By Moisette (Tonya) Sweat Know--and focus on--your membership.
The membership is the lifeblood of any credit union. Therefore, it is the key to a credit union’s management of its capital and its regulatory compliance program.
In the aftermath of the nation’s recent economic woes, credit unions now face the potential for new capital demands and plenty of other forms of increased regulation. More specifically, the National Credit Union Administration is working to “modernize” CU risk-based capital regulations. As financial institutions that must base their net worth on retained earnings raised from member deposits, credit unions can find these capital requirements daunting. Plus, the Consumer Financial Protection Bureau is revising regulations formerly issued by the Federal Reserve Board, adding increased disclosure or reporting requirements. Knowing a credit union's own, unique membership is the key to overcoming the burden of regulation, including the coming impact of a new capital rule. Every credit union should know who its current members are; who its potential members are (or at least where to find them); and the products and services its members need, want, or use most. By knowing its members really well, a credit union can determine the social and financial behaviors most prevalent within its membership and the financial products and services that best enable those behaviors for provident and productive purposes. Credit unions unwittingly already possess much of the information. By only offering the products and services a CU's specific membership requires or expects, a credit union will only need to comply with the regulations applicable to its enumerated products and services, which will reduce costs and the associated regulatory burden. The characteristics a credit union should know about its members and potential members include, but are not limited to 1) employer, 2) income, 3) gender, 4) cultural background, 5) community or area where the member lives, works, worships, and shops, and 6) other unique characteristic(s) associated with the common bond(s) described in the credit union’s charter. In essence, if the membership defined by the answers to the above questions does not need it all, then why do it all? There is nothing wrong with creating and perfecting a niche defined by the membership. For those members who require services or products their credit union does not or cannot offer, a credit union might consider negotiating an attractive, beneficial offering for its membership with another compatible financial institution. Ultimately, it will be less burdensome and more cost-effective.
Moisette I. (Tonya) Sweat is co-owner of Sweatism Consulting LLC, which provides consultation to credit unions in the areas of federal consumer protection, fair lending, financial literacy, and organizational and leadership development. Before founding Sweatism Consulting LLC, Sweat was director of consumer compliance policy and outreach and a staff attorney with the National Credit Union Administration. Director Risk and Compliance Seminar will be held Sept.14-15 in Savannah, Ga. Sign up for the CUES Advantage e-newsletter and get a link to our monthly, online "On Compliance" and "Inside Marketing" columns delivered to your inbox.
