New Research Substantiates The CU Difference

CUs have a strong and visible presence in economically challenged areas.

August 2, 2010
For decades, bankers have complained that credit unions don’t adequately serve consumers of modest means. But nearly all data prove otherwise. For example, Home Mortgage Disclosure Act (HMDA) data clearly and consistently show that low- and moderate-income consumers are substantially more likely to be approved (and substantially less likely to be denied) for mortgage loans at credit unions. Also, since 2003 the average credit union percentage of mortgage loan originations to low- and moderate-income consumers has exceeded the average bank percentage.

Service offerings at credit unions tend to be geared to help the underserved. Note, for example, that 75% of members have access to small-balance lifeline loans (essentially payday loan alternatives) at their credit unions. These products are generally eschewed by banks because they’re labor-intensive and much less likely to produce fat profit margins.

Pricing studies also highlight the credit union difference. The Filene Research Institute study, “What People Pay: Deposit Account Fees at Banks and Credit Unions,” reports the average annual fees consumers incur on bank checking accounts ($183) is more than twice as high as the level incurred on credit union share draft accounts ($72). And the average annual fee for low-balance checking users is nearly three times higher at banking institutions ($218) than at credit unions ($81).

Recent data reveal credit unions are more likely than banks to locate in economically disadvantaged areas. CUNA analysis used office location data obtained from the National Credit Union Administration earlier this year, along with similar office location data from the Federal Deposit Insurance Corp. CUNA used geocoding software to pinpoint and compare the exact locations of the offices of banks and credit unions.

With office locations mapped, we turned to the Treasury Department’s Community Development Financial Institutions (CDFI) Fund to identify economically challenged areas. The Treasury created the CDFI Fund to promote economic revitalization and community development through investment in, and assistance to, community development financial institutions.

The CDFI fund Web site ( includes a database of qualifying areas that helps identify geographic areas likely to be home to economically disadvantaged consumers.

The findings are striking, although not necessarily surprising:

• Nationally, 42% of credit union offices (main offices and branches) are located in CDFI-qualifying areas. Only 32% of bank offices are located in CDFI-qualifying areas.
• Credit unions’ physical presence in economically challenged areas tends to exceed banks’ presence consistently across geographic areas.

A detailed examination of metropolitan areas reveals that in 21 of the nation’s 25 largest metro areas, the percentage of credit union branches located in economically challenged areas exceeds that of banks. In four metro areas, the difference between the credit union and the bank presence is insignificant (a difference of plus or minus five percentage points).

Banks’ presence in economically challenged areas doesn’t exceed credit unions’ presence in any of the 25 largest metro areas. It’s interesting to note that 41% of Americans live in the 25 largest metro areas, according to the U.S. Census Bureau.

More banks than credit unions are located in CDFI-qualifying areas. That’s not surprising, because the nation’s 8,012 banks reported $13.1 trillion in total assets and more than 99,394 offices (main offices and branches) at year-end 2009. The nation’s 7,708 credit unions reported only $897 billion in total assets and 19,624 offices. Credit unions thus account for 6% of total depository assets and 16% of total depository offices.

Credit unions occupy a small segment of the depository market. But the closer you look at their operations, the clearer their dedication to people of modest means.

MIKE SCHENK is vice president, economics and statistics, for the Credit Union National Association. Contact him at 608-231-4228 or at