By Michael Fryzel
The National Credit Union Administration (NCUA) through its Community Development Revolving Loan Fund (CDRLF) recently awarded $1.5 million in grants to 105 low income credit unions (LICU). The grants are designed to help LICU expand outreach to underserved communities and improve digital services and security. Without such grant money, the LICU may not be able to increase services to low income communities and bolster cybersecurity defenses.
Of the 105 grants, 22 valued at $1 million were for underserved outreach; 83 grants valued just over $500,000 were for digital services and cybersecurity.
The CDRLF program has helped hundreds of credit unions to improve their capabilities and member services. If those funds were not available, they may not have been able to do so. The grant program serves a significant purpose. It must continue and be expanded.
Having the resources to improve technology, expand services to the underserved, maintain the quality of products offered to members and survive the increased competition in the financial world is essential. Money however, is only one of the elements needed to compete and retain your identity and independence as a credit union.
More than 70 credit unions have been approved to merge in the first two quarters of 2021. Some of the mergers involve large credit unions consolidating into even larger ones, creating a super-size financial institution. Others merged because they can no longer maintain themselves financially. Some cited the lack of sponsor support for their merger while still others pointed to declining field of membership, lack of growth or inability to obtain officials.
‘Forever Gone’
Credit unions across the country, many of which have been in business for decades, no longer will be identified by the unique names that proudly stated who they were and who they served. Community, faith based and employer sponsored credit unions are forever gone.
Some will argue that the merger was for the best because the members will continue to have access to financial services. In addition, the services may actually be improved and expanded. But the sad realization is that more than 70 credit unions that began when a small group of people got together and created their own financial institution no longer exist. The dream, the hard work, the achievements of all those who worked to nurture and grow their credit are now just memories.
Even with the availability of CDRLF funds, mergers will continue at an alarming pace unless the entire credit union industry commits itself to do something about it. There must be a declaration that a combined effort will be made to ensure the survival and growth of small- and medium-sized credit unions.
Plan is Needed
Federal and state regulators, state and national trade associations and large credit unions must resolve to create a plan that will stop the diminishing number of smaller credit unions.
The CDRLF is a good foundation on which to build a program but it will require additional grants from credit unions that can afford to help. Regulators must use the data and exam information available to them to identify those credit unions that need to tap into the resources of the program. Trade associations need to review and redefine the assistance they are able to offer to their member credit unions. The industry must take a hard look at what is needed to keep existing credit unions viable and in business.
Boots on the Ground
The most significant effort, however, must be the commitment by all parties to provide on-site expertise to those credit unions in need of it. Boots on the ground must be employed. Mentors, advisors, consultants, whatever name is suitable will be a key factor in achieving success.
Individuals who are experts in certain facets of financial services must be put on loan to these credit unions, at no cost to them, for periods of six to twelve months. These knowledgeable people can provide insight and instruction in areas of member growth, marketing, technology and succession planning.
It is a major commitment that must be made. It will require cooperation, funding and vision. It will not be easy but the results will surely be positive.
After all, isn’t it all about people helping people?
Michael Fryzel is the former chairman of NCUA and NCUA board member who is now in private practice in Chicago. Mr. Fryzel can be reached at meflaw@aol.com.