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Sunday, June 14, 2009
Credit unions mostly avoid card rate woes
By Winthrop Quigley
Journal Staff Writer
If years of experience lending money to people has taught William Jacobs anything, it has taught him this:
"When people can't pay, they can't pay," said the CEO of White Sands Federal Credit Union and the chairman of the Credit Union Association of New Mexico.
Jacobs, speaking by phone from his Las Cruces office, said that new federal regulations on the credit card industry contain some laudable provisions, especially regulations that require more complete disclosures to students, but consumers shouldn't expect too much.
"Some of the revisions were good housekeeping ideas," Jacobs said. However, he added, "If anybody thinks they've solved anything, I'm not sure they have, except we've put in more hoops. People who are going to go bad are going to go bad, despite these measures, for whatever reason. This is not going to fix defaults."
Big card issuers who have to restrain interest rate increases, give up lending to some customers and curb some penalty fees will have to make up the money they lose somewhere, Jacobs said. White Sands does not anticipate changing its offerings in light of new regulations.
"Something you have to wonder about, if you cut out this portion of your market, where do you make dollars up?" he said. "That's just a business question. Are (consumers) going to pay for these protections, is what I'm saying. That I don't know."
Harold Dixon, CEO of the State Employees Credit Union in Santa Fe, thinks he knows. "They're going to put that fee on somebody, and typically what happens is they're going to end up subsidizing those fees probably on borrowers who are probably higher credit risks. They'll somehow base it on the credit score or payment ability."
Kirtland Federal Credit Union CEO David Seely said his Albuquerque-based credit union wrote to President Barack Obama and members of New Mexico's congressional delegation supporting the legislation. Seely said Kirtland's credit card offering shouldn't change with the new regulations.
"We never played the games that the big credit card companies were playing," for example by raising interest rates if a customer was late in paying a credit card bill, he said.
"Never having lived on that kind of income and charged that kind of rate, we don't have to make any adjustments," Seely said. "Hopefully it will look like the great value it is when people start shopping."
"Part of being a credit union is we are not typically heavily fee driven," Dixon said. "We have fees for certain things, but it's not that we look for every way to get the maximum fees out of our members."
"As an industry, and for White Sands in particular, we try very hard never to make a loan that doesn't help someone," Jacobs said. "Our perspective is that we try to grant loans to creditable individuals to sustain their lifestyles. I think some of the credit card companies shove that aside for profit motives."
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