At a recent credit union meeting when I raised the subject ofthe NCUA's recent proposal to permit credit unions to voluntarily prepay their assessments, earning zero percentinterest with the agency, CEO heads were shaking. All in disbeliefand all in response to the question, “Will your credit union beparticipating?”

According to the NCUA, it doesn't have the authority to makethem participate in a program like this. Yet the industry wasasking to see something like the FDIC's plan. But Sheila Bair canmake her banks pay, and they have.

Unlike credit unions, banks have access to the capital marketsto fall back on to help them keep the lights on. Yet credit unions'income is under attack at every turn, just like the banks.

The deadline is winding down on credit unions and otherdebit-issuing financial institutions to push through the delay ofimplementation of the debit interchange cap. Though it applies onlyto the largest financial institutions–ensnaring a few creditunions–the marketplace will ultimately determine which institutionsare going to be giving up all but 12 cents per transaction.

In response, some credit unions have decided to charge fees forcertain services that otherwise might have been offered for free,in the name of consumer protection of course.

The Bureau of Consumer Financial Protection, also born out ofthe Dodd-Frank Act, like any other government bureaucracy will onlyadd to the compliance burden and expenses. Though it is encouragingthe bureau has shared streamlined and combined TILA and RESPA paperwork, adding another rulemakingbody logically can't make things easier.

The NCUA has already created an office of 13 staffers dedicatedto consumer financial protection in response; the agency's budgetapproved in 2009 said it expects the office will be fully staffedat 30. By 2010, the authorized staffing level was 37, though only30 were included in the NCUA budget. Additionally, Dodd-Frank also required an Officeof Minority and Women Inclusion with staffing of six at the NCUA.Each item, plus the National Treasury Employees Union contract,pushes the NCUA budget, which is entirely funded by credit unions,higher and higher.

At the same time, credit unions are having a tough time lendingand margins are compressing even further. Credit unions'loan-to-share ratio fell below 70% in the first quarter of thisyear, according to CUNA, for the first time since 1994. ARMs,fixed-rate mortgages and used autos are leading the way in creditunion lending.

And straw polls I've done show that most credit unions areselling off the fixed-rate mortgages to help avoid the interestrate risk, which the NCUA has been strongly encouraging.

But what will ultimately be the role of FannieMae and Freddie Mac in the housing market and how will that impactyour credit union's ability to underwrite mortgages? Will a creditunion solution arise? There are rumblings of this as the market hasstabilized.

Used autos have been a popular option for cash-strapped, nervousconsumers, but how will Japan's earthquake affect that? Toyotas andHondas have been known for their long life spans, but if the partsthat previously were coming out of Japan are unavailable, what willthat do to used auto lending? Should credit unions be making nicewith the domestic dealerships?

Then there's the competition. Target has introduced apass-through rewards debit card (see article, page 16). Rewardswill push them top of wallet and what little interchange income youwere getting into the retailer's pocket. Ironic that retailers areusually at fault in card data security breaches, yet they could betaking the interchange income that credit unions and otherfinancial institutions are supposed to be collecting to pay forexpenses related to breaches.

The American Banker also recently reported a linkupbetween Microsoft's Xbox and PayPal. We recently reported (in theMay 4 issue) on some overseas banks integrating Xbox's Kinect into their branch functionality.

With the national average credit union ROA at 51 basis points asof year-end 2010, what's a credit union to do? Credit unions don'tneed to turn a huge profit, but they at least need to keep thelights on. But if credit unions don't generate earnings, they can'tgrow and offer the services their members expect from financialinstitutions. Then they could become extinct by irrelevancy.