REMARKS
OF
YOLANDA TOWNSEND WHEAT

NCUA BOARD MEMBER

TO

CREDIT UNION NATIONAL ASSOCIATION’S
GOVERNMENTAL AFFAIRS CONFERENCE

Washington, DC February 29, 2000

"The Future Is Now"

I want to commend the leadership of CUNA for their involvement in all of the critical issues facing the credit union movement. Through your efforts, more Americans learn about credit unions and join them. Through your support and stewardship, your credit union members have improved their visibility, their services and their membership rosters. The NCUA applauds your efforts to make a real difference in the lives of millions of American consumers, and I personally commend you for the outstanding job that you do.

This year's conference theme "THE FUTURE IS NOW" is right on target. Some of us looked up recently and were shocked to see that the future is here. Thirty years ago, American writer Alvin Toffler defined "future shock" as "a dizzying disorientation brought on by the premature arrival of the future."

Well, I agree with CUNA that THE FUTURE IS NOW, but I do not believe that its arrival is premature. It's right on time, and it belongs, as the saying goes, to people who see possibilities before they become obvious. The future will be brightest for those who see it coming and prepare for it. We all anticipated the advent of the Year 2000, and we prepared for it. With the technology revolution upon us and advances in other fields occurring at dizzying speeds, it seems reasonable to prepare for both the immediate as well as the long term future of the credit union movement.

To prepare for the long term future would almost seem to require a crystal ball. With all the technological advances currently available, is it hard to imagine a future where we are all connected by "want it?-got it - everything" dot.com OR a society relatively cash free and plastic dependent? I can just imagine my grandchildren asking me what it was like to shop standing IN line, and not ON line. In a world where we become increasingly dependent on computers at work and at home, I am willing to bet that the ability to literally "reach out and touch someone" will be a highly prized commodity. We don't need a crystal ball to see that credit unions will always have a corner on the market when it comes to personal service. Capitalizing on the "personal touch" and maintaining their niche in the dot/com world will be the ultimate challenge in preparing for the future. This conference provides you with an opportunity to discuss the future of credit unions as we enter the new millennium.

In the short term, the future looks bright. We are entering an advanced technological era on a very prosperous and positive note. The United States is riding high on the wave of the longest economic expansion in our history. Over the course of the last decade, nearly 20 million new jobs have been created. More Americans own homes than ever before. Unemployment is lower than it has been in 30 years. Poverty rates are down and the crime rate is lower. We are experiencing the first back to back budget surpluses in 42 years -- and all this was accomplished while reducing the size of the federal government to its lowest point in 37 years.

We are entering the new millennium with something else going for us -- something we take so much for granted that most Americans never stop to think about it. That something is CONFIDENCE -- confidence and trust in the strength, safety and soundness of our system of financial services. Public confidence in the country's financial system is quite literally priceless. It was painstakingly earned and must be fiercely guarded.

But a shadow on this otherwise triumphant entry into the new millennium is that many Americans -- too many-- are still not part of this bright picture. Our challenge as a nation and within the credit union movement will be to bring more and more Americans into the picture, and to create opportunities where none previously existed. Credit unions have their part to play in this. Credit unions face the formidable task of extending credit union services to as many eligible consumers as possible.

This is no easy task. In the Year 2000, millions of Americans still have literally NO access to financial services of any kind. Recent figures indicate that twelve million U. S. households do not use either banks or credit unions -- a very troubling fact and one we should all be concerned about. Even more troubling is the fact that being "unbanked" varies significantly across racial and ethnic categories. Nearly one in three African-American and one in four Latino households are unaffiliated with any depository institution. There is also a deep divide along educational lines. Only 20% of all heads of household with less than a high school education use a bank or credit union, regardless of race or ethnicity.

The unfortunate result has been an upsurge in predatory lending practices in this country, practices that often lure in the vulnerable, the naive and the desperate and traps them in a spiral of debt from which it is almost impossible to escape. During the last decade -- a decade of tremendous growth, prosperity and opportunity for a large percentage of this country's population -- payday lenders created a new industry. Over 8,000 payday lenders operate in 30 states and the District of Columbia. According to the National Check Cashers Association of Hackensack, New Jersey, close to 100 new outlets open across the country --EVERY MONTH. Yet, payday lenders point out that they are merely filling a need that is not being met.

As long as there are no other options, those who can least afford it will be driven to these kinds of lenders. We at the NCUA have taken a stand against predatory lending. We have pledged to work with our fellow state regulators and other agencies to combat these practices.

