With rising interest rates and other economic headwinds, how are credit unions adapting? And how can they find the risks and opportunities in their portfolio?

Mike Schenk, Deputy Chief Advocacy Officer for Policy Analysis and Chief Economist at the Credit Union National Association (CUNA), said credit unions need to use their “superpower” to succeed during economic uncertainty. It’s what sets them apart from traditional financial institutions.

“Continue to have those conversations. Continue to serve people. You've got to be a little bit more careful. There's no question about that. But turning a lot of people away because you want to protect capital is not what we’re all about,” he said during the April 13 episode of our Market Pulse podcast.

“I've lived through probably three or four big crises, starting with the savings and loan crisis in the 1980’s. And at the tail end of every one of those crises, we see strong membership growth at credit unions because members appreciate the way they're treated in these environments,” said Schenk.

For the full interview, listen to our podcast. This episode is a continuation of our discussion during the March 16 Market Pulse webinar, and Schenk answers questions submitted by our webinar audience.

Or keep reading for excerpts from the interview.

Question: Our webinar audience said their top priority is to better understand the risks and opportunities in their current portfolio. What advice do you have for them? And where should credit unions focus their resources at this time?

Finding Opportunity

Schenk: Let me start by saying credit unions are unique in the marketplace. They’re not-for-profit, member-owned and democratically controlled. And that's important, especially during economic dislocations and challenges in the for-profit sector. So, it’s just in our DNA to interact with people and to try to get them through difficulties sooner than they otherwise would through those thoughtful conversations and through the extension of help. So that's kind of the cool superpower that credit unions have. 

And so, I would say just do what you've done in the past during difficult times. We were chartered during the Great Depression to help people get through. And so we use capital during tough times by embracing people who are turned away elsewhere. That's the big opportunity.

Finding Risk

In terms of the challenges, I would say what’s happening with credit cards is the canary in the coal mine. And that's part of the reason why we purchased the Equifax database. We've purchased a 10% sample. We have 28 billion records, and I think 2 billion new records every year. This allows us to see behaviors in the marketplace. 

The first place I look is the credit card portfolio. I'm looking for the volume and how are those portfolios growing, and whether the growth is completely new growth. For example, have balances gone from zero to some other significant number or are they revolvers who are adding to that pile of debt they already have? How are the transactors behaving? Are they still transactors or are they becoming revolvers? And I want to look at that across the credit spectrum. I'm especially concerned with those on the bottom rungs of the credit spectrum.

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For more on this interview, listen to the full episode How Credit Unions can Succeed in an Uncertain Economy. The Market Pulse podcast is available wherever you listen to podcasts. This episode was a continuation of our conversation of the February Market Pulse webinar. You can access it on-demand and sign up for our next webinar.