American Consumer Reality Check How Credit Unions Can Help

1. Office of Small Credit Union Initiatives Martha Ninichuk, Deputy Director American Consumer Reality CheckHow Credit Unions Can Help

2. Credit Unions Can Help

3. Factor In…Recent Economy Consumers Experiencing Hard Times Public who says they are in the lower or lower-middle classes rose from 25% in 2008 to 40% today. *Jan 2014 survey of 1,504 adults • 30 million workers ages of 18 and 64 live on $18,800 per year. Credit Unions Can Help

4. Young Adults • Fully 37% of 18- to 29-year-olds are unemployed or out of the workforce, the highest share among this age group in more than three decades • 27% of adults, ages 40-59, are the primary financial supporters of a grown child • 3 in 10 young adults have lived at home during the economic recovery Credit Unions Can Help

5. Increased Underserved Market • Banked and Unbanked • 17 million adults live in unbanked households • 51 million adults live in underbanked households United States underbanked financial services are a $78 billion marketplace that encompasses close to two dozen products and services provided to over 68 million consumers. www.fdic.gov/householdsurvey CFSI 2011 Underbanked Report Credit Unions Can Help

6. Use of Alternative Financial Services • One-quarter of households have used at least one AFS product in the last year • 1 in 10 households have used two or more types of AFS products • In all, 12 percent of households used AFS products in the last 30 days Credit Unions Can Help

7. What are Alternative Financial Services? Financial services offered outside of the traditional banking system Two general categories: • Transactional - Check Cashing, Money Orders, and Bill Payment • Credit – Payday Loans, Rapid Anticipation Loans (RAL), Rent to Own, Buy Here Pay Here, Pawn Lending, Auto Title Lending Credit Unions Can Help

8. Why Alternative Financial Services? • Transactions are done all at once • Costs are transparent and easily understood • Know what they will end up with ($) Credit Unions Can Help

9. Why Alternative Financial Services? • Poor Money Management Skills • Overdraft fees were too high • Too convenient to let the financial institution cover my NSFs • Paid hundreds of dollars in fees Find mainstream financial services difficult to manage • No margin of error • NSF Fee more costly than check casher cost • Cannot qualify for credit Credit Unions Can Help

10. AFS Users Need… Credit Unions Can Help

11. Unlimited transactions and free money orders for $5.00 a month. Credit Unions Can Help

12. How Credit Unions Can Assist and Compete Credit Unions Can Help

13. Create an Environment Instill confidence by offering guidance • Financial coaches, financial education • Teach responsible money management • Keep members best interests at heart • Look at your fee structure, can you make it easier to understand? • How about products? AFS users have to be convinced joining your credit union is in their best interest. Credit Unions Can Help

14. Fight the Inconvenience Reason Inconvenienceis the most cited reason for use of non bank check cash providers Mobile Banking Highest usage among: • Minorities • Younger generations • Persons with low income levels 96 percent of the world is connected via cellphone 64% of the unbanked own cell phones Credit Unions Can Help

15. Underbanked Use of Cell Phones • 29% used mobile payments in the past 12 months • 62% of those who used mobile payments to pay bills = ACCESS Credit Unions Can Help

16. Financial Services - Cell Phones Consumers and Mobile Financial Services Report Board of Governors, Federal Reserve System, March 2012 Credit Unions Can Help

17. Why Mobile? Information on credit union products and services made easily available Reach your members anytime anywhere Update members on promotions and offers Information on credit union products and services made easily available Credit Unions Can Help

18. Why is Cell Phone Use Attractive • Reduced Transaction costs • Saves Time-which they don’t have • Easy to understand • Greater accessibility to financial products and services OSCUI is holding a Mobile Services Webinar July 9, 2014 Credit Unions Can Help

19. Transaction Services ATM Debit Card Prepaid Cards Check Cashing Money Orders Bill Payment eBanking Low barriers with easy access to deposits Credit Unions Can Help

20. Credit Credit Unions Can Help

21. 780 Credit Score 690 Credit Score 40% of consumers, difficult to get credit under any terms 20% of today’s population Credit Unions Can Help

22. Lower Interest Rate for Timelines LIFT • Initial interest rate based on credit score • On time payments for 12 months secures a reduction in the interest rate for the next year www.filene.org Credit Unions Can Help

