The financial services industry and particularly credit unionsare at a crossroads right now. Many toss the term crossroads aroundevery time a tweak occurs, but current circumstances are exactlywhat the word was created for. Some things will need to change orcredit unions will cease to exist.

First and foremost, credit unions' overreliance on fee incomemust come to an end. Not only will fees charged to members likelybe regulated away, it's also not in keeping with the credit unionphilosophy. Fees such as overdrafts punish members for theirmissteps; instead, credit unions can grant a small line of creditattached to the checking account that charges a modest interestrate. Credit unions' fee income increased from $6.9 billion in 2008to $7.1 billion in 2009, or 3%, according to consultant TonyWard-Smith.

Relationship pricing can help credit unions replace that feeincome and create deeper relationships with their members at thesame time. Charge X dollars to open a checking account and handthat member a debit card (interchange income, which should stay),but if the member also takes two other products, like a credit cardand a CD, then cut out the checking account fee. This way themember feels like they're getting a special deal and the creditunion automatically has a stronger relationship with the member.The members over the age of 15 who just want savings accounts areonly going to end up costing you money anyway.

And as I wrote in a recent blog post (cutimes.com/blog) thatstirred a lot of debate, drop the word “credit union” from yourmarketing. It's a massive hurdle for credit unions to have toexplain what a credit union is before they explain what they do.Credit unions provide financial services, so sell that.

Drop “join” from advertising. It serves absolutely zero purposeto the credit union or the member. “Share draft” and “sharecertificate” are archaic and have to go. If you have to explain20,000 times that a share draft is the same as a checking account,then just call it a checking account and save your energy for moreimportant things, like cross selling an auto refis.

I'll probably be flogged for this one: The tax exemption is moreof an inhibitor than helper. I'm not saying credit unions shouldask to be taxed or should convert to mutual savings banks, but itshould not stymie progress either. Credit unions should never backaway from what they need to succeed, such as risk-based capital,alternative capital, member business lending, open fields ofmembership, just because of the threat of taxation. Whatever creditunions got would absolutely have to have more value than the loss,if there is one. According to FDIC data obtained by NAFCU, 3,605banks did not pay any federal or state taxes in 2009. This includednot only Citibank and Bank of New York Mellon but all the way downto the $4 billion Nevada State Bank, They all received massiverefunds.

It would be a mistake for Congress to decide to start taxingcredit unions because they are not-for-profit cooperatives that doa world of good for their members. Credit unions could still behavelike credit unions. But, if in the end, it did mean credit unionswould have expanded capital resources and service authorities, theywould be better positioned to succeed after taxation rather thanbeing stuck in a 1934 capital structure in the 2010 financialservices market place.

Lobbying for these changes, whether your credit union plans touse them or not right away, is crucial to the future of the creditunion movement. But if you think I'm full of garbage, then you needto make your voice heard, too. Participation in the legislative andrulemaking processes is critical to influencing any of it.

Finally, credit unions need to consider paying board members.The market place is constantly moving all over the place andfinancial institutions are growing exponentially in complexity.Attracting the appropriate level of expertise to a credit unionboard is crucial. Not all credit unions would have to do it and notall would have to do it the same way. However, to expand the poolof potential qualified board applicants, money talks.

What is important is that credit unions remain committed to-notjust pay lip service to-their not-for-profit, cooperative status.Competition and consolidations has created a level of distrustamong credit unions to where they do not share as much as they usedto. This needs to stop. A board or membership is going to vote tomerge or not with another credit union for one reason or another,but it's not going to be because the big guys made them do it. Casein point: the attempted merger by Wings Financial ofContinental.

Operating expenses must be brought under control. Last year,according to Ward-Smith, credit unions increased operating expensesfrom $26.9 billion in 2008 to $27.4 billion in 2009, or a 2.1%increase. I didn't realize credit unions were having such a goodyear they could afford this. Credit unions need to be willing tolet go of under-performing assets such as branches or employeeswhose positions are no longer necessary.

Loans per member have remained stagnant since 2003, nudging upfrom 0.50 to 0.51. In the meantime, deposits per member haveincreased from 1.73 to 1.85 last year. Yet, operating expenses havejumped from $229 to $301. How is this paid for? Oh yes, fee incomeper member is up from $53 in 2003 to $78 in 2009.

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