Credit unions are reaching and serving diverse members: How are they doing it and why does it matter more now than ever?

Credit unions have a long history of serving diverse and underserved communities. This goes back to their founding mission to promote thrift and provide access to credit for provident purposes, especially for people of modest means.

It is also consistent with credit unions’ “people helping people” philosophy and unique structure: member-owned, democratically controlled, and not-for profit. This ensures credit unions’ success is bound up in the success of their members and communities.

Continuing to reach and serve diverse populations matters for a variety of reasons:

1. Multicultural consumers accounted for 100% of U.S. population growth and 61% of credit union growth over the past five years, according to research by CUNA Mutual Group.

This trend will continue, according to U.S. Census population projections, making it a critical market for credit unions. To stay relevant, credit unions must reach more diverse and often underserved populations, and they must continue to improve and tailor products and services to the needs of this rapidly growing group.

2. Newly elected congressional leaders, as well as regulators, have made it clear that they care about deepening financial inclusion for diverse and underserved populations.

Late last year, Sen. Elizabeth Warren, D-Mass., introduced a broad affordable housing bill (the American Housing and Economic Mobility Act) which included language that would subject fintech mortgage originators and some credit unions to the Community Reinvestment Act (CRA). That’s just one recent example of how financial inclusion has become a priority for policymakers.

Further, NCUA's Minority Depository Institution (MDI) Preservation Program is in part designed to preserve existing MDIs and encourage the establishment of new MDIs.

How are credit unions reaching and serving diverse populations? Recently released 2017 Home Mortgage Disclosure Act (HMDA) data reveals that compared to banks, credit unions originate a higher percentage of mortgages to African-Americans (6.6% vs. 5.2%) and Hispanics (7.9% vs. 7.3%) despite field-of-membership (FOM) restrictions.

This difference may in part be because credit unions also receive a higher percentage of mortgage applications from African-Americans, Hispanic non-Whites, and other minority groups than banks—suggesting that these groups find credit unions more appealing when it comes to mortgage borrowing.

The most recent Federal Reserve Survey of Consumer Finance (SCF) provides further evidence concerning how credit unions reach and serve diverse populations.

The 2016 SCF demonstrates that credit unions serve approximately the same percentage of households of color as banks (34%). This is laudable given that, unlike banks, credit unions must comply with FOM rules.

Furthermore, the SCF shows that credit unions serve a relatively larger percentage of African-American households than banks (17.4% vs. 12.8%). But the data also reveal an opportunity for credit unions to expand in the Hispanic market where banks serve a relatively higher percentage of Hispanic households (10.5% vs. 6.8%).

The SCF data highlights that credit union members across all categories of race and ethnicity save at least one percentage point in interest rates on auto loans as compared to banks and other financial institutions. This difference is particularly pronounced for people of color.

For example, interest rates on auto loans for African-Americans are, on average, 1.7 percentage points lower at credit unions than at banks and other financial institutions, and 1.4 percentage points lower for Hispanics.

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