NCUA News Release
OFFICE  OF  THE  CHAIRMAN

Dollar Calls Financial Literacy The “Vital Link” Between Credit Union Access and Breaking “Vicious” Payday Lending Cycle

NCUA Chairman Tells NFCDCU Financial Literacy Conference That Financial Literacy Programs Are “Indispensable” For Credit Unions Serving Low-Income Areas

New York, NY (October 17, 2003) – National Credit Union Administration (NCUA) Chairman Dennis Dollar told a group of credit union and community leaders here today that financial literacy programs should a priority at all credit unions, but particularly at credit unions serving low-income communities because they “provide the vital link between access to lower-cost financial services and the breaking of the vicious payday lending cycle in many low-income neighborhoods.”

Speaking before the 2nd Annual Financial Literacy Day program sponsored by the National Federation of Community Development Credit Unions and held at the St. Mark’s Church and Federal Credit Union in Harlem, Dollar said, “Creative financial literacy programs are indispensable for credit unions seeking to make a positive long-term difference in many low-income communities.”

“Providing an 18% payday loan is an attractive option that many credit unions are offering to residents of their communities that might otherwise only have the option of a payday or pawnshop loan at 180% or more,” said Dollar. “However, the advantages must be communicated in a manner that results in a financial lifestyle change or else personal convenience more than one’s financial self-interest will prevail. Financial literacy programs can be a worthwhile public service to a community but also a valuable investment in a credit union’s membership and, equally as important for the future, a credit union’s potential members in that community.”

Dollar commended the National Federation of Community Development Credit Unions for its leadership in promoting and helping credit unions to put financial literacy programs in place. He also encouraged credit union consideration of the Money Smart financial literacy program developed by the Federal Deposit Insurance Corporation (FDIC) and endorsed by the NCUA as a part of an Access Across America partnership with other federal agencies.

“There are a number of quality financial literacy programs available in the market today,” said Dollar. “No credit union has to re-invent the wheel in order offer a financial literacy program. However, some credit unions are indeed developing their own programs and having great success. Either way, whether through a pre-packaged program or one developed specifically for an individual credit union, financial literacy should be a priority at all credit unions. I commend the Federation for their leadership in promoting financial literacy at community development credit unions and believe that the need for a commitment to financial literacy is becoming a matter of strategic emphasis for credit unions nationwide.”

Dollar said that “there is a lot of good business for credit unions in what have otherwise been underserved areas.” He cited the success of NCUA’s Access Across America initiative in extending credit union service to more underserved communities as an indication that credit unions recognize the business possibilities in low-income and underserved communities and are taking advantage of the opportunities available.

“With good risk management practices coupled with an effective financial literacy program,” said Dollar, “credit unions can make a difference for both these underserved neighborhoods and their credit union net worth. They can help break the cycle of payday borrowing for a lot of good folks who only need access to a lower cost alternative while strengthening their credit union’s financial position at the same time. Financial literacy is the vital link that ties the two together successfully.”

Dennis Dollar was appointed Chairman of the National Credit Union Administration (NCUA) by President Bush in 2001. A former two-term member of the Mississippi House of Representatives, Chairman Dollar served as President and CEO of the Gulfport VA Federal Credit Union in Gulfport, Mississippi, prior to his confirmation to the NCUA Board in 1997.

The National Credit Union Administration, governed by a three-member board appointed by the President and confirmed by the Senate, is the independent federal agency that regulates, charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the savings of more than 80 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.

-NCUA-