Taxes, Board Pay and Interchange Are Focus for Three Global CU Leaders
LAS VEGAS -- Australian credit unions pay both taxes and volunteers. However, like in the U.S., the loss of interchange income is a sore subject.
Louise Petschler, chief executive officer of Abacus-Australian Mutuals, the country's national credit union trade organization, shared unique aspects of her country's system during a general session. She was joined on a panel by CUNA Chief Economist Bill Hampel and Herve Guider, general manager of the European Association of Cooperative Banks who hails from Belgium.
Australia's credit union volunteers are paid because "they take on very serious obligations, and we expect a lot from them," Petschler said, adding the posts can be as time consuming as a full-time job. Boards down under are required to complete a skills test, and if they fail, a director is appointed from outside the membership to provide the missing expertise.
Hampel said a few state systems allow board compensation, but the U.S. tradition favors unpaid volunteers. He questioned if Australia's strategy of bringing in expert directors from outside the membership would work in the U.S., saying adding an additional expertise requirement to volunteers could upset the relationship they maintain with credit union management. Reports from management may lose trust and weight with volunteers, he said.
Petschler countered that because credit unions don't have the additional pressure from revenue-hungry shareholders to perform, they could tend to settle for a one-way flow of information from management.
"I think it's a good thing to require boards to provide that sort of independence, because they're taking people's money," she said. "It all comes back to good governance."
Herve also challenged the idea of directors from outside credit union membership, saying volunteers should first be members. European credit union volunteers are not paid, but Herve said that could become an issue in the future.
Both Petschler and Guider said credit unions in their systems are regulated and taxed just like banks, unlike in the U.S., where Hampel said tax-free status consistently rates as the top legislative concern in CUNA membership surveys.
Taxes "had a big impact on profitability initially" when enacted in the early 1990s, Petschler said, but now the expense is managed as a part of regular operations.
Petschler said interchange reform occurred in Australia three years ago. When the Australia Central Bank took control of payment system, the debit interchange rate was about 95 basis points per transaction. Now, it's dropped to anywhere from 4 to 15. All told, Australian credit unions have lost $22 million due to lost interchange revenue, but gained $15 million back in decreased interchange costs.
Like in the U.S., interchange reform was pitched as pro-consumer, but Petschler said Australians now pay higher fees, and some retailers no longer accept some cards.
Petschler drew laughs with another pointed comment, when asked why credit unions don't have higher market share if they offer the best rates and service. "This may be a Vegas observation, but some people are just idiots," she said with a laugh. "You can offer them the best deal possible, and they just won't take it."