Credit Union Legal Predictions – 2015
Each year, the nationally recognized Kaufman & Canoles Credit Union Team analyzes trends and changes in the credit union industry to forecast potential hurdles for the upcoming year. This year, we compiled 7 predictions which we believe will significantly impact many credit unions in 2015. Our top 7 predictions for 2015 are below:
1. Privacy Rights/Cybersecurity. Andy Keeney predicts that credit unions will spend substantial time and resources in 2015 to update their policies and procedures regarding members privacy rights and addressing potential cyber security threats. Although cyber breaches seem to be announced almost weekly, one critical element will be how fast a credit union responds to a cyber attack. NCUA will place a stronger emphasis on member privacy and the protections a credit union needs to have in place. Credit unions will need to protect their members in every way possible. They will need to address many legal issues, revise their policies and procedures, update their websites, and review and investigate their insurance coverage. We predict that the steps credit unions undertake to protect the privacy rights of their members will be costly, but will ultimately be a significant enhancement to the reputation and brand of all credit unions.
2. Lending Changes/Interest Rates. Ran Randolph predicts that the level of member business lending activity will rise significantly in 2015. Interest rates will rise, borrowers/members will seek fixed rates or interest rate hedge protection. The rising rate environment will also push borrowers/members to move to secure new credit at currently favorable rates. This will also lead to an increase in commercial member borrowing, lending and transaction activities and will provide the needed impetus to get those on the sidelines into the game. As values return to small businesses, pressure to move family businesses to the next generation or to third parties in sale transactions will mount. The challenge for credit unions will be to remain vigilant in lending practices since loan demand will surge.
3. Millennials. Erin Deal predicts that marketing efforts and growth expansion targeted at millenials will increase in importance in 2015 as credit unions continue to realize the potential financial impact of this group. Increased membership from this age bracket can result in share and loan growth, especially for smaller credit unions experiencing a decrease in membership in 2014. From first time home buyers to products specifically developed for this demographic, credit unions will focus on bringing in these consumers who can grow with the credit union and support its future success. This tech-savvy generation has high expectations for convenience and mobility, so credit unions will have to continue to adapt to attract this influential group.
4. Member Business Loans. Dustin DeVore predicts that Member Business Loans (MBLs) will increase in importance in 2015 as the economy slowly improves. New demand for credit from small businesses cannot be met by community banks alone and these businesses will increasingly look to credit unions for their lending needs. Credit unions will continue to attempt to increase their business loan portfolios in order to increase revenues as well as their visibility in their communities. Credit unions that pursue a strategy of increased MBLs must closely evaluate and analyze business lending opportunities through sound underwriting principles, review of interest rate risk, strength of guarantors, available collateral and other factors. As business lending increases, so will requests for waivers and NCUA monitoring for compliance.
5. Class Action Litigation. Marc Darnell predicts that there will be increased consumer litigation in 2015. For the most part, the litigation will revolve around key consumer statutes enacted by Congress. But some litigation also will flow from state statutes aimed at picking up what Congress left undone this past year. Federal and state scrutiny of consumer issues continues to grow and spin off litigation for lenders will be a headache of growing proportions.And to the extent that any systemic mistakes in the lending or asset recovery processes may have affected groups of members, credit unions can expect a continued rise in class action litigation.
6. Mergers. Hazel Wong predicts that merger activity will increase in 2015. Between 2003 and 2012, there were 2,462 credit union mergers. During this period, the total number of credit unions declined from 9,369 to 6,812, or 27 percent. Last year, NCUAs Office of Small Credit Union Initiatives (OSCUI) issued new guidance to assist credit unions in the merger process. OSCUIs published its new guidance in the form of a brochure Truth in Mergers: A Guide for Merging Credit Unions. This brochure is the result of a review of more than 430 mergers and is designed to help credit unions from the first steps in deciding if a merger is right for them through the merging process. With increasing compliance requirements and accordingly, increased liability, more credit unions will elect to locate a merger partner.
7. Foreclosures. Brian Dolan predicts that in many areas of the country the number of foreclosures during the first six months of 2015 will exceed the number of foreclosures during the first six months of 2014. The new mortgage servicing rules which took effect in 2014 now prevents the first notice of foreclosure until a member is more than 120 days delinquent. This rule artificially decreased the foreclosure rate during the first half of 2014. The second half of 2014 saw the foreclosure rate increase in comparison to the first half of the year. Also, as result of the 120 day prohibition, by the time many members now seriously attempt to cure their default, the deficiency has become so large that they cannot secure the necessary funds. Thus, we predict the foreclosure rate during the first half of 2015 may be closer to the rate in 2013 than the rate in 2014.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2019.