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CUs weigh in on FDICs unbanked study
MADISON, Wis. (12/4/09)--Several credit unions had a chance to weigh in with local media about a Federal Deposit Insurance Corp. (FDIC) report that found roughly nine million U.S. households have no checking or savings account while another 21 million use payday lenders and other nontraditional services. In Great Falls, Mont., 9.1% of households with income below $30,000 are unbanked and 25.3% are underserved., according to the FDIC survey, released Wednesday. Julie McCamley, marketing director of the Great Falls Teachers FCU, a $75 million asset credit union, said the survey should help insured financial institutions understand the demographic of the unbanked and underbanked population (Great Falls Tribune Dec. 3). "You'd be surprised, it's often times people you don't expect--single moms with good jobs that need money right away [and] that are often going to places that charge big interest rates," McCamley told the publication. "Sometimes they are people who are intimidated or have had a bad experience with a financial institution." The credit union participates in several outreach efforts to the underbanked, such as an income tax refund anticipate loan program with Rural Dynamics designed to steer people away from high-interest products. "But sometimes you think you are hitting the bull's-eye, and often we are not, so it's good to see this information and find out where the areas are that we are not reaching," she said. In San Antonio, a columnist for WOAI.com (Dec. 3) , reported on the FDIC study and included advice from the Consumer Credit Counseling (CCC) of Greater San Antonio for how to avoid high-priced check cashers. Although CCC said to check with several different banks, the columnist said: "Check with credit unions; the organization says credit unions may be even more likely to give you a second chance." A columnist in the Tampa (Fla.) Times (Dec. 2) offered Tampa-based GTE FCU as an example of how a credit union has moved to provide services in a neighborhood where banks feared to tread. "In 19 days, a new GTE FCU branch opens in the heart of Midtown, a St. Petersburg neighborhood that's been scrapping to attract basic consumer services for years," wrote columnist Robert Trigaux. He noted Sun Trust bank years ago committed to building a branch in Midtown, "but the land it bought remains vacant." "Earlier this year, the Tampa-based GTE credit union heard that St. Petersburg was looking anew for a financial institution for Midtown. GTE stepped up quickly. "What SunTrust chose not to do for years, the credit union did in months. I mention this because a new government study was released Wednesday that shows who uses and who does not use banking service," he wrote. Trigaux noted three reasons why banks won't attract the segment of the population.
* They've never been anxious to reach out to the unbanked or underbanked because banks do not consider them profitable customers. * People who do not use banks do so for a reason--living paycheck to paycheck and lacking funds to deposit into accounts. * Today's best innovations aimed at providing services to the unbanked/underbanked come not from banks but from other financial and non-financial companies.
In Oceanside, Calif., Daniel Scott, president of Faith Based FCU, which works with low-income residents, said people in lower income brackets tend to be poorly educated and have little idea how to manage their money. Noting that rich people don't pay fees while poor people do, Scott told North County Times (Dec. 3): "They pay fees based on not knowing how to control their resources to avoid fees." The fees lead to a mistrust of the banking system, said Scott, and they end up using payday loans or other high-cost methods to take out loans. "It doesn’t really help them to build wealth. It basically marginalizes their economic capacity," he said, calling it a Band-Aid, not a longer-term strategy.
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