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In 2022 the ABA Was Right. In 2023 Credit Unions Will Prove Them Wrong

By Sam Brownell - December 21, 2022

Credit unions must change the way they quantify member and community impact in order to create a more accurate measurement of success.


The American Bankers Association (ABA) was right: credit unions haven’t provided sufficient evidence to demonstrate their success in meeting the needs of their members or their communities. However, the validity of that assertion extends only so far. The ABA’s claim does not prove that credit unions aren’t meeting the needs of those they serve or that they don’t deserve their tax exemption. On the contrary, the ABA has only proven that, to date, credit unions have failed to adequately measure the impact they have on their members and communities. This industry-wide challenge leaves credit unions unequipped to defend themselves in 2022. 2023 will be a different story.

The American Banker Association’s Memo to Lawmakers

It's undeniable that credit unions provide extraordinary benefits to main street Americans and that the loss of their tax-exempt status would ultimately damage the U.S. economy. In spite of this value, the ABA employed an advocacy strategy in 2022 that encouraged more stringent oversight of credit unions. They asked lawmakers to magnify the way credit unions both quantify their success and fulfill their purpose. Why? The ABA wagered correctly that most credit unions wouldn’t have the resources to capture their member or community impact, and in that way, made its intentions clear.

This occurred in the days leading up to the 2022 Credit Union National Association’s (CUNA) Governmental Affairs Conference (GAC), held in Washington, D.C. The ABA published a memo titled, “Six Questions to Ask Credit Unions during this Week’s fly-in” in which the association encouraged Congress to apply pressure of their credit union counterparts. Here is the memo’s first question:

How do you track and quantify your success in meeting the needs of your community? How can the public get access to this information?

Context: Credit unions were created to serve consumers of “small means”—they receive a tax advantage on this basis—yet there is limited evidence they actually do this, and instead are targeting more affluent customers. Credit unions are exempt from the Community Reinvestment Act, which results in a major regulatory blind spot. CRA reporting metrics demonstrate that banks are serving underserved communities.

Follow up question: To ensure the substantial tax and regulatory preferences awarded to the credit union industry are appropriately targeted, would you support service metrics to low-income communities? If not, why not?

How Credit Unions Can Improve Their Advocacy

Credit unions are under siege, and if they wish to best advocate for their continued interests, change must occur. That change is centered around responding to lawmakers by answering the following questions:

  • How much more money do your lawmakers’ constituents have in their pockets by virtue of your credit union’s mere existence?
  • How well are you serving your lawmakers’ constituents, especially those residing in rural or economically distressed areas? How well are you serving their constituents at every income and credit tier?
  • Do you serve a disproportionately high percentage of racially and/or ethnically diverse populations? How does diversity fortify your community?
  • How many jobs has your credit union created or sustained in the lawmakers’ district(s)?
  • How much has your credit union contributed to your community’s GDP?

Every credit union should track their responses to these questions on a regular basis. Doing so not only advocates for the value credit unions deliver to their members but further provides a more accurate measurement of success in the credit union market. By better understanding their member and community impact, credit unions can facilitate the development initiatives, DEI efforts, and board reporting that matter most. It’s time credit unions take a holistic approach to measuring their success, and that ends exactly where it began—with the benefit to the member.

 


Learn how CUCollaborate’s data consortium and analytics platform, AnalyzeCU, redefines the way credit unions measure success by quantifying and benchmarking member and community impact by attending our January 18th webinar or scheduling a demo with our sales team.

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