The changes already put into effect are going to affect everything you do, from mortgage modifications to credit card lending. More amendments are percolating as well that could have significant impacts on your overdraft programs, student lending and other operations.
Fortunately, credit unions generally enjoy bipartisan support in Congress; however, they will be hit with the flying shrapnel Washington likes to call "unintended consequences." Credit unions generally did not follow the same arcane practices that banks did. However, credit unions cannot be the exception to the rules regarding consumer protections lest they be perceived as less consumer-friendly. So rules that are constantly changing right now, including Truth-in-Lending, must apply to all. (The same went for the Bank Secrecy Act following 9/11: credit unions could not afford to be seen as less guarded against terrorist financing than other financial services sectors.)
Thus, we arrive at the reintroduction of the Community Reinvestment Act expansion legislation, which would make credit unions subject to the reporting. The NCUA already started its member service data collection efforts this year with its regular examinations, but this will not appease Congress, particularly since the data to be divulged will be aggregated from all credit unions. Everyone knows that, as a whole, credit unions are more member-oriented than other financial services providers, but composite data will not drill down to those credit unions that are not serving their primary mission.
Additionally, the credit card law was intended to halt abusive practices by some of the largest credit card issuers. Still, credit unions have become ensnared in the web of new requirements, including the ban on interest-rate hikes on existing balances without a triggering event, such as a change in index, expiration of a promo rate or a payment more than 60 days late. New cardholder promo rates must be in place one year and existing cardholder promo rates must be maintained for six months. One top of that, issuers must provide 45 days notice to the borrower before increasing the rates, and the borrower will be able to cancel the card before the rate takes effect. These changes alone will modify how you price for risk, provide less flexibility in adapting to market conditions and hit your bottom line.
Another provision of the new law will require creditors to maintain Web sites to post their written credit card agreements. However, the Fed in this specific case can grant an exemption when the administrative burden outweighs the benefits. But you-not just your trade associations-need to lobby for that. The national credit union trades are there for your day-to-day representation needs so you can run your credit union. However, if you neglect to put a face (or a credit union) to the issue with real statistics and examples of how regulations could change your business, you have no right to complain.
Credit union executives have always been far too complacent about Washington, figuring that if you bury your heads in the sand, you'll get left alone. WRONG. Despite the fact that there are more credit unions than banks, the banking regulators regularly get hundreds, if not thousands, of comment letters from their constituents. More often than not, the NCUA is lucky to receive half a dozen, and two of those are always from CUNA and NAFCU, typically tucked in with one from the American Bankers Association. This ostrich mentality will not do!
It's often said that credit unions are afraid to complain because they think they'll get in trouble with the NCUA. I have news for you: the agency has more important things to worry about than retaliation for a negative comment letter from XYZ FCU in Indiana. And if it doesn't concern itself with larger matters, then retaliation should be the least of your concerns.
Credit unions have many places along the way to provide input on upcoming legislation or regulation as it meanders through committees and notices of proposed rulemakings. CUNA and NAFCU try to make it easy for you to grab policymakers' attention with their GAC and Congressional Caucus. Take advantage. If you can't, bend your congressman's ear back in his local district office where 1) there'll likely be more time, and 2) he knows he's dealing with a voting constituent. Supplement your comments by noting how many members you represent in his or her district. Politicians are always counting votes.
New regulations and laws, particularly pertaining to lending, are coming at you fast and furious. This at a time when lending at federally insured credit unions nationwide dropped 0.1% in the first quarter, according to the NCUA. At the same time, FICU shares grew 6.4%. What's this doing to your net worth and your ability to serve members? Credit unions need to continue their path of responsible lending, not only for their own benefit but for the sake of their members who can't get loans anywhere else. Be sure you let your members of Congress and regulators know how all the new requirements they're imposing on you will strike a blow to your members, the voting public.
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