Once again, the Kaufman & Canoles Credit Union Team has predictions for trends and changes in the credit union industry for the upcoming year. For 2016, we forecast six potential hurdles we believe will significantly impact many credit unions.
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Medallion loans. Dustin DeVore recalled 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 have declined precipitously. This has obviously caused significant concern and potential losses for credit unions. 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.
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Class action litigation. Kaufman & Canoles' Erin Deal predicted 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, as well as courtesy pay programs, 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.
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Foreclosures. Kaufman & Canoles' Brian Dolan predicted that with the gradual improvement in the overall economy, national foreclosure rates will decline in 2016 (in comparison 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.
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.
TRID. Kaufman & Canoles' Hazel Wong noted that the TILA/RESPA Integrated Disclosure rule became effective on Oct. 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 Homebuyer's Assistance Act to encourage normal processing times and business operations during the first few months of TRID integration. This grace period expired Feb. 1, 2016. TRID compliance will require comprehensive changes in the way credit unions make home loans.
Mergers. Andrew Keeney predicted 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 made 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.
Employment issues focus on sexual orientation. Kaufman & Canoles' John Bredehoft predicted that complying with human resources and civil rights law will continue to be a challenge in 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. Credit unions should pay attention to changing their equal employment opportunity statements in handbooks and hiring materials. We also predict that more claims will be brought by transsexuals forced to use a men's or women's restroom.
Dustin H. DeVore is team leader for Kaufman & Canoles. He can be reached at 757-259-3808 or [email protected].
E. Andrew Keeney is also a team leader for Kaufman & Canoles. He can be reached at 757-624-3153 or [email protected].
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