As Prepared for Delivery on March 21, 2022
Good afternoon. It’s my pleasure to join you today. Remarkably, this is the first time I’ve spoken to a gathering of the Education Credit Union Council (ECUC), which I find a little surprising given that I’m serving my second stint on the NCUA Board. But I do know a great many of you from meeting and working together over the years, so it still feels like a homecoming.
It’s especially an honor to be invited to join you this year as you commemorate ECUC’s 50th anniversary. That longevity is a testament to the community leaders we see in education credit unions.
Since we’re in Texas, I’ll borrow a quote from Sam Houston, one of the Lone Star State’s Founding Fathers, who noted that “a leader is someone who helps improve the lives of other people or improve the system they live under.” That’s as simple and concise a definition of leadership as we could imagine and an accurate description of the work you are doing on behalf of your members and communities every day.
When I speak of those values — service, shared purpose, community leadership — I do not use those terms lightly. Those values are at the very heart of what we are seeking to accomplish when we talk about extending financial inclusion more broadly through our society. And it’s financial inclusion that I would like to take as my theme today, as we’re coming up on National Financial Capability Month in April.
The Case for Financial Inclusion
You all may be aware that, over the last several years, and particularly when I served as NCUA chairman from 2019 to 2021, financial inclusion has been one of the top priorities on my agenda because I recognize how important it is to create an economy that works for all Americans. I’ve called financial inclusion the “civil rights challenge of our generation,” and I’ve urged financial industry leaders to rise to that challenge.
Now that’s a pretty lofty-sounding goal, but what does it mean in practice? Specifically, when I talk about financial inclusion, I’m urging financial services industry leaders to do what we can do, within the realm of our influence, to increase financial access for vulnerable and under-served communities. And in practical terms, that means:
- Reducing the number of unbanked Americans who lack access to safe, affordable, reliable financial services; and
- Encouraging greater financial literacy and financial capability to help empower Americans to weather the challenges they will meet in life by making better decisions about their money and their credit.
On the first of these goals, reducing the unbanked proportion of our population, we can point to real progress. In February, the Federal Deposit Insurance Corporation (FDIC) published updated results from its survey of household finances (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) and these results serve as our most authoritative measure of the unbanked. I was pleased to see we’ve made steady progress at getting more Americans into the traditional financial system. The most recent FDIC survey results show that just 5.4 percent of American households lacked access to a checking or savings account at a bank or credit union as of 2019. It’s the lowest proportion of unbanked households since the FDIC began tracking these numbers in 2009.
We should bear in mind that’s based on survey results from 2019. So, there may have been some slippage in the last two years as more American households confronted serious financial stress with job losses and higher expenses in the wake of the COVID-19 pandemic. Still, the fundamental trend-line is reassuring. This is an important goal because more American households with banking and credit union accounts mean more Americans with a tie to the financial mainstream. It means access to affordable credit, federally insured accounts, a chance to build wealth, all of which are essential to financial inclusion.
So, we should be very pleased with these results, but never complacent, because we all know we continue to face severe economic challenges that are having, and will continue to have, an impact on the most vulnerable Americans. While we’ve seen an impressive financial recovery from where we were two years ago when the pandemic struck, we’re still not out of the woods. While we’ve seen strong gains in the jobs market, that’s just getting us back to the pre-pandemic level. Moreover, we should be deeply concerned by the impact that the pandemic and lockdown orders had on small businesses, many of which closed their doors and have not come back.
I’m also keeping a close eye, as I know you are as well, on the historically high inflation we’ve experienced in recent months, with the Consumer Price Index up 7.9 percent in February, the highest in 40 years. Certainly, we’re all concerned about interest rate risk and the pressure inflation will have on credit union operations. And I know you all are witnessing the pain and anxiety that your members are feeling as prices for gas, food, and other needs are squeezing their household budgets. We’re all aware of the Federal Reserve’s household survey that revealed that some 40 percent of Americans (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) would have trouble coming up with $400 to meet an emergency expense, so there’s no question that rising inflation will only put more pressure on a lot of American households. We should not downplay or ignore that reality.
We add to that the ongoing supply chain crisis, the growing national debt, and the geopolitical crisis in Ukraine, and it’s very likely these challenges will grow only more acute. It’s not my intention to dwell on the negative news. But if credit unions are to be resilient in the face of these challenges, we need to have a clear and frank accounting of the challenges we face.
The good news is that as we confront those challenges, credit unions continue to be in a relatively strong position. In the fourth quarter of 2021, federally insured credit unions continued to show strong performance. Eighty-four percent of credit unions had positive net income in 2021, and we’re seeing solid growth in loan activity while delinquency rates remain manageable. Since the start of the pandemic, credit unions have added more than 7 million members. Those results, especially considering the economic challenges we’ve seen in the last two years, are a testament to the fact that the credit union model continues to be a strong option for consumers seeking quality financial services and affordable, reliable credit.
The question is, how do we maintain that strong performance and institutional stability in a very uncertain, precarious, and highly competitive environment? As a regulator, people ask me all the time: what should our institutions be doing in this environment? And I urge them, I urge all of you, to focus on the fundamentals.
So, first of all that means prudent management to ensure the safety and soundness of your institutions, as well as the safety and soundness of the larger credit union system.
