Some Observations on This and That..

* A credit union CEO who attended a conference of one of the largest electronic payment networks last week told me he was horrified by the talk of overdraft protection as a profit center. The talk was coming predominantly from bank leaders, as CUs did not have a major presence at the conference. A story was told of a bank that charged a customer $30 to get to the remaining $10 in his account! One banker said, “It’s a great country.” The credit union CEO said to me, “If this type of practice doesn’t lead to legislation on overdraft, I don’t know what will.” Meanwhile, overdraft protection programs are being launched everyday in the credit union industry. A number of popular vendors continue to sign up new clients. Given Congress’ interest in credit unions serving those of modest means, it goes without saying credit unions need to manage their overdraft protection programs with members’ best interests in mind. Kudos to the California CU League, which recently partnered with a law firm to assist credit unions in ensuring they are in compliance with all regs related to overdraft protection. * The poor, poor bankers. The USA Today last week published statistics that show banks’ profit margins outpace just about any industry. Banks earn an astounding 17 cents of profit per $1 of sales. Banks are followed closely by pharmaceutical firms at 16.2 cents. Community bankers, who are oft complaining about the credit union tax-exemption, would probably say those profits are mostly from the large, mega banks. Alright, then how about we tax those large, mega banks twice as much than they are paying now. Let’s segment the banking industry into the large, mega banks – which would pay more taxes- and the community banks, who can continue to pay what they’re paying. Doesn’t make sense does it? Neither does segmenting the credit union industry and taxing large credit unions that meet certain criteria as the bankers are proposing. * Credit unions must take the lead on identity theft. Helping members prevent identity theft is a perfect way to build solid member relationships. Every credit union newsletter and Web site in the country should include information on how members can protect themselves, and CUs should align themselves with identity theft vendors. There are many quality products available to credit unions. Credit unions should hold seminars on identity theft and promote identity security wherever they can. It’s time to take the lead in combating this incestuous fraud. I love what State Employees CU of North Carolina is doing. Jim Blaine’s CU is offering SECU Member Identification Cards which include the member’s picture and signature. The cards can be swept at the teller station so a member doesn’t have to speak aloud their account or Social Security number. The cards are a neat way to promote identity security, and they look great! (See page 12, CU Times, Nov. 16.) * I see so many ads for online banks and brokerages, I decided to do some secret shopping to see what credit unions are up against. I started with ING Direct, which is publicizing its Orange accounts seemingly everywhere. The Web site is simple and slick, but I wanted to talk to someone live. I called the toll-free number and could not have reached a person any faster. Literally two seconds after pressing a selection, a courteous service rep was on the line. He outlined the different savings options, including the Orange Savings Account, which is paying 3.5% and carries no minimums and no withdrawal penalties. He quickly took me through the online application process which was simple – the account could be opened and funded entirely online. I rate the experience very highly. However, when I asked about online security, the rep stumbled a bit, saying ING takes security very seriously. I asked what that meant and he said the site does not have military security, because it’s not available commercially, but it has the next best thing. I next moved on to e*Trade Financial. I saw an ad touting 370,000 ATMs nationwide. I called and asked if there were any ATMs near my location, Central New Jersey, a very heavily populated area and often ranked as one of the nation’s top counties to live in by Money magazine. Many of the residents commute to New York City, so it’s safe to say I do not reside in an obscure area. The e*Trade rep said unfortunately there were no ATMs near me! I was taken aback, but she quickly pointed out that if I keep $5,000 in an account, they will rebate any ATM fees I incur. I then asked about the 370,000 nationwide ATMs the e*Trade ads tout? She laughed and said those ATMs are located in very obscure locations such as bowling alleys and gas stations. She said e*Trade is relatively new to banking, so their ATM network is still being developed. I was not impressed with e*Trade, but the rep was more than courteous. * Credit unions should count themselves as fortunate for having been involved in check truncation for so many years. Many banks are going to have a devil of a time explaining to customers why they’re not getting their checks back or they will have to use various technologies to print out images of checks for customers. More importantly, credit union item processors are way ahead on the image exchange curve. Most have told me they’re simply waiting for banks to catch up. One thing is clear, when image exchange takes off, geography will no longer be a factor in item processors signing up clients. It’s because of this I predict the credit union industry’s major item processors will either merge, or form a consortium to benefit from economies of scale. -Comments? E-mail [email protected]