“The times are changing”….How many times have you heard your credit union peers say this, or, have they been hearing it from you? There have been so many significant changes in the operating environment for credit unions over the past 20 years – expanded fields of membership and community chartering, exponential growth in compliance regulations, growth in indirect and business lending, the CFPB and its mortgage underwriting constraints, the worst recession since the Depression and a lingering anemic recovery, and an unprecedented period of low interest rates, just to name a few. Looking at just this short list, it’s easy to see that the complexity of operations is never going to get easier, and it’s time to stop pining for the “good old days.”
Granted, some of these changes were given to the credit union system, gifts from over-bearing regulators and Congress, but others were actively pursued by credit unions – especially those related to expanded chartering and lending authority. Looking back, sometimes I feel that “be careful what you wish for” applies to the industry’s modified field of membership and lending activities. What came from these modifications? Growth opportunities for single sponsor credit unions. A broader spectrum of loan products. More CUSOs. The ability to more easily diversify some balance sheet risks. All good stuff.
What else came from these chartering and lending modifications? A weakened defense against the taxation war waged by banks because of the blurry common bond definition of community chartering and the astronomical rise in commercial lending. Indirect loan conduits for commercial and auto loans that remove credit unions from some face time with potentially lucrative new members. An emphasis on product rather than service. Increased competition among credit unions, and, arguably, more mergers. A loss of identity with core members after a charter expansion. All bad stuff.
Now, the $64,000 question – Does the good outweigh the bad? On a case-by-case basis, yes, it’s likely that the expanded FOM and lending powers helped some credit unions. In the context of the entire credit union system, however, I don’t think these changes will be for the greater good. Do credit unions need a community charter with a potential membership base of 1 million people to help diversify from a single sponsor? Hardly. Do most credit unions need to have purchased commercial loan portfolios that exceed 12.25% of assets to be financially successful? Not if they are running efficiently.
As credit unions are implementing 2014 strategic plans, now is a good time to contemplate member service and reflect on your institution’s “good old days.” I would argue that instead of trying to canvas an entire metropolitan area with the marketing efforts for your community, geographic or multiple common bond charter, it may be better to go back to your roots and focus on developing relations with your primary SEG companies and meet with their employees and management on their turf. It’s more labor-intensive, but the credit union will get a core of loyal members. Or, the credit union can add new “members” based on a signature card completed by the local car dealer during an indirect loan transaction. You are stuck in a tough and competitive marketplace, but some old school marketing efforts may be long overdue.