We can all agree that these practices are abhorrent, but, again, we come back to the retort of these lenders that they are merely filling a void --a void in accessible, affordable financial services. To truly fill this void, financial service providers have to make a commitment to bring their products, their services and their branches directly to the communities that need them most. Unlike some other financial service providers, credit unions have traditionally viewed low-income and underserved communities as pools of potential, not pockets of poverty. Credit unions know the difference between a financial service which offers reasonably priced loan products and a lending practice designed to gain control of the assets of vulnerable borrowers.

At last year's GAC conference, I highlighted a new provision of the Credit Union Membership Access Act which specifically allows any federal credit union to add an underserved community to its field of membership regardless of its type of charter or location. Over the last year alone many credit unions have taken advantage of the new provisions. More than one million potential members were added to the fields of membership of credit unions who expanded into low-income and underserved areas. That's a start, but you can and I know that you will do more.

To support credit union efforts to expand services, we at the NCUA are in the process of developing a database which will help identify every low-income and financially underserved community in the country. Our examiners will then deliver this information directly to all federal credit unions eligible to expand into these areas. In other words, we will identify the communities in need. It will then be up to the credit unions to serve those communities.

Like you, we are taking concrete steps at the NCUA to help make credit union services available to those who need them most, so that credit unions can continue to serve as real alternatives to payday lenders. Many of you have shared stories with me about helping your members out of financial distress. Too many of your members are being lured into a financial death spiral they cannot pull out of and never should have entered.

I hear your stories and I believe that credit union officials and credit union members are asking us to work together with them and legislators, regulators, other financial institutions and community groups to protect consumers and put an end to these unscrupulous practices.

Many credit union members have recounted their feeling of being robbed not, in their words, "by men with masks, but by businessmen with briefcases." Even though credit unions have traditionally been part of the solution to predatory lending and NOT part of the problem, the fact is that abusive lending practices have the potential to affect the public's perception of all lenders. Credit unions have earned the public's trust. And we must guard that trust with all of our collective power. It is not enough to assign blame to the predators and think we have done enough. It is not enough to say "Let the buyer beware" and walk away.

The NCUA has taken up the banner. NASCUS has taken up the banner. I was glad to learn that the CUNA Board has taken up the banner on behalf of credit unions and their members. Because credit unions are THE movement of PEOPLE HELPING PEOPLE. Consumers being preyed upon need our help BEFORE they lose their life savings, BEFORE they lose their homes, BEFORE they lose their self-respect and BEFORE they lose the American dream. To step in after the fact is too late. That's what PEOPLE HELPING PEOPLE is all about.

Credit unions have done so much and yet there is so much more to do. Credit unions are willing and want to do their part to end these practices, but as you know, the credit union share of the financial services "pie" is very small -- less than 6 percent of all depository institution assets are in credit unions. So what can we and the other 94 percent of the financial services industry do together to win this fight?

Regulators can close in on predatory and abusive lenders by taking a look at our own rules and regulations to remove any inadvertent loopholes, strengthen our laws and enforcement remedies. We can require fair disclosure so that better informed consumers will make better informed credit decisions. Credit unions can add their voices to the considerable momentum on Capitol Hill and in state legislatures where legislation has been introduced to curtail these abusive practices. Credit unions can expand their debt and credit counseling programs and their first time homebuyer programs and better market the products and services which are alternatives to payday lenders.

We can win this fight! We can win this fight by working together to meet these challenges and to build a secure future for all Americans.

In the grandest American tradition of hard work, trust and "Undaunted Courage," the explorers Lewis and Clark set out in the early 1800s on what many thought to be an impossible expedition. They went from the east coast to the west coast and back again to chart a trail across this great continent. It took them about three and one half years, but they made it.

Earlier this month the Space Shuttle Endeavor mapped every nook and cranny of three- fourths of this planet in less than 10 days. Who's to say what's possible?

Ladies and gentlemen, the FUTURE IS NOW.

In his final speech, President Franklin Roosevelt said that "the only limit to our realization of tomorrow will be our doubts of today." He urged his fellow Americans to move forward with strength and courage, exactly as the credit union community must do today.

You've been serving the people of this country and serving them well for nearly a century now. And by looking ahead -- reaching out and embracing the future, I have no doubt that credit unions will continue to serve the American people in exemplary fashion for many, many years to come.

It's our future. THE FUTURE IS NOW. Let's make the most of it!

Ladies and Gentlemen - THE BEST IS YET TO COME!

# # #

For further information contact:
Rosemary George
(703) 518-6309
rgeorge@ncua.gov