Operations

Legislation May Lead to Higher Fees

Loss of interchange income could lead to higher costs for CUs and members.

January 27, 2011
KEYWORDS fees , income , interchange
/ PRINT / ShareShare / Text Size +

The sluggish economy, probable loss of fee income due to the 2010 financial reform legislation, and corporate stabilization assessments continue to burden credit unions.

Contributing to the concern over the loss of fee income is the proposed interchange fee regulations by the Federal Reserve.

The proposal is expected to reduce the amount of check card interchange income credit unions earn, as well as negatively affect members through changes to rates, fees, and services changes.

Credit unions will not only need to cover the loss of fee income, but also the increased costs of complying with the regulations.

CUs’ Potential Responses to Interchange Legislation

  • Increase debit/check card fees: 41%
  • Increase NSF/overdraft protection fees: 40%
  • Eliminate free checking accounts: 30%
  • Reduce deposit rates: 25%
  • Increase nonmember ATM fees: 21%
  • Increase monthly checking fees: 18%
  • Increase loan rates: 14%
  • Increase member ATM fees: 10%
  • Eliminate credit card rewards: 7%
  • Increase loan fees: 7%
  • Increase credit card fees: 6%

Source: CUNA's 2010-2011 Credit Union Fee Survey

While the fallout of interchange legislation will not be clear until the Fed releases final rules by its April 21 deadline, credit unions are considering what actions to take [ppt] if the new regulations do indeed have a negative impact.

In fact, most credit unions (91%) that offer check cards anticipate they will make some sort of changes to their rates, fees and/or services as a result of interchange legislation according to CUNA's 2010-2011 Credit Union Fee Survey.

The most common changes credit unions anticipate making will be to introduce or increase debit card/check card fees and to increase nonsufficient funds/overdraft protection fees. About 40% cite each of these changes.

Furthermore, 30% of credit unions say they’ll eliminate free checking accounts—long a hallmark of credit unions service to members.

Beyond these changes, lowering deposit rates and/or increasing nonmember ATM fees would be changes implemented by the next-largest percentages of credit unions, at 20% to 25%. Only 9% of credit unions indicate they would make no change.

These findings support the contention of CUNA and state leagues that interchange legislation will hurt credit unions, members, and consumers in general.

Credit unions undoubtedly will make changes to their rates, fees, and service offerings if the final rules match the current proposal.

While credit unions strive to provide the best service to members and to offer the lowest rates and fees, a loss of fee income and increased costs means they have no choice but to take these actions.

CUNA's 2010-2011 Credit Union Fee Survey Report assists credit unions in evaluating fees for a full range of services, including those related to: share draft/checking, nonsufficient funds (NSF), overdraft protection, online bill-payment, and more.

This report will also help credit unions set the types and amounts of fees that are not only a good deal for members, but also cover business costs and encourage members to use money-saving services. Results are provided by credit union asset size, as well as geographic region so that credit unions can compete with other financial institutions in their area.

BETH SOLTIS is senior research analyst for the Credit Union National Association’s market research department.

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive