LAS VEGAS – Considering the theme for NACUSO's 20th AnnualConference was “Dare to Dream,” it wasn't surprising that the themefor many speakers' presentations had to do with finding creativeways to deal with changes and challenges. Dennis Dollar also tookup that theme, telling attendees at his presentation on “ThePolitical, Regulatory and Legislative Environment for Credit Unionsand CUSOs,” that “the marketplace is changing, and we have toenable credit unions to be able to adjust to that marketplace.Credit unions can't fear the marketplace, they have to embrace it.The idea of `vision' has replaced the `if it ain't broke, don't fixit' mentality. If we took the `if it ain't broke, don't fix it' asour mantra, we would still be typing letters on IBM Selectric IIItypewriters and putting an actual carbon copy in the files.”Speaking from the “unique” perspective as a former credit union CEO– Gulf Coast Community FCU- and regulator – former NCUA chairman –the principal partner of Dollar Associates LLC, a credit unionindustry consulting company emphasized that, “Credit unions aremore respected on the national scene, are safer and sounder, andhave greater regulatory empowerment at the state and federallevels, but credit unions and CUSOs have to be innovators, not getcomfortable with being successful and be willing to adjust tochanges in the marketplace to remain competitive.” Dollar madeseveral predictions on what the financial services market of thefuture that credit unions will operate in will look like. Among hispredictions: * interest rate environment: rates will rise but stayat relatively low rates historically with a 200 basis point swingbut remaining around 3-4%; pressure will begin to mount on fixedrate mortgages; yields will increase only slightly on interest rateearnings; management of earnings will remain a challenge. * marginswill remain tight: loan diversification will remain key; autolending will remain tough with low interest dealer financing;member business lending will be considered by more credit unions;creative mortgage products will become necessary; fee income willbecome crucial to credit unions. “Fee income is not inconsistentwith credit union philosophy,” said Dollar commenting on hisprevious point. “Greater fairness and enhanced marketplacesensitivity is a credit union member service opportunity.” Dollaralso forecast there will be a “tremendous proliferation” ofproducts and services available to credit unions from new vendorswho are entering the credit union market. In addition, as creditunions seek out innovative ways to offer products and services tomembers, there will be an increase in the number of CUSOs as creditunions see the value of working together. Dollar's futurepredictions were not all upbeat. Despite the greater flexibilitybeing allowed for well-managed credit unions at both the state andfederal levels, for example, credit unions should expect to seemore laws, regulations and compliance costs associated with areassuch as privacy, the Patriot Act, Bank Secrecy Act, Identity Theft,and documentation of service to low-income people in CUs' field ofmembership. Just how big does Dollar see the credit union industryin his glass ball? The demise of the small credit union is vastlyoverstated, he said citing the following statistics – there were9,208 CUs at the end of December 2004 of which 61% have $20 millionor less in assets. In contrast, there were only 3,517 CUs with over$20 million in assets. “The definition of `small' may change in thefuture and go up,” says Dollar. He predicts by the year 2010 therewill be approximately 6,000 CUs in the U.S. but stresses that, “Thesuccess of the credit union movement is not the number of creditunions, but the number of members they serve. It is the size of acredit union's vision, not the size of its assets, that willdetermine its long term future.” Still, Dollar cited what hereferred to as the “anemic membership growth in credit unions” –1.48% in 2004. Despite more credit unions being approved forcommunity charters and more consumers having access to credit unionmembership, why aren't consumers joining CUs? Are they aware of thevalue of membership? Do credit unions suffer from the “Field ofDreams” syndrome where they think just because they have acommunity FOM that consumers will line up in droves to join a CU?“Credit unions still have to market and outreach to bring in newmembers,” Dollar stresses, adding the “greatest extension of creditunion services may be among its existing membership.” As for fieldof membership trends, Dollar says that despite what some expertshave said that there is no longer any such thing as field ofmembership because of the advent of large community charters, “Aslong as field of membership is recognized by the law, credit unionsneed to maximize the amount of options available to them withinthat law. “There are no regulatory processes in the U.S. that canprotect credit unions from the market. There are only regulatorsthat determine how a credit unions can serve that market,” saysDollar. Any talk of credit unions' future has to include discussionof the banker attacks, and on that point Dollar reassured attendeesthat, “the banking industry's `Operation Credit Union' is alive andwell.” He also reassured attendees that the battle between thefor-profit and not-for-profit industries is not limited to creditunions and banks. He cited for example, Keebler and Girl Scoutcookies, Home Depot and the local Farmers Co-Op, Time/Newsweek andNational Geographic. “There will always be friction between thosewho choose each structure, but it's the structure that makes thedifference in the tax treatment, and the structure is a decision abusiness has a choice to make at the time of incorporation,” saysDollar. “If the tax fight is lost, it will be the end of creditunions as we know them,” he says, adding “we would see a wholesaleconversion of credit unions to mutual savings banks.” But creditunions can't just make their argument based on their structure,says Dollar, “this is a political battle.” The credit union storyshould be based on their structure and backed up with safe andsound performance, strong member service, documented service to theunderserved, community success stories, member satisfaction, andgrassroots political support. “Everything credit unions are able todo on Capitol Hill today is based on being able to prove you'resafe and sound financial institutions,” said Dollar. -

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