MADISON, Wis.-The increasing number of fees banks are building into their pricing will affect credit unions' thinking on the same issue, according to one person.
"We think that as a result of all the changes taking place in the market and from a regulatory standpoint, that we may now be in a place where the credit union system has to become adept at charging fees for products and services that generate [an actual service] for the member," said John Lass, SVP of strategy and business development at CUNA Mutual Group. "People pay for things all the time ... and to the extent that the value that they generate is positive, we don't have a problem with [fees]."
Speaking as part of CUNA Mutual's second annual Online Discovery Conference, Lass said the key question is whether or not a CU's fee strategy is set for long-term success. "Interest rates are as low today as we've seen in a couple of generations," he said, adding, "We can't go lower than zero, and it seems likely that at some point we're going to see an increase in interest rates. At that point, some of these fees that you've generated [such as mortgage re-fi fees] will probably go away."
Lass noted that despite the Durbin amendment's two-tiered system, the new rules will likely impact CUs of all sizes-and not just those above $10-billion in assets-as a result of market forces. Citing data that says Durbin will decrease ROA by about 11 basis points, Lass said "this is not something that is insurmountable, but ... it is significant." As such, all FIs need to shift fee strategies to recover those losses.
Additionally, Lass cited the possibility that the Consumer Financial Protection Bureau (CFPB) may examine capping NSF fees. While the majority of NSF income comes from a tiny portion of most CUs' member bases, a cap "is something that we should be nimble and alert to." He recommended credit unions do contingency planning to understand exactly how they would be affected if such a cap were imposed. "You don't want to be caught flat-footed and unaware of the changes that may be coming."
Lass said that it's important to keep in mind the "value equation" (value = benefits minus price) when considering fees, but "It's very important to keep in mind that two different members may have very different values for the same service."
