SAN DIEGO — For chief operating officers at credit unions, there are so many issues and potential issues to be dealt with that picking which is the most "urgent" may be impossible.
Sue Douglas, SVP and chief operating officer for State Employees CU, Raleigh, N.C., along with several attendees of the recent CUNA Operations, Sales and Service Council Conference here, assembled a list of 10 top-drawer topics for credit unions attempting to thrive in today's market:
- Interchange income.
- Overdraft/courtesy pay
- Increased regulation
- Additional NCUSIF assessments
- Changes to the corporate CU network
- The Community Reinvestment Act
- Mergers and acquisitions
- The potential for a double-dip recession
- Proposals in Washington for a "super regulator" for financial institutions and a new Consumer Fraud Protection Agency.
"I couldn't come up with just one important topic for credit unions because there are so many," quipped Douglas, who facilitated a discussion session where CU representatives were invited to participate in debating a number of "whwt if" scenarios.Douglas opened with interchange because, she explained, and was a few minutes late to the session because she was on the telephone with Visa regarding a lawsuit. "There is a possibility of a loss of interchange fee income depending on how the suit goes," she said. "Interchange fee income could be taken away, at least as it is known today."
Suggested remedies to make up for the potential loss of interchange income included increased efficiency in operations, improved productivity of branches, use of in-branch kiosks to allow members to accomplish more self-service tasks, not automatically replacing each and every departing employee, and centralization of non-traditional services such as investments or insurance.
"A kiosk is not going to be cheap to start with, but then the credit union does not have to keep paying for it," noted Douglas, a member of the CUNA OpSS Council executive committee. "Sometimes you have to spend some money to save some money, and if income is going down, credit unions have to reduce expenses."
One suggestion Douglas offered to the group: review all vendor contracts carefully, as CUs might be paying someone else to do something they could do for themselves.
'Tell the CEO'
An attendee from one credit union suggested a strategy she said has helped improve efficiencies in many operational areas: the ability of employees to make suggestions directly to top management via the CU's intranet. The program, known as "Tell the CEO," allows staffers to win a cash prize of $50 if their idea is implemented.
"We really like it," she said, asking not to be identified. "We feel in many cases if the person had gone to a manager, they might have been told 'Oh, we've never done it that way.' Some of the ideas we've received we were already working on, and some are not useful, but there are some real nuggets."
Because of the drain recent NCUSIF assessments have made on credit unions' financial statements-the most recent assessment was announced by NCUA just three days before the conference began-Douglas said everyone who works at CUs "must be aware" of issues such as alternative capital and risk-based capital.
As for the problems among corporate credit unions, Douglas said she does not believe corporates are going away, "but there won't be as many as we have today," she predicted.
One attendee expressed a concern about the specter of the Community Reinvestment Act being foisted upon credit unions. The group's conclusion: CUs must be able to prove they do not participate in redlining.
The Obama administration's proposed Consumer Fraud Protection Agency prompted a stern warning from Douglas: "The CFPA could be another regulator, in addition to what we already have, and possibly another assessment to pay for another regulator."
Douglas asked the group if their respective CUs have considered a merger, and most indicated they have. "If you lost income and can't make it up by cutting expenses, your credit union is a candidate for merger," she said.
Speaking not just about mergers but all topics discussed, Douglas told the group their CUs cannot wait for "the if" to happen. "Before you think about it, you have to keep up with what is going on because a lot of issues affect your credit union. Read and be informed."
