Financial Wellness Pitfalls And Possibilities

An Urban Institute presentation offers plenty for credit unions to move on.

 
 

What offers savings-building solutions, credit-building programs, small-dollar loans without churned payday lending products, and financial counseling using a third-party online service called HelloWallet?

One answer is KeyBank. At $134 billion as of fourth quarter 2016, it’s No. 19 on the FDIC’s list of big banks. It touts its status as the only top-25 bank with eight “excellent” ratings from the CRA since the act became law in 1977.

Bruce Murphy launched the bank’s KeyBank Plus products and services for low- to moderate-income people in 2004. He’s the Cleveland, OH-based bank’s head of corporate responsibility and was one of the presenters recently at an Urban Institute session titled Coping With Financial Volatility: Strategies Families Use.

Murphy says his group’s offerings drive more new clients to his bank than any other line of products and services.

“We’re committed to serving this marketplace in a very responsible fashion," he says. "We have in place a platform our competitors don’t have.” 

Except credit unions, which were mentioned only once during the session. But much of what the panelists presented as solutions have been in the credit union quiver since the beginning, at least in principle.

The Downs And Ups

The other panelists were from the Urban Institute, which hosted the session at its Washington, DC, headquarters, and from the Center for Financial Services Innovation. Also presenting was Lisa Servon, University of Pennsylvania professor and author of the provocative The Unbanking of America: How the New Middle Class Survives.

The presenters have done extensive research and work together and have resumes that include sitting on the FDIC board, testifying on the Hill, and publishing multiple articles and books.

Their panel discussion yielded both pain points for the financial eco-system we all live in and possibilities for the credit union movement:

Here are some major downers:

  • Real wages have been declining since the 1970s. The job market has become one with large numbers of people working in jobs with volatile incomes: Their spikes and dips in income don’t match their spikes and dips in expenses.
  • Markers of financial difficulties — such as missing mortgage and utility payments or suffering eviction — are pretty evenly spread across the country, including urban and rural, high-income areas and low.
  • Financial stress is causing mental health and emotional problems for many people. Research is being done to quantify that, the presenters said.
  • Financial insecurity is a problem for entire communities, because of the strain on schools, agencies, tax collections, etc. The list is lengthy and encompassing. This is not a single-issue problem.
  • Public and private safety nets — insurance, welfare, pensions, and other self-funded and employee-matched retirement plans — have shrunk in recent years, at the same time as incomes have become more uncertain.
  • Financial insecurity is helping to drive disconnection from institutions that used to engender trust and serve as tendons that has until now kept the body politic together. As one speaker said: “It’s hard to feel loyal to the hospital that just made you go broke.” One result of this disaffection: the kind of angry populism we’re seeing now.

Here are some points of credit union opportunity:

  • As little as $250 to $750 in savings makes a family significantly less likely to experience a financial shock and to handle one that occurs. Here’s a Money article on that Urban Institute research. And here’s a credit union that’s created a lending/savings program to address that reality — Freedom First in Virginia.
  • Check cashers and payday lenders are so popular because they’re perceived as transparent about fees, far more affordable than banks, and make services available that many people otherwise couldn’t get at all. Here’s an interesting NPR piece with more on that from professor Servon. Payday lending alternatives also are nothing new in our space. Check out “A Team Solution to the Payday Lending Problem” at Redstone FCU in Alabama and this tech-savvy solution: “Mobile App Drives Short-Term Lending At WSECU”.
  • The people who frequent these establishments typically see them as relationship lenders, part of the community, and can easily be people with steady incomes in the $50,000 to $75,000 range and even higher and own their homes. Here’s a look at how Kane County Teachers Credit Union is stepping up to work with its SEGs in that regard.
  • Financial counseling works. Measurable positive effects have been observed from even one face-to-face session. The CFPB and Urban Institute offer their data driven findings in a report titled: Financial Coaching: A Strategy To Improve Financial Well-Being.

Along with Servon’s book, recommended reading for more on this new reality could include The Financial Diaries: How American Families Cope in a World of Uncertainty. CFSI senior vice president Rachel Schneider, one of the panelists at the Urban Institute session, is a co-author of this upcoming work – it’s publishing on April 11 – and covers the financial decision-making of 235 diverse families from across the country over the course of a year.

And back home at the credit union, there’s no time like the present to year to “Turn Financial Wellness Talk into Action in 2017.”

 
 

March 16, 2017


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