Don't Put Member Relationships at Risk by Raising Fees

January 12, 2010

By John M. Floyd

As uncertainty continues to permeate the financial services industry, credit unions are faced with new challenges almost daily. And while it may be tempting to consider gaining additional income by raising service fees, in the end the cost of losing members won’t make up for the "quick fix" of increased fee income from a small pool of accounts.

Your credit union would be better served by looking objectively at how the organization functions and considering programs that can improve operational efficiencies, streamline processes, and support employee performance—actions that can strengthen member relationships.

To assess the overall health of your organization, look at the following:

  • Organizational structure. What departments do you have? Is there a reporting structure at the department-head level? Do you have the proper “span of control?”
  • Department workflow. This will help determine how the workload is distributed among staff and if there’s too much or too little work for current employees.
  • Reporting processes. You may find that not all of your existing reports are necessary and that some can be replaced with more effective documents.
  • Branch profitability. Determine the cost of each facility. Consider how technology could improve the efficiency and profitability of each branch.

Once you have completed this process and re-engineered your basic systems, look at both sides of your balance sheet to determine how you might lower your operating expenses and increase your revenue.

Your commitment to members is demonstrated when you can operate at the maximum efficiency while minimizing the cost of their doing business with you. Don’t let the risk of easy fixes and quick returns distract you from seeing the big picture of long-term stability and success.

Help members feel secure

In an uncertain economy, consumers are more concerned than ever about doing business with an institution that helps them maintain financial stability. They want to know that if they make a mistake on their account or experience an unexpected financial emergency, the transaction will be covered.

For many, it’s worth moving their business to an institution that can save them the embarrassment of having a check returned to a retail store and paying the merchant an equivalent fee, being late on important monthly payments, borrowing from family, or adding to their credit card debt. If your credit union doesn’t have an overdraft privilege program, it could be at a disadvantage with competitors.

However, not all overdraft programs are created equal. Consumer advocates claim that some overdraft programs create consumer hardships by not disclosing policies on how overdraft charges are assessed, charging excessive fees that sometimes are higher than the original check or debit purchase amount, and using discriminatory practices to determine program use.

As a result of such practices, stricter regulations are being imposed in the coming year that will greatly impact how all institutions disclose processing and fees for covering overdrafts. In addition, Congress is considering the implementation of a new Consumer Financial Protection Agency (CFPA) to oversee how such programs are presented and maintained over the long term.

Seemingly lost in all of the discussion and opinions is the fact that there’s an easy way to avoid all the regulatory and consumer scrutiny on overdraft services.

For more than 20 years, JMFA Overdraft Privilege® has made this easy by offering a transparent program that discloses fees, educates accountholders on how the program works, and is 100% compliant with all federal regulations. We believe that overdraft programs should provide value for members, not put them at risk for more financial challenges.

If you already have an established overdraft program, now is the time to schedule a compliance and performance review that evaluates existing programs in regard to regulatory concerns, risk, and performance, and provides a graded assessment of safety and soundness, legal risk, best practices and social responsibility.

If you’re considering an overdraft program for the first time, choose one that provides the support and assurance that the results are beneficial for both your credit union and your members.

John M. Floyd is chairman/CEO of John M. Floyd & Associates, a profitability and performance consulting firm based in Baytown, Texas, and a CUNA Strategic Services strategic alliance provider. To learn more about JMFA, visit or call 800-809-2307.