Credit unions use every tool at their disposal to meet the needs of members—including those facing financial challenges. As an integral part of the communities they serve, credit unions succeed because they know what their members need to thrive and work together with them to provide it.
This is a different approach than for-profit banks. Too often, banks leave many people without options when it comes to homeownership, car loans, credit cards, and other financial needs, especially those with lower credit scores.
Credit unions collaborate with members to find out their financial needs, looking not only at credit scores but also the person seeking the loan, and coming up with a financial product that meets the member’s needs while balancing the risk tolerances and underwriting requirements of the credit union.
The CFPB’s latest proposal to remove medical debt information from most credit reports would upend this approach and prevent lenders from getting the full financial picture about borrowers to make decisions. Policies that directly contribute to incomplete reports will ultimately result in less access to credit for the very people the bureau is tasked with protecting.
The data shows the credit union difference has a very real impact. A deep subprime credit union borrower taking out a six-year, $40,000 auto loan would save $11,000 over the life of the loan compared to a bank (and $12,000 compared to an auto finance company). Borrowers across the entire credit spectrum save thousands when using a credit union versus banks or auto finance companies, but higher savings are especially notable the lower the credit score of the borrower.
Having access to the necessary information makes it easier for credit unions to properly price these loans, work together with a member, and provide a solution.
The CFPB’s proposal would muddy the waters by reducing lender confidence and impacting pricing decisions, ultimately leading to less loan availability as many community financial institutions will be unable to handle the increased risk.
This wouldn’t impact just one product. If finalized, this rule would have a seismic negative impact on borrowers looking to buy a home, start a small business, or pay for higher education.
Incomplete credit histories are an obstacle to safe, sound lending, and the CFPB’s proposal would increase that obstacle exponentially.
Credit unions, time and time again, produce the kinds of outcomes the CFPB wants to see for consumers, but regulations that continually tie their hands stand in the way of this progress.
There is so much the CFPB can do to help fully unleash the credit union difference instead of continuing its regulatory onslaught. The data is clear that expanded access to credit unions leads to better financial outcomes.
Credit unions deserve the freedom to keep serving the underserved, to expand their role as the original consumer protectors.
