Balancing CU Needs With Member Needs Is Essential in Rebuilding Process
"Fees and reduction of noninterest expenses will rebuild capital. Credit unions should not increase fees-let the Wall Street banks do that. Consider the economic circumstances of members and consider reducing fees for essential services such as overdrafts and ATMs," said Mike Moebs, economist/CEO of Moebs Services in Chicago.
Moebs said credit unions should not raise essential fees right now and suggested that they even consider lowering fees to help members.
"Members are hurting as much as most credit unions, and lower fees will help members and win new share draft members from the Wall Street banks who are raising fees."
Moebs said he assisted one credit union in moving its overdraft fee from $24 to $12, and the credit union is going to make more revenue. In another case, he said a credit union lowered its overdraft fee from $25 to $19 and is paying overdrawn checks for members who have FICO scores from 450 to 500. That credit union, Moebs said, will increase revenue after losses.
If a credit union chooses to keep fee prices the same right now, Moebs said that they should build incentives into their fee price for members to pay less in fees and help the credit union reduce expenses.
Strunk & Associates, a financial advisory service company based in Houston, recognized the need for credit unions to build revenue and optimize noninterest income programs.
New customers that sign contracts between now and Aug. 31 for Strunk & Associates overdraft privilege service will not have to pay monthly service charges until 2010 in order to allow the customer to gain the most income out of the service.
"Among our many clients, their message is clear: noninterest income has provided much needed revenue support for nearly two decades," said Marc Paine, executive vice president of Strunk & Associates. "As a company, we realize that revenue from programs such as our overdraft privilege is important, especially under today's economic climate."
Right now, Paine said they are not at all recommending that credit unions raise overdraft or NSF fees and they're not telling them to lower fees either.
"We're telling them to use good judgment and make wise decisions on returning fees back," Paine said.
Having a well-managed and properly disclosed discretionary overdraft service is extremely important right now, according to Paine, which is why the company decided to eliminate charges for its overdraft privilege service until 2010.
"We're hoping that credit unions can use that to recapitalize and do whatever they need to do to rebuild."