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REAL Solutions, a signature program of the National Credit Union Foundation is being expanded to Illinois during 2008. "REAL" stands for "Relevant, Effective, Asset-building, Loyalty-producing" Solutions.
The program is designed to help credit unions offer dozens of services that have proven successful in serving people of modest means, working families, and "low wealth" households. More than 260 credit unions in 14 states with 6.2 million members are already participating in the program. Success stories are coming in daily telling how credit unions have been able to help their members with products and services which exemplify the "Not for profit, not for charity, but for service" motto of credit unions.
"As a program of the National CU Foundation, REAL Solutions is designed to help credit unions effectively reach low-wealth households and create a new generation of loyal credit union members," explains NCUF Executive Director Steve Delfin. "This is important because underserved households - while at the bottom of the economic pyramid now - represent future savers, future car-buyers, future homeowners, and future generations of credit union members."
Said Dan Plauda, ICUL President/Chief Executive Officer, "The Illinois League is excited to be a partner in REAL Solutions. Through this progressive program, we look forward to making a difference in people's lives."
Research has shown the low-wealth market includes not only lower-income consumers and low-wage workers, but also consumers with moderate and middle incomes who have been unable to build significant savings or assets. In other words, low-wealth includes people who have decent incomes, but who spend it all and people of all income levels who live paycheck to paycheck. The low-wealth market is not a "politically correct" way to refer to deadbeats.
Traditionally, low-wealth households turned to "alternative financial services" (AFS) outlets to meet their basic financial needs. Traditionally, AFS has been comprised of check-cashers, payday lenders, finance companies, pawnshops, rent-to-own stores, and auto title lenders who work with this market for the purpose of generating revenue to make a profit. The AFS market is estimated to be $250 billion annually. The number of check cashing outlets grew from 6,000 in 2000 to 13,000 in 2005, while the number of payday lending outlets grew from less than 50 in 1990 to more than 26,000 today.
Large corporations are now actively trying to capture this lucrative market of low wealth households. For example, Wal-Mart has introduced Money Centers in its stores which offer services, such as check-cashing for a $3 maximum fee, money transfers, money orders, bill payment, check printing, credit cards, and investment services.
A study by MetLife shows 87% of households with incomes of less than $30,000 live paycheck to paycheck, while 65% of households with incomes between $30,000 - $49,000 are in the same boat. The distribution of wealth in the United States shows the top 1% of households control 33% of the net worth. The top 20% of households have 84% of the net worth. The bottom 80% of the country holds only 16% of the net worth.
There are five categories for the products and services: education, transaction services, savings, credit, and home ownership. Specific examples include check cashing, pre-paid stored-value cards, tax preparation services, refund anticipation loans, bill payment services, payday loans, savings vehicles, and wealth accumulation.
Credit unions that participate in the REAL Solutions program have access to:
- Proven products and services designed to meet the comprehensive needs of low-wealth families
- Business models, technology and skills from REAL Solutions program consultants
- State-level partner meetings featuring speakers who are subject experts that have created and introduced products and services for low-wealth households
- Opportunity to select the specific products and services they will offer and access implementation assistance
- Online learning center which will share best practices, a database created using tested research strategies, tools for identifying low-wealth members, and much more
The participation fees for the REAL Solutions program have been covered by the Illinois Credit Union League (ICUL) and ICU Foundation. REAL Solutions is a benefit of your ICUL membership. Each participating credit union will sign an agreement form (included as part of the application process) which indicates willingness and ability to serve the low-wealth market. At least one representative from your credit union must attend the partner meetings.
A letter introducing the program has been mailed to all credit unions. In addition, please mark your calendar to attend one of the REAL Solutions informational meetings. These meetings, to be held as part of the roll-out of this program in Illinois, will be hosted by ICUL in Springfield on March 11 and in Naperville on March 12. Watch your mail for further details about the meetings.
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