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Today President Biden held a press conference in which he vowed that the Federal government would help middle class American’s by outlawing junk fees. He cast a broad net, which encompassed credit unions.
From the official press information:
The CFPB is taking action to require large banks and credit unions to provide basic information to consumers without charging fees—meaning no more fees for basic services like checking bank account balances, obtaining a payoff amount for a loan, or getting account information needed for applications.
Ultimately, the above paragraph is about information. Consumer information. They should have free access to their own information.
I don’t think, generally, credit unions charge fees for any of the named services, so we probably don’t need to worry a ton about it. But if the idea of “junk fees” becomes very broad, encompassing legitimate and necessary fees, it could be problematic.
But I do think that the next thing the president said could be a problem. It expands on the idea of consumers having access to their information. The White House press information includes this paragraph:
Later this month, the CFPB will propose a rule that, if finalized, would require financial companies to allow customers to safely, securely, and reliably send their banking transaction data to other companies and banks. The proposal would make it easier for people to break up with their bank, switch to banks with better offerings, and to manage accounts from multiple providers. This reform will ensure financial companies compete based on service quality and up-front pricing, deterring junk fees.
This idea is encapsulated in the phrase “open banking”—a concept that I recently discussed with credit unions at our Quantum Group Conference.
The idea is that consumers’ data belongs to them, and they should have the ability to do with it what they want. This would include downloading data and taking it somewhere else. Ultimately, this makes switching financial institutions very easy, as the White House press information indicates.
This is already going on in other parts of the world, such as Australia and Europe. And I think eventually it’s going to reach our country, too. Maybe not this time, with whatever rules the CFPB releases, but certainly sometime. After all, information wants to be free.
This is good for consumers, and expensive for credit unions. It’s also a threat to financial institutions, as well as an opportunity.
At the very least, credit unions should sit up and take notice, and consider their efforts to offer more services digitally. These efforts should take on a new sense of urgency because a large portion of consumers will be interested in switching to the financial institution with the most robust electronic offerings. And if it’s easy to switch . . . it will be easy to go to whatever institution has the best electronic offerings.
In my opinion, this is the way of the future.
At the Quantum Group Conference, I presented on this very topic, and would be happy to give the same presentation to any of our member credit unions. It could be helpful to provide some context to boards and executive teams, and provide a springboard from which to discuss how the technological revolution will continue to affect credit unions.
Just reach out via email or phone, and we can talk more.
