Credit Union Legal Predictions – 2016
Once again, the nationally recognized Kaufman & Canoles Credit Union Team has predictions for trends and changes in the credit union industry for the upcoming year. For 2016, we forecast 6 potential hurdles we believe will significantly impact many credit unions. Our top 6 predictions for 2016 are below:
1. Medallion Loans. Dustin DeVore recalls that just a few years ago Taxi Cab Medallion loans were considered one of the most secure and liquid asset classes a commercial lender could hold as collateral. A significant number of Credit Unions have made direct member business medallion loans and also participated in loans secured by Medallions. As UBER and other non-traditional car services have taken the market by storm the value of medallions has declined precipitously (in many cases over 50%). This has obviously caused significant concern and potential losses for credit unions. We predict that this trend will continue in 2016 and that Credit Unions and other lenders holding Medallions will continue to see the value of their collateral decline and be forced to make difficult decisions related to these loans (including, in some instances, write-offs, modifications and other collection activities).
2. Class-Action Litigation. Erin Deal predicts that spikes in class-action lawsuits against Credit Unions and their overdraft programs will continue. Credit Unions will be forced to closely examine, and possibly revise, all overdraft disclosures, account agreements, and courtesy pay programs or risk governmental enforcement actions or member lawsuits. We predict that many Credit Unions will revise or revamp these programs to avoid any issues in the future. At a minimum, Credit Unions will need to confirm that all policies, disclosures, and agreements track the credit unions actual practices when it comes to overdraft programs and that members are properly advised of these practices. Credit Unions may even require members to opt-in for all overdraft payments, not just those requiring affirmative consent by the Regulation E rules. These affirmation efforts might reduce the risks that the member does not understand the program and its associated fees, and file a lawsuit. We predict that notwithstanding affirmation actions by Credit Union the trend in class-action litigation will continue.
3. Foreclosures. Brian Dolan predicts that with the gradual improvement in the overall economy, national foreclosure rates will decline in 2016 as compared to 2015. Due to continuing problems with some state and local economies, however, there will be pockets where the foreclosure rate will remain high and might even increase from 2015 numbers. Such states as Florida, Nevada, Maryland, New York and New Jersey could have an increase in foreclosures. Although modifications and refinancing options, including HAMP and HARP, still exist, the majority of those eligible troubled members have already received help through modification or refinance. While subsequent modifications may aid some members, the overall numbers of subsequent modifications and refinances are not expected to have any significant influence on the foreclosure rate but will help contribute to the general downward trend.
4. TRID. Hazel Wong notes that TILA/RESPA Integrated Disclosure (TRID) rule went into effect October 3, 2015, changing the forms required to close home loans. Congress provided Credit Unions and other lenders a grace period for compliance with TRID through the Homebuyers Assistance Act to encourage normal processing times and business operations during the first few months of TRID integration. This grace period expires February 1, 2016. We predict TRID compliance will require comprehensive changes in the way Credit Unions make home loans. Technology has provided a method for streamlining changes required by TRID through what is known as digital closing solutions, including automation of the delivery of disclosures and enabling electronic signatures. We predict that 2016 will see the beginning of a trend towards the implementation of digital closing solutions to facilitate TRID compliance.
5. Mergers. Andy Keeney predicts that the trend for mergers of Credit Unions will continue and perhaps increase throughout 2016. For all Credit Unions, the regulatory burden is becoming extremely cost prohibitive. Many maintain that the regulatory burden could cost credit unions, nationwide, billions of dollars. For Credit Unions that are $100 million or less in assets, this regulatory burden has become such a financial impact that even with a strong financial position, these Credit Unions, in 2016, may seek merger partners. The difference, however, will be that mergers in 2016 will be by and between strong Credit Unions with a mutual goal of improving member service and increased opportunities to members. We predict there will be hundreds of mergers in 2016.
6. Employment Issues Focus on Sexual Orientation. John Bredehoft predicts that complying with human resources and civil rights law will continue to be a challenge during 2016. The U.S. Equal Opportunity Commission in 2015 ruled that employment discrimination on the basis of sexual orientation was unlawful, even though federal law does not expressly say as much. In 2016, this theory will gain acceptance in the courts. Does this mean Credit Unions need to change their practices? Probably not, unless they fire folks based on their sexual orientation but Credit Unions should pay attention to changing their EEO statements in handbooks and hiring materials. We also predict that more claims will be brought by transsexuals forced to use a mens or womens restroom and some Credit Unions will consider unisex public facilities in the branches. A final prediction and some good news? Long-expected federal rules on what you need to do to make a company web site accessible to individuals with disabilities has again been delayed. We predict regulations will appear in 2018, not in 2016.
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.