FCU) $25 opening/ $25 Mo. Direct Deposits thereafter No withdraws allowed until $1000 reached Thereafter, withdraws limited to 2 free a month If monthly deposit is not made for two months, account closed and transferred to a regular savings account National Credit Union Foundation REAL Solutions Savings Products for Low Wealth Households

30 Millennials Credit Unions Can Help Family Ties: 50% said they talked to their parents on a daily basis 74% reported getting financial help from their parents in the last year 64% reported getting help from their parents with running errands, housework, or home repairs PEW Research

31 Parental Expectations Credit Unions Can Help Financial Independence In 1993, 80% of parents said that children should achieve financial independence by age 22 Now 31% say this milestone should come at 25 or later This factor alone could reinforce the boomerang trend for a decade

32 Parent Feedback Credit Unions Can Help Guilt and stress with children moving back home Unprepared to help children find their way into their own space Discussing moving out and paying rent were very uncomfortable conversations

33 Relaunch Credit Unions Can Help Two accounts are opened: 1.Simulating household expenses (rent, utilities, insurance, etc.) 2.Savings ( Deposit amount is agreed upon ) Credit Union Provides: Online reward modules-budgeting, paying off student debt, financial management Once completed a bonus deposit is made to the account

34 Negative to Positive Credit Unions Can Help Parent and grown child are on the same team The credit union is the neutral, trusted resource Provides support and cheering on Diffuses uncomfortable situation WWW.FILENE.ORG

35 Assist Members in Building Their Credit Credit Unions Can Help Risk based pricing Report to Credit Bureaus has a partnership with Experian

36 Effective Outreach Credit Unions Can Help Community outreach collaborations – School districts, volunteer income tax assistance (VITA) sites, community groups, nonprofits, government agencies, other organizations Multi Lingual Staff Marketing in target group’s language Understand target group concerns It takes time and effort

37 Credit Unions Can Help LID vs. Non-LID by Asset Size, 2013Q1 LID Non-LID Asset Size<$50M$50M-<$500M$500M+<$50M$50M-<$500M$500M+ Count14154365931001379364 Median Asset Size (million)$7.82$108.50$879.93$10.86$119.86$1,000.53 CAPITAL ADEQUACY Net Worth/Total Assets11.7310.4210.1212.2710.4010.10 ASSET QUALITY Delinquent Loans / Total Loans 31.671.041.061.331.030.97 * Net Charge-Offs / Average Loans0.640.490.640.460.540.66 EARNINGS * Return On Average Assets0.210.610.990.100.531.01 * Yield on Average Loans6.555.645.575.965.264.96 * Operating Exp./ Avg. Assets3.993.813.453.403.502.76 Operating Exp./Gross Income82.5373.9264.0084.0074.8958.67 ASSET / LIABILITY MANAGEMENT Total Loans / Total Shares55.7364.9469.1152.0462.1968.37 PRODUCTIVITY Borrowers / Members39.8544.8849.3539.4146.7054.42 OTHER RATIOS (FPR) * Net Worth Growth-5.877.0086.06-12.28-8.8210.38 * Market (Share) Growth4.3719.6482.05-0.31-0.9515.45 * Loan Growth-16.203.3380.32-18.56-15.532.09 * Asset Growth3.1118.3582.03-1.81-2.1213.73 * Investment Growth26.3346.9188.2215.2219.6733.10 * Membership Growth-9.298.4058.60-14.96-9.646.43

38 Build a Business Case Credit Unions Can Help State your business goal Provide a budget - project costs, ongoing maintenance expenses and estimated returns Provide scenarios - best vs worse case Consider the Culture-internal and external Don’t ignore Non Financial Impact– go beyond what the numbers show; strategic impact is important too Policies, procedures and staff training

39 How to find us: Credit Unions Can Help

40 OSCUI Credit Unions Can Help Grants and Loans for Low Income Designated Credit Unions Consulting Assistance for credit unions under $50M in Assets Free Training Partnerships and Outreach

41 Stay Informed Credit Unions Can Help

42 FOCUS Sign Up Introduction to OSCUI 42

43 NCUA OSCUI Contact Page Feel free to contact our office with questions: Consulting Grants & Loans Partnerships & Outreach Training Credit Unions Can Help

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