23. LIFT It’s a web based tool Credit Union sets: • Annual rate reduction percentage • Floor rate on loan • Rate change frequency • Maximum number of times the rate is allowed to reduce • Number of late payments allowed before disqualification • Grace period on payments • Maximum rate reduction Credit Unions Can Help

24. Lift • Automatic notification tool Congratulations! Updates Encouragement Credit Unions Can Help

25. Benefits Member Credit Union Reduced collection efforts and cost Encourages those members routinely late to pay on time Increased member loyalty and referrals • Tangible rewards for positive payment behaviors • No action required for rate reduction-automatic • Build up credit score while reducing debt Credit Unions Can Help

26. Loan Products Small balance loans Payday Alternative Loans Savings secured VISAs Credit Rebuilder Loans National Credit Union Foundation REAL Solutions Credit Unions Can Help

27. Savings Products Small Saver Products Low barriers to open Incentive to a savings goal Penalty for early withdraw No or Low monthly maintenance fee Credit Unions Can Help

28. Savings Products Reverse Tiered Savings • Inverse interest rate structure • Higher interest for lower deposit balance accounts • Encourages persons of modest means to start saving • Usually packaged with direct deposit and checking account National Credit Union Foundation REAL Solutions Savings Products for Low Wealth Households Credit Unions Can Help

29. Savings Products Wealth Builder (Atlanta FCU) • $25 opening/ $25 Mo. Direct Deposits thereafter • No withdraws allowed until $1000 reached • Thereafter, withdraws limited to 2 free a month • If monthly deposit is not made for two months, account closed and transferred to a regular savings account National Credit Union Foundation REAL Solutions Savings Products for Low Wealth Households Credit Unions Can Help

30. Millennials Family Ties: • 50% said they talked to their parents on a daily basis • 74% reported getting financial help from their parents in the last year • 64% reported getting help from their parents with running errands, housework, or home repairs PEW Research Credit Unions Can Help

31. Parental Expectations Financial Independence • In 1993, 80% of parents said that children should achieve financial independence by age 22 • Now 31% say this milestone should come at 25 or later • This factor alone could reinforce the boomerang trend for a decade Credit Unions Can Help

32. Parent Feedback • Guilt and stress with children moving back home • Unprepared to help children find their way into their own space • Discussing moving out and paying rent were very uncomfortable conversations Credit Unions Can Help

33. Relaunch Two accounts are opened: • Simulating household expenses (rent, utilities, insurance, etc.) • Savings (Deposit amount is agreed upon) Credit Union Provides: • Online reward modules-budgeting, paying off student debt, financial management • Once completed a bonus deposit is made to the account Credit Unions Can Help

34. Negative to Positive • Parent and grown child are on the same team • The credit union is the neutral, trusted resource • Provides support and cheering on • Diffuses uncomfortable situation WWW.FILENE.ORG Credit Unions Can Help

35. Assist Members in Building Their Credit • Risk based pricing • Report to Credit Bureaus • Williampaid.com has a partnership with Experian Credit Unions Can Help

36. Effective Outreach • Community outreach collaborations • School districts, volunteer income tax assistance (VITA) sites, community groups, nonprofits, government agencies, other organizations • Multi Lingual Staff • Marketing in target group’s language • Understand target group concerns It takes time and effort Credit Unions Can Help

37. Credit Unions Can Help

38. Build a Business Case • State your business goal • Provide a budget - project costs, ongoing maintenance expenses and estimated returns • Provide scenarios - best vs worse case • Consider the Culture-internal and external • Don’t ignore Non Financial Impact– go beyond what the numbers show; strategic impact is important too • Policies, procedures and staff training Credit Unions Can Help

39. How to find us: www.ncua.gov/oscui Credit Unions Can Help

40. OSCUI • Grants and Loans for Low Income Designated Credit Unions • Consulting Assistance for credit unions under $50M in Assets • Free Training • Partnerships and Outreach Credit Unions Can Help

41. Stay Informed Credit Unions Can Help

42. FOCUS Sign Up Introduction to OSCUI

43. NCUA OSCUI Contact Page Feel free to contact our office with questions: Consulting OSCUIConsulting@ncua.gov. Grants & Loans OSCUIApps@ncua.gov. Partnerships & Outreach Partners@ncua.gov. Training OSCUITraining@ncua.gov. Credit Unions Can Help