Missed the first day of the 2023 CUNA GAC? Not to worry. Here are four takeaways to catch you up.
No. 1: Credit unions are preparing for a fight over fee income.
With the Biden administration pushing to block junk fees — think fees from Ticketmaster, airlines, and more that add no value to the item or service — credit unions are keeping close watch on how that might impact their balance sheets. Fee income remains a key driver of credit union revenues, and the industry is raising the alarm that income from NSF fees, interchange, and more could be under attack.
“For any government entity to say the fees you levy on your members are junk fees is malarky,” said Juan Fernandez, CEO of the Credit Union Association of New Mexico, during a panel of league CEOs. “We don’t have junk fees — we have services that are changing lives and communities all across our nation.”
That sentiment was echoed by Samantha Beeler, CEO of the League of Southeastern Credit Unions, noting that interchange income and more is “wildly important” because the revenue streams under attack cover everything from data breach protection to card replacements and more.
During a fireside chat later in the day with CFPB Director Rohit Chopra, CUNA CEO Jim Nussle pointed out that the costs of data breaches and more are — at best — barely covered by the fees credit unions currently generate, particularly in an inflationary period when the cost of everything is on the rise.
“The challenge we’re having is how do we pay for this and provide the access we all want — that [the CFPB] wants — and pay for that in an environment where the costs are rising, and the fees — whether someone wants to call them junk or not — aren’t even covering the costs.”
For his part, Chopra said it’s gratifying to see some financial firms have begun lowering overdraft fees and stopped reordering transactions in ways that trigger fees. The big question, he said, is around which fees actually provide a service to consumers.
“With respect to fees, there’s a lot of really good momentum in ways that I think can be very beneficial to the market,” he said.
No. 2: “We’re in the possibilities business.”
As more and more credit unions shift from tracking the bottom line to also tracking their impact, Tony Budet, CUNA board chair and University Federal Credit Union ($3.9B, Austin, TX) CEO, offered a simple definition for those unclear on the concept.
In short, he said, tracking impact means tracking the outcomes of a credit union’s strategies through the lens of how those strategies impact people and quality of life across the community, rather than simply focusing on quarterly financial statements.
“Our communities and the people who live in them in many cases are not thriving, and for many credit unions, it’s getting difficult to differentiate the credit union value proposition,” he said. “That’s why impact may be the best way to stand out in the market.”
While basic data is important, he added, data must be balanced with human dreams, passion, and vision, which speak to possibilities. We’re in the possibilities business, and our metrics must focus on human impact rather than first focusing on financial results.”
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No. 3: A new era.
Credit unions largely haven’t had to struggle with liquidity for the past 10 to 12 years. They’ve been able to focus on growing their businesses via lending without putting much thought toward the deposit side of the business. That dynamic is shifting, which presents new hurdles for the finance side of the organization as well as, as one industry leader noted, personnel.
“A lot of folks who entered the industry in the last 10 to 12 years have been in a lending era, not a deposit era, and now some credit unions don’t have the talent on their team to guide that,” Christine Messer, CFO at Heritage Family Federal Credit Union ($719.0M, Rutland, VT) and vice chair of the CUNA Finance Council, said during a CUNA Councils panel.
As the cost of funds rises from 30 basis points to 350 basis points, she said, that’s going to force credit unions to change their sales cultures to compete on the deposit side, and they could struggle to find the right talent.
In the past, she added, tax season was a deposit-gathering strategy for many credit unions, but the new realities of the market mean it’s time for credit unions to come up with something more sustainable.
No. 4: Putting partisanship aside.
CUNA CEO Jim Nussle opened the annual event with an address emphasizing that GAC offers an opportunity for the industry to come together regardless of political affiliation.
“This doesn’t have to be partisan,” Nussle said. “We’re partisan for credit unions.”
After all, the annual event is an opportunity for credit unions not meet with lawmakers to showcase the cooperative difference. That’s a light lift, considering every single member of congress serves credit union members.
“We call ’em members, they call ’em voters,” he quipped.
Much of Nussle’s remarks focused on financial wellbeing. That has always been a focus for the industry, but it has taken on renewed importance in light of inflation, rising interest rates, and rampant economic uncertainty. Lawmakers love to talk about freedom, he noted, but there is no freedom without financial wellbeing.
“If you don’t have something in your checking or savings account, you don’t have freedom — you’re constantly looking over your shoulder,” he said. “You don’t have the ability to feel like you can be productive.”
GAC offers the industry an opportunity to collectively focus its conversations on how credit unions and legislators can help consumers avert their own fiscal cliff, not just one for the government.
“America and the world need the example and the motivation of credit unions and the seven cooperative principles like never before in our history, and you are leading the way,” Nussle told the crowd assembled both in-person and virtually. “So let’s get to work.”