Second, it means continuing to provide high-quality service to your members and your communities.
And third, it means growing the family of credit union members through an ongoing commitment to financial inclusion.
As I noted before, I’ve been beating the drum on this issue for some time now. As I’ve thought more deeply about the issue and talked with industry leaders and experts, I’ve tried to crystallize my thoughts into a broader financial inclusion agenda that includes commitments to more credit union charters, the careful adoption of innovative financial technologies, and sensible regulatory reforms to boost competition and to ensure access in under-served areas.
An Agenda for Financial Literacy and Capability
My vision for financial inclusion also encompasses an expanded commitment to building financial capability through financial literacy training and support. With that in mind, I’d like to talk about what I see as the four pillars we need to support a long-term effort to build true, broad-based financial literacy and capability.
First, government leadership is important to set long-term goals and provide overall direction. For example, I’m always pleased to see news that another state has added financial literacy education modules to public school curriculums, which helps to give young people a critical head start on thinking more clearly about their financial goals. In fact, Florida just passed legislation to require high school students to take a personal finance course to graduate (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) , which Governor Ron DeSantis will soon sign into law. I’d be very pleased to see other states follow their lead.
Likewise, financial regulatory agencies at both the federal and state levels can make a difference by establishing industry guidelines and encouraging institutions to promote financial literacy to their customers and communities, as we’ve done at the NCUA. That was certainly what I had in mind when I established the ACCESS program at NCUA under my chairmanship. That stands for “Advancing Communities through Credit, Education, Stability and Support,” and this program is intended to give over-arching direction to all of the agency’s various financial inclusion efforts.
The NCUA is also working to distribute grant funding to smaller credit unions under the Community Development Revolving Loan Fund to assist with training, mentoring, and outreach to under-served communities. Over the last several years, this funding has made a big difference, so I’m pleased that we’re able to continue making that investment.
But as valuable as that government role is, we also have to recognize that the real work on financial inclusion will need to be done in local communities. That’s where you come in.
The financial services industry can also make a substantial contribution to financial literacy through its own marketing and education efforts. Credit unions and many local banks already do a great job on this front. When I look at what education credit unions are doing in addition to your financial services mission — grants to teachers and local schools, student scholarships, tax preparation support, student apprenticeships, the list goes on — I’m convinced that you all are an excellent model. If people ask me what financial institutions should be doing to improve financial literacy and financial inclusion, I’ll happily tell them to look at the work that education credit unions are doing in their communities every day.
The third pillar of our financial literacy and inclusion agenda needs to be technological. Some of you may have heard me speak in other venues over the last couple of years where I’ve talked about the promise of fintech as a way to boost the efficiency and performance of credit union operations. But I also want fintech to be a way to reach members and potential members in under-served communities. So, when we look at fintech software, platforms and other tools, we should look at those tools not only as ways to enhance operations, but also as ways to leverage those tools to empower your members with greater knowledge.
Finally, I encourage credit unions to forge partnerships with community-based organizations like churches, health care providers, and other service providers. Sharing information and developing constructive partnerships with these entities can help these organizations to serve as a force multiplier. It’s an outstanding way to reach under-served communities, often through institutions that are already trusted service providers, and a step that too often goes overlooked.
One point I always try to impress upon financial industry leaders is that a commitment to financial literacy isn’t just a charitable endeavor or a form of community service. It’s good business because an effective financial literacy program can create the clients, customers, and members of the future.
You’ve all seen this happen in your own institutions: the family that’s facing a health emergency, or a job loss, or they’re burdened by punishing debt, you help them to consolidate the loan and reduce their spending. Before long, they’re getting on their feet, able to create an emergency fund and save for the future, and they come back to you when they’re ready to buy a house, open an IRA, or refinance their mortgage. It takes an ability to see further than the next quarter to do right by your members for the long-term, and it’s something credit unions, with their member orientation, are able to do very effectively.
We often talk about inequality and about the inequities that continue to plague our society. These are things we are all deeply and justifiably concerned about and should be committed to addressing. That has certainly been what has motivated me throughout my career in financial services, which started more than three decades ago working on community investment issues for a leading financial institution in my native North Carolina.
But while we focus on combating inequality and inequity, we should also recognize that we have, in fact, made significant progress. A recent report from the Government Accountability Office (GAO) (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) on access to banking services included a remarkable statistic related to African-American households. According to the GAO, in 1989, only 56 percent of African American households had access to a checking or savings account, compared to 89 percent of White Households. By 2019, 86 percent of Black households had a checking or savings account. Think about that: from just over half to almost 90 percent in three decades.
That’s a stunning testament to the power of financial inclusion, and something we should be proud of and seek to extend more broadly. And to be clear, although that particular example centers on African Americans, I’m not talking strictly about race and ethnicity here. I want us to think and talk about financial inclusion much more broadly, whether it’s racial minority groups, the disabled, the needs of tribal communities, vulnerable seniors, people in underserved rural areas. If we’re going to talk about inclusion, let’s think much more broadly than skin color. But that statistical comparison from the GAO report certainly shows that this is an achievable goal — we know how to do this. I look forward to working with education credit unions and the wider financial services industry to make true financial inclusion a reality.
Thank you very much, and I believe we have some time for questions, both about what I’ve discussed today as well as other issues that may be on your minds.