It is often that when we are busy doing the good work that credit unions do, we forget to stop and take a moment to embrace it.
Let's use this moment to do a quick flyover reminder of the CU HUG.
THE CU HUG
Credit unions are financial cooperatives, meaning that they are owned and managed by its members. Every account holder has an ownership share in the credit union, allowing them to participate in the management of the credit union via elections the other actions. The cooperative business structure is a unique feature of credit unions and comes with a fantastic set of 8 cooperative principles, and just as a refresher, here they are.
Democratic Member Control
Members' Economic Participation
Autonomy and Independence
Education, Training, and Information
Cooperation Among Cooperatives
Concern for Community
Diversity, Equity and Inclusion
The principle of “concern for community” is a favorite as it exemplifies the credit union spirit of “people helping people.” Of course, the word "cooperative" is just fantastic. It means that credit unions work together to solve problems and build a better financial landscape. To put it in simpler terms, credit unions hug. Bother literally and figuratively.
This hug is expressed in credit union employees' passion for their members. They love to help them and ways that you wouldn’t expect from your financial institution. Credit union employees have been known to help change members’ flat tires in the rain, check on older members during snowstorms, and even, on rare occasions, temporarily take care of members’ pets.
The Loan Hug
During the great financial crisis, credit unions worked hard to keep members in their homes when foreclosure from other financial institutions loomed uncomfortably close.
When monthly energy prices were nearly the amount of an auto loan payment, many credit unions offered qualifying members to skip their auto loan payment to pay their energy bills to keep the lights on.
The ability to skip a loan payment is nearly a standard benefit found with most credit union credit cards and auto loans. While skipping a loan payment extends the life of the loan, the ability to have additional cash available may be a critical way for members to stay afloat. Recognizing this need and creating solutions for it is the hug that credit union offers.
While the credit union hug is lovely and genuinely does differentiate them from other financial institutions, there may be an economic benefit from these hugs, specifically in keeping members in their homes and providing methods for an increase in cash flow. If deferring an auto loan payment is considered a form of a micro-loan. Then micro-finance research performed by Harvard Professor Rohini Pande and Duke University Professor Erica Field indicates a positive economic impact when a borrower is given a chance to defer a payment. Professors Pande and Field found that offering borrowers a grace period of just two months doubled the rate the new businesses were created. The cash flow generated by the deferred payment allowed the borrower to take more significant risks that then resulted in bigger rewards. After three years, business profits were 41% higher, and household incomes increased by 19.5%.
Does this mean that credit union members who skip an auto loan payment will have a similar economic impact? The research has yet to be completed; however, an argument can be made that by allowing the member to have the freedom to have additional cash has two positive impacts on local economies. The first is it keeps the member from defaulting on other loan obligations and keeps them in a positive cash flow state. The second is it makes the member more loyal to the credit union and increases the likelihood that members will not default on the auto loan in the future. And, most importantly, credit unions are, for the most part, the only financial institution that offers this important and needed financial hug.
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We believe that data activation doesn't have to feel overwhelming or expensive to be impactful. After helping over 600 credit union leaders launch their data journeys, we have identified several consistent knowledge gaps. We have worked hard to fill these gaps with a variety of educational offerings:
There is something for everyone!