Credit Unions, Resilience, And The American Dream

On display at ACUC: Resilience in the credit union movement, among members, and at the institutions themselves.

Resilience in the credit union movement takes many forms, among members and at the institutions themselves.

I started working in credit unions in 1979 and half of them are still around, says Maurice Smith, president and CEO of Local Government Federal Credit Union($1.9B, Raleigh, NC).

We’ve seen communities devastated by the loss of jobs, families with challenges, and we’ve helped them both weather the storm, Smith, a CUNA board member, told the attendees during the Tuesday general session of America’sCredit Union Conference at Caesars Palace in Las Vegas, NV.

Tuesday was Resilience day at the ACUC and Smith used the stage to praise the industry’s performance during the Great Recession, including an example from his own credit union: a new member who called him to say thathis message in the credit union’s magazine about being able to help people get a home of their own was not realistic.

She dared us to do something about it, he says. I told her,It’s on now! And that she could expect a call from a financial wellness adviser, and they’d work together. Eleven months later I got atext from her, on Thanksgiving Day, with a picture of her, her husband, and their two adorable children on the front porch of their brand-new home.

Smith said, Resilience describes her, our credit union, your own credit union, your own career in the movement.

The determination to own a home also was the topic of a story related by Amy Nelson, president and CEO of Point West Credit Union ($103.9M, Portland, OR), at an afternoon session about the Filene Research Institute’s financial empowerment incubator.

Nelson’s credit union has an active non-citizenship lending program, including one participant who grew a $500 loan to her tamale business into her own house and two cars. That member’s payback performance is typical for Point West, whichhas had only two charge-offs in the last nine years from that member segment.

Resilience? Some of these people have three jobs and many live in multi-generational households, Nelson says. All they’re asking for is the same open door to opportunity as everyone else. We can’t be resolute enough aboutthis unbanked and underbanked population.

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The resilience of home ownership and the American Dream also came up in a morning session by Visa senior economist Jay Hawkins. He began by noting that persistent tailwinds continue to support consumer spending and thatconsumer confidence overall is at its highest level since 2001.

But, he says, a divergence in such confidence has emerged since the presidential election, with younger Americans notably less enthusiastic about their economic prospects than their elders, especially those over 55.

Job availability remains strong, however, and that should bode well for that large group of young Americans who will soon be entering their prime homebuying years, Hawkins says. The majority of millennials aren’t buying housesyet, so you can expect muted recovery in housing until millennial demand takes off in 2020 and beyond.

Then there’s another kind of resilience, the one that involves credit unions’ ability to withstand the assaults of hackers and fraudsters, phishers and skimmers making off with billions worldwide.

CUNA Mutual risk consultant Robert Jarosinski says after a bit of a lull in 2016, he expects 2017 to turn out to be a very bad year for fraud, in no small part because cyber thieves are now using the fruits of data breaches from recent years past.

In fact, things would be worse if not for widespread adoption of EMV chips, Jarosinski said in an afternoon session titled The Card Fraud Epidemic. They’ve led to a dramatic drop in card-present fraud and even have helped with card-not-presentfraud when the three-digit security code on the back of the cards is used properly by issuer and merchant.

Even with that, overall plastic card fraud is expected to keep growing, and fast. Jarosinski cited a Nilson report from October 2016 that predicted a 42% growth by 2020. Because debit fraud often costs more than credit unions make on the card accounts,credit unions will need to strike a balance between how much they can absorb in losses versus the expense of mitigation, Jarosinski says.

Meanwhile, situational awareness is a key to cybersecurity effectiveness, and can be helped along greatly by sharing information among issuers, processors, merchants, and law enforcement, says Lori Lucas, manager of IT compliance programs at PSCU.

We have a resilient cybersecurity program, Lucas said after a morning session on cybersecurity. If something happens, we notify our credit unions and the other stakeholders. It’s a shared responsibility. You have to have that resilient posture.We don’t know what’s coming.

June 27, 2017

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