CUNA Chairman Juri Valdov, CEO of Northwest FCU in Herndon, Va., has grabbed the chairmanship during a difficult and challenging time for the credit union industry. From banker attacks and calls to document credit union service to those of modest means, credit unions have to be ready to defend themselves on both fronts. Credit Union Times offers this Q&A with Valdov to see what he's thinking about these hot-button issues. CU Times: What is the toughest challenge for credit unions right now? How will they confront it and what will be the outcome? How can CUNA help, if applicable? Valdov: The toughest challenge by far is to remain relevant, and provide appealing service to credit union members. The fact is, the financial services industry operates in a highly competitive, fast-paced environment where change is constant. No financial institution – regardless of size or scope of operation – can stand still in this setting; each has to move forward in responding to its members' or customers' needs, or no longer move at all. For credit unions, this is especially relevant, since their members receive – and expect to continue receiving – the best service that they can. After all, for 21 straight years, more credit union members than customers of any other financial institutions have said they were "most satisfied," according to an American Banker/Gallup poll. CUNA has been working for a number of solutions to help credit unions keep their edge. We have been working to enact into law provisions of the Credit Union Regulatory Improvement Act, which offers credit unions additional flexibility in serving their members. Two key provisions are included in the bill: Prompt Corrective Action reform and member business lending flexibility. The PCA improvement would modernize credit union capital requirements by redefining the net worth ratio to include a risk-based asset approach to PCA and improve the safety and soundness of credit unions and the NCUSIF. Flexibility in business lending would help credit unions serve a need expressed by their members and improve access to credit for small business owners, a niche that is not being served by many banks. Meanwhile, CUNA is also making products and services available that help credit unions provide more services to their members, be more competitive in the marketplace – and save money at the same time through CUNA Strategic Services. With this focus, CUNA believes that it can develop and support an environment for credit unions which assures that credit unions can remain relevant and appealing to their consumer members. CU Times: What might happen with credit union documentation of service to those of modest means in light of the Nov. 3 hearing in the Ways and Means Committee? Is some form of documentation a given and what might it look like? Valdov: NCUA's "Letter to Credit Unions" issued early this month is a first step in what is likely to be a long process for the agency and credit unions. The ultimate goal would be to develop a process that serves the needs of credit unions, the regulator, and the Congress – which has demonstrated an active interest in exercising oversight of this process. The method that NCUA outlined in its letter Feb. 10 may not be perfect – and, in fact, will be the subject of tweaking by the agency and certainly refined based on suggestions made by CUNA and others. However, CUNA believes that a certain amount of reasonable cooperation is necessary by the credit union movement in order for this process to move ahead, and particularly in the interests of credit unions. Having said all of that, CUNA also believes that close scrutiny of the development of this information collection program by the credit union movement is vital. As issues arise among credit unions about the program, CUNA will be addressing them point-by-point with the agency. This is certainly no time for anything less than candor and frank discussion between the regulated and regulator – aimed at reaching a solution that works for both, and responds to what we have heard on Capitol Hill. CU Times: Are the ABA's latest lawsuits against NCUA in Utah and Pennsylvania harassment or substantive? How confident are you in NCUA's stance? Valdov: The lawsuits being brought by the national, state and local banking groups are part of a coordinated campaign by the banking industry to stifle and eventually choke the credit union movement. This legal campaign is just one arm of an overall program, which includes public relations, political advocacy and legislative lobbying. The fact is, the consumer market for financial services – so long shunned by the mainstream banking industry – has recently become so much more lucrative for bankers. The only thing that stands in the way of bankers obtaining the market all for themselves are credit unions. Regrettably, the bankers' legal strategy has not been without its successes (such as the case that eventually led to the Supreme Court case of 1998, which led to passage of HR 1151). Credit unions can be no less tenacious than the bankers in this arena. Currently, CUNA is an intervenor, along with the Pennsylvania Credit Union Association, the National Association of Federal Credit Unions, and several credit unions themselves in a case brought by the bankers against NCUA for decisions the agency has made regarding fields of membership for Pennsylvania credit unions. To date, the court has not found that any of the cases the banking industry has brought to be harassment. However, we do keep a very close eye on all of the filings made by the banking industry, and we are ready and willing to challenge any actions brought that we find to be superfluous or trivial. Bankers, however, must be wise to the fact that the courts take a very dim view of pointless lawsuits. The risk for them is very great. CU Times: What is the impact, practically and politically, of the merging away of small credit unions? What are the plusses and minuses? What about overall industry consolidation? Valdov: Whenever a credit union goes away, it is a time of sadness for all of us in the movement; it's just that much more diversity and tradition that slips away. On the other hand, the movement at large is thriving: There are more members and assets in credit unions than ever before. Financially, credit unions are on top of their game, with net worth as high as it has ever been. The ultimate test for the movement has to be "are the members being served?" To date, there is no indication that members are getting anything less than the highest level of service, and the best deal that they can from their credit unions. Frankly, it is up to the boards of credit unions to determine how much, and how long, to provide service to their members. Some boards – no doubt with reluctance in many cases – determine that merger with another credit union is the best way to ensure high quality service to their members. Others – perhaps with a tinge of nervousness – determine that their answer is to continue meeting the needs of their membership on their own, and make the hard decisions to make that happen. CU Times: Right now there are no volunteers serving on CUNA's board. Does that matter? What value might volunteer representation bring to the board? Should seats be set aside for volunteers? Valdov: CUNA has an open and transparent process for electing leadership to our 24-seat board. In that context, volunteers are free and welcome to involve themselves in the process. In fact, there are many opportunities for volunteers to run for a seat on the board. As recently as three years ago, CUNA's board included volunteer membership (although there are currently no volunteers sitting on the board). As far as reserving one or more spots on the CUNA Board for volunteers, this is among many issues currently being examined by the CUNA Renewal Review Committee, which I appointed. The issue of permanent volunteer representation in CUNA governance has not yet risen to the point of consideration by the CUNA Board. If it does, the issue would have to be taken in the context of the many other issues facing credit unions and, in particular, CUNA. If and when this issue rises to the board's review, it will be taken under sincere consideration.