6 topics credit unions are talking about

ByDaniel Wolfe, Ken McCarthy, Frank Gargano

March 4, 2022 3:42 PM

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The Credit Union National Association's annual governmental affairs conference is a massive gathering in Washington where its members from across the country gather to discuss every issue that's important to them.

Regulatory challenges, efforts toward diversity and inclusion, competitive pressures and more were discussed.

"There's energy that comes from this that you cannot replicate online. We took advantage of Zoom, [Microsoft] Teams and things like that the best we could, [but] there's nothing that replaces the energy from a live event," said Jim Nussle, president and CEO of CUNA.

Here is a rundown of some of the key topics and issues that were addressed:

War in Ukraine

The war in Eastern Europe is stoking fears throughout the credit union community of potential ripple effects in the United States.

"The conflict there has raised concerns about potential cyberattacks here in the U.S., including those against the financial services sector," Todd Harper (pictured), chairman of the National Credit Union Administration, said in a speech at the conference.

"Recently, the NCUA circulated a cybersecurity alert from the Department of Homeland Security, the FBI and the National Security Agency. I cannot stress this enough: All credit unions and vendors, regardless of size, are vulnerable to cyberattacks. Given the events over the last few days, attacks on financial institutions are potentially imminent," Harper said. "So, all parties within the system must maintain the highest level of alertness."

Separately, the Ukrainian National Credit Union Association is working with member credit unions to establish charitable accounts through which their U.S. counterparts may donate support to victims of the Russian invasion.

"We can certainly as individual credit unions, and as a national association, directly help monetarily," said Andrew Horbachevsky, who chairs the Ukrainian association. "But in the larger scope of things, we can act as a lever to leverage and provide information to where the greater general American public, and specifically our brothers and sisters in American credit unions, can funnel their donations."

Economy and fee income

The economy — especially inflation and monetary policy — was top of mind this year, according to Amy Brodersen, president and CEO of the $40 million-asset Family Focus Federal Credit Union in Omaha, Nebraska.

“What does recovery look like, and how long can we expect it to last? When can we see an improvement in the interest rate markets and when do we expect the supply chains to return to some normalcy?” she said in reiterating the questions her peers were asking.

Gauging the impact the economic recovery will have on credit union operations is crucial, Brodersen said. “I also would like to hear conversation around this current move to reduce overdraft fees and what others might be doing to prepare for a reduction in fee income,” she said.

National Credit Union Administration Chairman Todd Harper explained during a speech at the CUNA event how the agency plans to address overdraft issues.

"Punitive overdraft fees can harm consumers, and households hit by frequent charges often have their checking accounts closed. So, such fees can actually lead to financial exclusion, instead of financial inclusion. That runs counter to the [credit union] system’s purpose," Harper said. "For that reason, the NCUA has included a review of credit union overdraft programs as a supervisory priority. This year, examiners will request information about overdraft policies and procedures, as well as audits of credit union overdraft programs. We will also review credit union communications with members about such programs."

Many credit unions have already reduced or eliminated their fees, he said.

"I recognize, however, that not all credit unions are ready for this change. Therefore, if your credit union is going to maintain an overdraft program, I encourage you to include features like linking to savings accounts, offering affordable lines of credit or short-term, small-dollar personal loans and helping your members to build savings."

A de novo's obstacles

Debra Hurston, executive director of the Association for Black Economic Power in Minnesota, is trying to start a new credit union. But there are many hurdles to doing so.

Village Financial Credit Union is planned as a Black-led credit union in north Minneapolis, and it would be the state's first new credit union in about a decade if it launches as planned by the start of 2023.

"It is a journey. It is an effort. It does require all of us," Hurston (pictured) told potential members in a virtual town hall meeting after returning from CUNA's conference. "The regulators at the national level, I met with them this week — they have a diversity and inclusion program, [and] Village is on their list of things to monitor. They want to see this happen."

North Minneapolis is a banking desert "riddled with payday lenders and fringe bankers," Hurston said earlier in the week. Expertise needs to come from outside, and the African-American Credit Union Coalition provided that. Hurston herself comes from outside the community, having grown up on the South Side of Chicago and then moved to Detroit. But the local community is key, and Village's founders are still collecting pledges from potential members and need to hire a CEO and board.

Inclusion: A matter of survival

Community development financial institutions are working to lend deeper into overlooked communities, but other banks and credit unions can do more, said Víctor Corro (pictured, on right), CEO of Coopera Consulting. And they need to, because if they don't, they will become pushed out of their markets by organizations that are better at representing their communities.

“In a country that is already 40% multicultural … 90% of our decision power is white,” Corro said. “In a country that in a few years will be majority people of color, that is a big gap. That is a big issue because we need the voices of people everywhere to be represented where decisions are being made.”

Banks and credit unions are being threatened by fintechs and neobanks that develop products that appeal to a younger and more diverse audience. There are also less well-intentioned competitors such as the payday lenders that prey on vulnerable consumers.

Both of those threats can erode the potential customer base and membership of banks and credit unions. This is a business problem as much as it is a matter of empathy.

“We keep appealing to the same demographic over and over and over — for almost 100 years we’ve been doing that, perfecting that customer service for basically the same people,” Corro said. “We are on the fast lane to being irrelevant because the country has changed.”

Coming out

Before the pandemic, a nascent LGBTQ organization for the credit union community had just a few dozen members. This year, CU Pride has grown to more than 1,200 members.

"That, I think, is super important because we have so many more people now who are feeling more comfortable to be out," Linda Bodie (pictured, center), CEO of Element Federal Credit Union in Charleston, West Virginia, and one of CU Pride's co-founders. "That's a movement. That's something I'm proud of and that I'm excited is going to be even way bigger than it is right now."

Bodie offered advice to credit unions that want to embrace their local LGBTQ community. Credit unions need to work with local LGBTQ organizations to build relationships and market through them if they want to demonstrate that they're serious about helping the community, Bodie said.

That can be challenging in rural areas, such as her credit union's home state of West Virginia, she admitted. But her organization was still able to find ways to be welcoming, such as marching in pride parades. "Being that presence in the LGBTQ community in a very small town, a rural town, I mean, this is not normal, right? It's normal for bigger cities but it's not normal for us," Bodie said.

Credit unions' buying banks

Outside the confines of the CUNA event, credit unions were active in the mergers-and-acquisitions market, with four announcing deals to buy banks just in a span of two weeks.

The first such deal this year was an agreement unveiled Feb. 21 between Georgia’s Own Credit Union in Atlanta and Vinings Bank in nearby Smyrna, Georgia.

Two more were announced Monday. Robins Financial Credit Union in Warner Robins, Georgia, said it had agreed to acquire Persons Banking Co. in Forsyth, Georgia; and Barksdale Federal Credit Union in Bossier City, Louisiana, said it's buying HomeBank of Arkansas.

On Thursday, Summit Credit Union in Madison, Wisconsin, said it would purchase Commerce State Bank in West Bend, Wisconsin.

“Community bank management, shareholders and investors continue to exercise their rights to consider [credit union] buyers,” said Mike Bell, an attorney with Honigman who represented Summit in its deal for Commerce State. “That said, these are and will remain a small minority of all transactions. In general, I do expect this geographic concentration to continue, but you will see more of these announced very soon, some of which are in different geography.”