By Frank J. Diekmann
What’s that they say about what’s old being new again? Get ready! CUToday.info, which has grown into the number-one digital source of news, analysis, opinion and whatever “The Spin” is, is celebrating six months of extraordinary growth and online traffic by…publishing a print issue. Yes, that’s right, a throwback, your-father’s-Oldsmobile, four-color, pulp-that-originated-as-trees-before-being-recycled paper.
We are also going Old School in part to mark the largest credit union meeting of the year, CUNA’s GAC, which will convene in the Washington convention center next week. We’ll not only have issues on hand for that show, but we’ll be mailing a copy to the CEOs at the 5,000 largest credit unions in the U.S., as well. If you're headed to GAC, make sure to stop by and visit with us.
Our dedication to being digital hasn’t wavered. But with other publications serving credit unions slashing the number of issues they publish each year (without reducing their annual subscription prices or reimbursing readers for the issues they won’t be receiving), we thought it would be something nice to deliver just a bit of the content we’ve assembled for credit unions in a different format as a bonus for all the support CUToday.info has received to date. And for that we say thank you.
Now, dig out your cassette or CD player, grab some gluten-stuffed snacks, and prepare to turn the page. Literally.
Changes At Retail Banks Deserve CU Attention
Some changes going on at banks across the country deserve credit unions’ attention. CUToday.info recently published a forecast from analyst Michael Moebs that is a pretty dire warning to credit unions: prepare for up to $6 billion in industry-wide revenue to disappear is the CFPB cracks down on overdrafts. You can find that story here.
Overdraft revenue hasn’t just helped keep the lights on at credit unions. Overall, U.S. financial institutions saw about $32 billion in overdraft income over each of the past three years, according to Moebs $ervices. About 40 million Americans use overdrafts annually.
As a result, it isn’t just credit unions that are thinking about what’s next. The Bank Administration Insitute (BAI) recently published a piece by Rick Barham, CEO of Market Rates Insight, who noted that “financial institutions continue to hunt for new revenue sources, first from retail fees and second by increasing minimum deposits on time accounts.”
But that’s as Old School as CUToday.info’s print issue, said Barham. “It’s time to consider flipping those priorities and focusing on raising deposit minimums to make up for shortfalls in fee revenue,” he noted.
Barham pointed out that fee income across the banking industry has been trending down in large part because of the CFPB and consumer backlash (he offered as a reminder response to BofA’s proposed $5 a month debit card fee—remember how well the 99% embraced that?).
And it won’t just be credit unions looking for replacement income, with Barham point out that overdraft fees generate about 27% of income at smaller banks and 12% at larger banks.
Some banks are already testing alternatives. According to Barham, First Tennessee Bank has looked at imposing higher balances on customer accounts in lieu of higher fees. The Memphis-based bank isn’t alone. Market Rates Insight has found minimum balances at banks are up across product types. For instance, balances on term accounts jumped 15.45% between December 2014 and this January, while those on more liquid accounts, checking account and money market, fell 7.64% and 6.85% respectively.
“In this regulatory environment, it’s clear that financial institutions can’t sacrifice customer satisfaction for the sake of fee revenue,” Barham wrote. “It’s time the banking industry stopped relying on NSF and OD fees and started looking elsewhere for new revenue sources, such as raising minimum balance requirements. Competition for deposits is going to become fierce again once rates start to rise. Accumulating deposits now will lay the foundation for future profits.”
Ye Olde School
And while we’re talkin’ Old School, how about Ye Olde School?
Robin Hood appears to have gotten the last laugh, as a long-time foe seems to have bought into his message. Egad!
Speaking out against payday lenders and in favor of credit unions recently was the Sheriff of Nottingham. Yes, there is such a real person who is, of course, in England. In this case, the real, live Sheriff of Nottingham took to the streets to warn people in his region about the perils of borrowing from loan sharks and payday lenders. That's right, the Sheriff of Nottingham wants to stop the robbing of the poor to give to the rich. He and other local politicians urged the citizenry to turn to alternatives, such as Nottingham Credit Union (the place sounds like an ad agency’s dream).
Ella Ferris, general manager at Nottingham Credit Union, told local media that a loan from what are referred to here as “doorstep lenders” is usually much more expensive than the advertised APR.
“For instance, borrowing £300 from a well-known High Street payday lender currently costs you £127.70 in interest at an APR of 5,853%,” Elis said. “Borrowing the same amount from a doorstep lender will cost you £246 in interest even though the advertised APR is 272.2%”
Ellis said a £300 loan from Nottingham Credit Union would cost £58.26, based on an APR of 42.6%.”
Robin Hood. Banks and other lenders raising minimums and fees. Print issues. In some cases what goes around does seem to come around.
Frank J. Diekmann is Cooperator in Chief at CUToday.info, and can be reached at Frank@CUToday.info.