Another Revenue Stream Bites the Dust
Last week credit unions and banks failed to muster the votes to even delay the interchange fee cap regulation by a year. One could argue it was a failure of the American political structure that grants some groups or individuals inordinate amounts of power.
But the real failure was the lobbying. The retailers play in exactly the same field but apparently know the game better. Credit unions by themselves are not necessarily a force to be reckoned with–though they can grow to be–but combined with the bankers they should be virtually unstoppable.
As a consolation prize, credit unions will have the opportunity to kvetch about member business loan restraints, again. The Senate Banking Committee will be holding a hearing on Sen. Mark Udall’s legislation June 16. Current legislation is quite a bit less empowering than previous iterations but given the current economic circumstances, and more specifically Texans Credit Union’s problems as well as others, it is necessarily so. However, there are concessions in that legislation that 1) probably allowed for it even to get introduced but 2) could create problems for credit unions in the future.
Udall’s bill would increase some credit unions’ business lending capacity to 27.5% of assets, which is a sizeable chunk of change. In exchange, the legislation would impose a business lending growth rate not to exceed 30%. A credit unions’ business plan and growth rates should not be set in legislation.
And, the credit unions that meet the requirements could lose their ability to continue making new business loans if their capital ratio falls below what is defined as well-capitalized. So if a credit unions is having trouble with an entirely different part of its portfolio, it wouldn’t be able to make business loans but could still make whatever type of loan it’s in trouble with as far as the potential statute is concerned. It would make more sense to curtail business lending it that’s what was demonstrated to be the problem loan sector but it would make even more sense to leave that decision at least up to the regulator. As credit unions have found over the last decade or more, changing law can be a Sisyphean effort.
That does not mean lobbying efforts should be abandoned in the least. In fact, it means that credit unions need to participate more. Individual credit unions cannot fear angering a constituency for how they position themselves politically. If you end up regulated out of business then it doesn’t really matter. Get your members involved and get your money involved.
Political activity doesn’t need to be partisan or for or against a particular politician. Base a campaign on an issue. More credit union leaders should be contributing their own money to candidates that support issues they care about, like defeating the interchange cap. Start a political action committee if feasible, or at least support the PACs that support your causes.
Write letters to the editor and opinion pieces for local and national news outlets. Better yet, get members to write about the small business loan they were able to get from the credit union and how credit unions should be permitted to expand these programs.
Credit union executives and board members need to get involved in campaigns and join politically active organizations like a Chamber of Commerce. This valuable face time is crucial to winning battles like interchange and should be a part of their job descriptions. Resources are slim, but they’ll only be tighter if credit union representatives don’t get cranking now because the recognition and reputation credit unions need to build takes time to cultivate.
Sports coaches say, You play like you practice. If you don’t hustle all along, you won’t be properly conditioned come game time. Then maybe credit unions can crow “We Are the Champions.”
Similarly, credit unions must invest the time and money to attract younger members. At least one, Members First Credit Union in Columbus, Ohio, has found a formula that works for it. Amanda Thomas, the credit union’s marketing and business development manager, said in the last three years the credit union’s average member age has plummeted from 57 to 45.5. That is why we are recognizing her in our Trailblazers 40 Below program for innovative young executives. Read about her efforts on page 6.