Rising rates, new regulations, increasing cyberthreats andchanges in the country's demographic profile all will contribute toa changing credit union service landscape in 2015, according tolawyers at Kaufman & Canoles, a Virginia Beach, Va.-based lawfirm.

The seven lawyers who comprise the firm's credit union team eachoffered one of the following predictions to help credit unionsprepare for a new frontier of service changes.

Focus on Privacy Rights and Cybersecurity

Credit unions will spend substantial time and resources in 2015to update their policies and procedures regarding members' privacyrights and addressing potential cybersecurity threats, according toattorney E. Andrew “Andy” Keeney. With cyberbreaches announced on analmost weekly basis, credit unions will be expected to respondquickly to cyber threats in the year to come.

The NCUA will place a stronger emphasis on the types and depthof cyber protections credit union need to have in place, Keeneysaid, and credit unions will need to protect members and their datain every way possible. This will mean addressing many legal issues,revising policies and procedures, updating websites, and reviewinginsurance coverage.

“We predict that the steps credit unions undertake to protectthe privacy rights of their members will be costly, but willultimately be a significant enhancement to the reputation and brandof all credit unions,” Keeney said.

Expect Lending and Interest Rate Changes

Interest rates will rise, member-borrowers will seek fixed ratesor interest rate hedge protection, and more will seek new credit atmore favorable rates, Alfred M. “Ran” Randolph, another attorney with Kaufman &Canoles, said.

In addition, expect an increase in commercial member borrowing,lending and transaction activities that will provide the neededimpetus to get providers who have been sidelined back into thegame.

As value returns to small businesses, pressure to transitionfamily businesses to the next generation or sell to third partieswill mount.

“Loan demand will surge,” Randolph said. “The challenge forcredit unions will be to remain vigilant in their lendingpractices.”

Target Millennials for Membership

Expect marketing efforts and growth expansion plans toincreasingly target Millennials as credit unions continue to betterunderstand the financial impact this group does and will have onthe marketplace, according to attorney Erin Deal.

Increased membership culled from this age bracket can result inshare and loan growth, especially for smaller credit unions thatsuffered membership decreases in 2014, Deal said. From servingfirst-time homebuyers to developing products specifically for thisdemographic, credit unions should focus on bringing in youngerconsumers who can grow with the credit union and support its futuresuccess.

“This tech-savvy generation has high expectations forconvenience and mobility, so credit unions will have to continue toadapt to attract this influential group,” Deal said.

Anticipate More Member Business Loans

A blossoming economy means greater business growth, and demandfor member business loans will definitely rise, attorney DustinDeVore, said. Credit unions will attempt to increase theirbusiness loan portfolios in order to increase revenues, as well asgain greater visibility in their communities

“New demand for credit from small businesses cannot be met bycommunity banks alone, and these businesses will increasingly lookto credit unions for their lending needs,” DeVore said.

However, credit unions that pursue more MBLs must closelyevaluate and analyze business lending opportunities using soundunderwriting principles, consider and accommodate interest raterisk, accurately measure the strength of guarantors, assessavailable collateral and consider other factors, DeVore added.

As business lending increases, so will requests for waivers andthe NCUA's monitoring for compliance.

Expect More Class Action Litigation

In 2015, expect increased consumer litigation, especially aroundkey consumer statutes enacted by Congress, according to attorneyMarc Darnell.

But some litigation also will flow from state statutes aimed atpicking up what Congress left undone this past year.

“Federal and state scrutiny of consumer issues continues togrow, and spin-off litigation for lenders will be a headache ofgrowing proportions,” Darnell said. “And, to the extent that anysystemic mistakes in the lending or asset recovery processes mayhave affected groups of members, credit unions can expect acontinued rise in class action litigation.”

Understand That Credit Union Mergers WillIncrease

There will be fewer credit unions at the end of 2015 than thereare now, according to attorney Hazel Wong.

With increasing compliance requirements and the correspondingincreased liability, more credit unions will elect to merge in thecoming year.

Between 2003 and 2012, there were 2,462 credit union mergers,Wong said. During this period, the total number of credit unionsdeclined from 9,369 to 6,812, or 27%.

Last year, NCUA's Office of Small Credit Union Initiativesissued new guidance in the form of a brochure — “Truth in Mergers:A Guide for Merging Credit Unions” — to assist credit unions in themerger process. This brochure is the result of a review of morethan 430 mergers and is designed to help credit unions from thefirst steps in deciding if a merger is right for them through thefinal merger process, Wong said.

Expect Foreclosures to Increase

One would expect a strengthening economy to reduce the number offoreclosures, but attorney Brian Dolan predicts that in many areas of the country, thenumber of foreclosures during the first six months of 2015 willexceed the number of foreclosures during the first six months of2014.

Blame the new mortgage servicing rules, he said, which tookeffect in 2014 and prohibited the first notice of foreclosure untila member is more than 120 days delinquent.

This rule artificially decreased the foreclosure rate during thefirst half of 2014. The second half of 2014 saw the foreclosurerate increase in comparison to the first half of the year.

“As a result of the 120-day prohibition, by the time manymembers now seriously attempt to cure their default, the deficiencyhas become so large that they cannot secure the necessary funds,”Dolan said. “We predict the foreclosure rate during the first halfof 2015 may be closer to the rate in 2013 than the rate in2014.”