TNB Conference Speakers Remain Optimistic Despite Economic Woes

DALLAS — Speakers at TNB Card Services’ 2008 payments conference emphasized the strength and profitability of credit union card programs amid the economic turmoil.John Reap, CEO of Town North Bank, emphasized credit union strength by pointing out that CUs are already doing what many in the rest of the financial services industry were forgetting to do.“Fortunately, credit unions are more conservative in their lending practices, so the credit union industry has not been hit as hard as banks and thrifts. However, there is always room for improvement and this should be a lesson to us all to adhere to sound lending practices,” Reap said.He also encouraged the nearly 100 credit union executives attending the event to be patient, keep a firm hand on the wheel, and be more visible and vocal in the community about the credit union difference. He emphasized the need for credit unions and banks to work together to correct misconceptions about the financial industry.Chip Filson, president of Callahan and Associates, observed, “This extraordinary turmoil we are living through is a demonstration of why we have credit unions. Market cycles, greed and excess are not new. This is why we have a cooperative model that does not depend on fear or favor in the market to succeed. We can do things that market-driven firms aren’t in a position to. We can take risk. We can make loans.”Filson reported that credit unions had the highest six-month lending volume in their history in the first half of 2008, while the rest of the country was essentially in a lending freeze. “You are doing what Congress is trying to do-stimulate the flow of credit. I believe credit unions are part of the solution that Washington and the rest of the country are so desperately seeking,” continued Filson.Outstanding balances in credit union credit cards grew 12% in a year, reaching slightly more than $30 billion, by the end of the second quarter of 2008, Filson reported. He added, “Three, four or five years ago, if you had been at a credit card conference you would have heard that credit unions can’t compete. We are competing and we are winning.”According to Callahan’s, the credit union industry has more than $90 billion in capital, which means it has the ability to continue to provide credit while so many other financial institutions have halted or restricted their lending.Although Filson expressed optimism about the future of credit unions during this economic downturn, he warned about the danger of the recent bailout plan and the new regulatory era the industry is entering. He noted that the Treasury reform model suggests that credit unions are an anomaly and that they are too small to make a difference.“There is a powerful temptation to line up at the federal trough when it looks like money will be passed out. In doing this, we risk compromising the integrity of the cooperative, self-help concept. The reason you are in business today is not because of the government, but because of our philosophy-members helping members. This is a powerful model, and the American way.”Both debit and credit are good for CU business. “For credit unions, getting members to use both debit and credit cards will increase revenue,” said Frank Martien, partner with First Annapolis Consulting. “In studies we’ve conducted, we have found that consumers with a debit and a credit card from the same institution had more debit activity and debit spending than customers that only had a debit card with the financial institution. This emphasizes the need to get both card products into members’ hands.”–[email protected]