In all kinds or businesses and organizations, “economies of scale” are often critical factors in the success or failure of the business or organization. That is certainly true with credit unions. Even at slightly over $2 Million in assets, which is larger than many credit unions, we face higher costs (as a percentage of assets or members) than larger credit unions for most products and services. While there are some cost breaks for smaller credit unions from NCUA and from some trade associations, it seems to me that we are facing more “increased minimum charges” on many products and services.
An absolute necessity today for almost all credit unions is pulling credit reports on loan applicants. We were just notified by the credit bureau we use that our minimum monthly fee will double. Because we are small, we rarely ever reached the minimum before this doubling of our monthly costs to pull credit reports. On the credit reporting of our borrowers, although I am working on a creative solution, credit bureaus will not accept reporting below a certain threshold of reported loans. With the increasing importance of credit scores and credit reports today, if we can not report our borrowers (good and bad), we are not fully serving our members.
Being able to accept and initiate electronic transfers and payroll deductions from our members is also vital to us. Most of our loans are paid electronically, as are a significant part of savings deposits. The costs of using these services keeps increasing because of the basic “minimum charges”, both from the federal reserve and from our Corporate credit union.
The list goes on, but I see this trend of increased “minimum charges” as a factor leading so many small credit unions to go out of business (merge or liquidate).
The good news for us, so far at least, is that we are successfully dealing with these cost issues. The trend, however, worries me.