How Are You Preparing For Loss Of Interchange Revenue
COLUMBUS, Ohio-With the outcome of the Durbin Amendment still up in the air, Credit Union Journal asked CEOs attending the Ohio Credit Union League's inVest48 annual meeting what steps they're taking to adjust to the potential revenue reduction.
Kelly Schermerhorn, CEO, CES CU, Mount Vernon, Ohio
The loss of over 70% of our debit income currently represents more than 100% of our net income post-NCUSIF assessment, so we can't wait for the outcome of the interchange debate. We have to be ready. We are certainly looking at implementing fees we've not had. For instance, we have not charged a loan application fee and everyone in our market charges a loan app fee except us. When people call in about a loan they never ask what's the application fee, they want to know the rate. If for some reason we get this two-year extension on Durbin we can use the application fee money to make our rates more competitive. We will look at checking fees, too.
Art Kremer, CEO, Sharefax CU, Cincinnati
It's a little bit of wait-and-see, but we are making plans. But I'll tell you that we will try not to impact free checking, that has been our niche. So we are looking at cost reductions and other revenue-generating areas. We do charge fees on the credit card side, as well as NSF fees, and we could adjust those. We have not been allowing members to advance at the point of sale (with an overdraft) and go negative. We have never taken the strategy and we might start doing that, and disclose the change to members. That would generate fees.
Linda Capella Credit Union One, North Jackson, Ohio
"We are a small credit union with $10 million in assets, and we are waiting to see if the carve-out will work. I am not sure how Visa and MasterCard, and the merchants will implement that-how they will tell if we are under $10 billion. But we will wait to see what happens. What other choice do I have? If the carve-out does not work, then we will consider adjustments at that time.
Jim Updike, CEO, Honda FCU, Torrance, Calif. (which has a branch in Ohio)
I think we could take the hit if the Durbin Amendment goes through as it is now. It would hurt us, but not as much as other financials, in my opinion. We already have some pretty robust income outside of debit interchange because of the relationship we have with the Honda companies We have a number of credit card programs with Honda that are very profitable. We may look at other books of business, for example we are considering SBA lending to Honda motorcycle dealers. That is a good book of business and could make up the difference.
Brent Binkley, CEO, School Employees Loraine County CU, Elyria, Ohio
We are taking a wait-and-see approach and will react as soon as we see something definite about the interchange rules. We are hoping the Durbin Amendment will be delayed and hopefully not passed. If it does pass as is, then we'd have to find other sources of income, including increasing fees, such as overdraft. I don't think we would eliminate free checking, as that is a meaty product that encourages members to make us their primary financial institution.