Business - Business News

POSTED: Sunday, Oct. 12, 2008

As economy swoons, more people are joining credit unions

With all of the troubles taking place in the financial industry these days, one sector that appears to have avoided the mess of subprime and other shaky loans is credit unions — and consumers are noticing.

Among Washington state’s 129 nonprofit credit unions, 62,782 people opened new accounts between December 2007 and June 2008, according to the National Credit Union Administration — a 167 percent jump compared to the same period last year.

Membership also is increasing at some local credit unions. Between June 2007 and June 2008, Whatcom Educational Credit Union increased its membership by 8.6 percent, to 54,604. Last month, WECU landed 790 new members — a record month for the organization. Bellingham-based Industrial Credit Union has seen its membership rise by more than 3,000 since June 2005 and recently opened a new branch in Barkley Village.

“Credit unions offer things that are attractive to consumers right now — we keep the money invested locally; as a cooperative our goal is to provide services to members while not making a profit; we’re very conservative in what we do with (the money),” said Kim Sutton, vice president of member services for ICU. “We haven't been a part of the current problems, and members are comforted by that.”

Credit unions currently hold a small portion of the nation's assets, about 8 percent, compared to 92 percent by banks, according to the Washington Credit Union League, a state trade association.

The 8 percent is still a significant amount of money, however, totaling $757 billion. Credit Unions have also benefited from changes around eight years ago that have allowed more people to join. Memberships vary for each credit union, but most in Whatcom County extend memberships to all local residents.

While local credit unions are looking smart now for not loosening their standards on real estate loans — ICU demands a 20 percent down payment, something they have been doing since the 1980s, according to Sutton — it was tempting to follow the lead of banks a few years ago and offer riskier loans. Wayne Langei, WECU's CEO, said it was tough passing up on the opportunity a few years ago when the market was booming.

“One of the hardest things for me was when a member asked 'why won't you do this for me?' when such-and-such bank would,” Langei said. “We did receive criticism for it, and now I'm glad we just took the criticism.”

STILL SOME CHALLENGES

While many credit unions statewide are seeing memberships rise, it is still a challenging time. While credit unions such as WECU haven’t changed their loan qualifications, they are turning down more loan applications than ever. This is because as the economy slows, more applicants are in worse credit shape and are unable to meet the standards.

“We do have money to lend, but so many are no long able to qualify,” Langei said. “I think now is a time to conserve assets. It may be a difficult time ahead with this economy.”

Increasingly, people also have been missing payments on loans, said Jeff Dykstra, vice president and chief lending officer at WECU. A member may have an auto loan at WECU and a riskier home loan at another financial institution. If forced to choose between making a home or a car payment, people will pay the mortgage first, Dykstra said.

As other financial institutions are adjusting to the current economic climate, so are credit unions. Congress recently passed legislation that raised the deposit insurance at credit unions to $250,000.

While the current economic woes weigh heavily, Sutton is focusing on something she believes is important — with Monday, Oct. 13, the start of International Credit Union week, she’s getting ready for the annual community food drive.

“The biggest thing right now is the concern about the economy, so participating in this food drive is our way of addressing a need in our community,” Sutton said. “Investing and contributing to our community is a guiding principle for credit unions.”