ORLANDO, Fla. — Credit unions can bolster fee income through better service, according to Bill Strunk of Strunk & Associates.
"The efficiency ratio is the number we have to manage to," he offered during Credit Union Times' conference here on non-interest income. The efficiency ratio, he explained, is total non-interest expense divided by the sum of net interest income and non-interest income. The best ratio is under 50%, but credit unions right now are at nearly 75%. There are only two things to do to rectify that scenario: lower expenses and increase non-interest income.
"The key is to give the member what they want," Strunk emphasized. Members know they are not supposed to write bad checks but they do anyway, he said. "The problem is, we get a little moralistic about this thing," he said. The member would rather have their check covered temporarily for one fee rather than face up to $85 in fees from merchants and the financial institutions involved, not to mention the hassle and embarrassment.
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"It's better to pay the check than it is to return it," he advocated. If you have a "fully disclosed program," Strunk stated, you are serving your members. And run it like a line of business he recommended.
He concurred with Wescom Credit Union CEO Darren Williams assessment that while legislation to curb abusive overdrafts program could affect credit unions, the bill was dead for 2007 but will be a topic of congressional discussion in 2008.
Generally speaking, Strunk also suggested that with a large and growing portion of credit union income coming from fees, credit unions should establish a fee income committee.
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