Credit Union Legal Update – Legal Hurdles for 2018
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 2018, we forecast 7 potential hurdles we believe will significantly impact many credit unions. Our top 7 predictions for 2018 are below:
- Increased Business Borrowing. Dustin DeVore predicts that commercial loans and the demand for loan participations will increase in 2018. The economy in 2017 improved significantly in nearly all measured areas. Unemployment decreased, the stock market increased significantly and in the fourth quarter of 2017 national economic GDP growth was on pace to be the best in many years. Kaufman & Canoles attorneys saw a major increase in commercial loan activity at the end of 2017 and expect this to continue at least through mid-year 2018. One factor of uncertainty in this area are the further rate increases by the Federal Reserve that are expected in 2018.
- A lot more anti-sexual-harassment training, but not many more claims or lawsuits. John Bredehoft predicts that with a plethora of sexual harassment claims surfacing against prominent men in government and the entertainment world, “sexual harassment” and the imbalance of power in the workplace is again a prominent part of the national conversation. The positive effects of this discussion will be widespread and, hopefully, enduring. We predict credit unions will want to refresh training for line employees and managers, an excellent idea at any time. Training for volunteers would also be encouraged. But we do not believe there is a pent-up tsunami of unasserted claims that will burst forth and inundate credit unions. We also believe credit unions will see some male employees over-reacting, intentionally or not. But remember: no one ever got sued for holding a door or standing to greet a colleague. Civility and politeness are watchwords for 2018.
- Bitcoin and Crypto Currencies. Christy Murphy predicts that new cryptocurrencies will continue to pop up in the marketplace to challenge the more relatively “established” cryptocurrencies (such as Bitcoin and Ethereum) and both the new and existing cryptocurrencies will present a number of legal challenges in 2018. No one knows if and when the “bubble” of cryptocurrencies will burst. It is clear that a number of new upstart cryptocurrencies will appear as tech savvy entrepreneurs see an opportunity to create their own marketplace and make money from this trend. The varying degree of liquidity of cryptocurrencies and the legal challenges associated with these transactions will continue to increase in 2018. Credit unions should be on the alert.
- Home Mortgage Disclosure Act. Erin Deal Johnson predicts that there will be increased emphasis on Home Mortgage Disclosure Act (“HMDA”) compliance. Beginning this year, credit unions must collect additional mortgage information and submit HMDA data collected using the Consumer Financial Protection Bureau’s (“CFPB”) new online platform. The CFPB requires financial institutions to collect additional information regarding applications for, and originations and purchases of, home purchase loans, home improvement loans, and refinancing. Fortunately, the Federal Financial Institutions Examination Council has announced some new examiner transaction testing guidelines that will apply to 2017 HMDA data that should require fewer credit unions to resubmit and correct their HMDA Loan Application Registers. The CFPB also issued a public statement that it does not intend to require data resubmission for 2018 data unless errors are material or assess penalties with respect to errors for data. We predict that credit unions will expend considerable compliance efforts to fully adapt with the HMDA changes that go into effect in 2018.
- Continued Focus on Decreasing Regulation. Dustin DeVore predicts that the Federal Government will continue its focus on decreasing regulation or at a minimum not enacting significant new regulations. Although repealing Dodd-Frank is almost certainly not going to happen, the recent Congressional repeal of the CFPB’s arbitration rule shows one path to help alleviate the regulatory burden on credit unions and other financial institutions. As Mick Mulvaney increases his hold on the CFPB and begins to populate the CFPB with more business friendly regulators and NAFCU and CUNA continue to lobby vigorously for decreased credit union regulation; this trend should continue in 2018.
- Threat of Lawsuits Will Continue Through 2018. Andy Keeney predicts that the threat of lawsuits will continue through 2018. Previously we have anticipated and identified litigation involving repossessions, courtesy pay, the Fair Credit Reporting Act, sexual harassment, the Servicemembers Civil Relief Act, the Fair Debt Collection Practices Act, and most recently, threats to a credit union’s website for a claim of an alleged breach of the Americans with Disabilities Act requirements. The ADA issues are likely to continue in 2018. They will be joined by threats against credit unions that utilize remote deposit capture programs.
- Legal Complexities Associated with the Spread of Legalized Marijuana. Alex Powell predicts that the legal issues surrounding legalized recreational marijuana use will continue to grow. Despite the legalization of marijuana by many state governments, marijuana remains illegal under federal law. The legal landscape for the depositing of marijuana business funds in federal insured institutions remains a challenge for the industry. Credit unions that offer banking services to marijuana related businesses face significant legal risk of violating federal laws, including the Bank Secrecy Act. To reduce the risk, credit unions must exercise due diligence before establishing new account relationships and also monitor existing accounts for unusual or suspicious transactions.
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.