PORT NECHES, Texas – Andrea Johnson remembers when members could walk into any given credit union and get a $200 loan to buy school clothes for their kids. Today, she says those loans are more trouble than they're worth for some larger credit unions, forcing some members to the whims of payday lenders. “Now, most of the big credit unions have a profitability limit on the size of the loan they will make,” said Johnson, president/CEO of $65 million Neches Federal Credit Union here. “I am proud to say my credit union will still lend $100.00 when it's needed.” The beginning of 2004 saw a bit of a reprieve from slowed member growth when 181,000 new members joined credit unions, according to the latest data from CUNA Mutual Group's Credit Union Trends Report. Before then, membership had only crawled a percentage point in 2003 with 909,000 new members that year for a total 84.5 million for the entire industry. The numbers may be a bit off given that most data counts one member who belong to more than one credit union as a separate member for each one that he or she belongs to. However the numbers are skewed, the more important focus is exploring whether members are actually leaving and why. Johnson threw cold water on the warm and fuzzy theory that credit unions are always looking out for the little guy. “Why is membership slowing down, maybe we are not as wonderful as we used to be,” she said. “Maybe we need to stop buying fee surveys (that) say `aha, here's a fee we don't currently have.'” Like most credit unions, $234 million DuTrac Community Credit Union in Dubuque, Iowa has had to come to grips with the notion of savvy members who don't mind shopping for better rates and will pack up their accounts and go elsewhere if they're not satisfied, said Tom Sarvis, president/CEO. “Twenty years ago people wanted to do business at one financial institution,” Sarvis said. “Competition (back then) came from banks, savings and loans and some finance companies. Today, there's Wal-Mart, brokers and Di-Techs.” DuTrac switched to a community charter in 1986 after its sponsor John Deere fell on hard times and saw its employees dwindle to less than 2,000 today, Sarvis said. Which gives rise to the growing number of credit unions expanding to massive communities, sometimes with a potential membership base in the millions. Can those credit unions effectively serve those larger member bases and is something lost in the conversion with rates, fees and service? “It's not really a question of community charter but of perception,” Sarvis said. “Being larger does give you the ability to offer more, but I think what happens is as credit unions migrate from single sponsor to a broader membership, the message to that (established group) of members gets diluted – it's going to take more messages to market to that larger group.” Sarvis emphasized that this is not a `woe is me' industry concern because credit unions are still beating the banks across the boards in a number of areas including the coveted bonus dividends. Likewise, today's single account member with small deposits will be tomorrow's multi-account relationship as a result of marriage, children and buying a home. “Borrowing members become savings members,” Sarvis said. “We need to find the things along the way that really matter to them at different stages of their lives.” Like DuTrac, standing out among competitors is an ongoing battle said Tony Terrizzi, president of $44 million Everett Credit Union in Everett, Mass. Having home banking and online bill payment helps if members are asking for those services but that's not going to stop the inundation of advertisements from other financial institutions chomping at the bit. “Some credit unions are adding SEGs for the sake of doing it but I know some of my colleagues have been very successful in expanding and providing the services members want,” Terrizzi said. “Whether you're small or big, the plan has to be an aggressive one.” The credit union is in a unique position given the Federal Reserve's recent approval of the $936 billion merger between Bank of America and FleetBoston Financial, poised to woo bank customer fallout that typically comes from such large alliances. Indeed, Terrizzi said during commercial breaks with a recent program on a local radio station here, six banks and eight credit unions ran ads touting their wares. One way Everett CU is looking to retain its members is focusing on the community of Everett here with more aggressive advertising and having more of a presence through local events, said Shannon Cragen Everett CU assistant vice president, marketing and member development. “It starts with looking at the entire member experience from spending more money on training, operations and expanding technology,” Cragen said. “Our members must be completely wowed by our experience here.” Ignoring CU Roots? Johnson said that “wowed” relationship must still have its roots in the reasons why credit unions were founded in the first place. “Maybe we ought to ask a member why he has credit problems – bad things do happen to good people – before our `instant decisioning' rejects his application,” Johnson said. “Maybe we all ought to have a live person answer the phone (but) isn't that everyone's pet peeve?” Johnson said years ago when life insurance savings insurance matched the amount in a members account, usually up to $2,000, it was “very easy to convince the primary member (usually the husband) to open an account for his wife and all of the kids to get this free insurance.” While it was technically counted as one active account, membership grew significantly with these additional accounts, Johnson recalled. When credit unions stopped offering this free insurance, it was much harder to open an account for a wife or children because they didn't need it. “And most of us had raised the minimum to open an account,” she said. “Along about that time, some of the large credit unions began to look at these stagnant accounts as bringing down their profitability and got rid of them.” The question goes back to Sarvis' concern: “what are we doing to distinguish ourselves from banks.” “The employment sector has changed, jobs are lost, companies shut down,” he said. “For some credit unions, community charters are not only a means of survival but it gives a leg up to the ability to compete and keep members from walking out the door.” Ed Gallagly, president/CEO of Central Florida Credit Union acknowledged that some credit unions have started implementing “membership relationship pricing modules” for a number of reasons including to “weed out” unprofitable members. In fact, the $196 million credit union launched a module in January but mainly for “putting out carrots” to members as an enticement to bring their balances up. So far, the results have been “pleasing” with only “a very few members closing their accounts.” “By and large members are very pleased with their credit union but we don't stand out as much as we used to,” Gallagly admitted. “The bottom line is we're being squeezed all the time.” Gallagly said the decision to implement the module came with much controversy but sending the consistent message that its purpose was to bring in more business not to get rid of accounts, brought naysayers around. Central Florida CU members with small accounts – typically less than $500 in total deposits – are being wooed to use more services with incentives such as a quarter discount increase on their next loan, free checks and a “bump up on a CD.” “Industry-wide, I do agree that the rate of (member) growth has slowed down,” Gallagly said, citing data from a well-known research firm that he says shows who the profitable members are. “There's no question that subconsciously – and even consciously – some credit unions are trying to run off unprofitable members. I hate to use that term run-off but that's what's happening.” [email protected]