Rising rates, new regulations, increasing cyberthreats and changes in the country's demographic profile all will contribute to a changing credit union service landscape in 2015, according to lawyers at Kaufman & Canoles, a Virginia Beach, Va.-based law firm.

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

Focus on Privacy Rights and Cybersecurity

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

The NCUA will place a stronger emphasis on the types and depth of cyber protections credit union need to have in place, Keeney said, and credit unions will need to protect members and their data in every way possible. This will mean addressing many legal issues, revising policies and procedures, updating websites, and reviewing insurance coverage.

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

Expect Lending and Interest Rate Changes

Interest rates will rise, member-borrowers will seek fixed rates or interest rate hedge protection, and more will seek new credit at more 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 needed impetus to get providers who have been sidelined back into the game.

As value returns to small businesses, pressure to transition family businesses to the next generation or sell to third parties will mount.

“Loan demand will surge,” Randolph said. “The challenge for credit unions will be to remain vigilant in their lending practices.”

Target Millennials for Membership

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

Increased membership culled from this age bracket can result in share and loan growth, especially for smaller credit unions that suffered membership decreases in 2014, Deal said. From serving first-time homebuyers to developing products specifically for this demographic, credit unions should focus on bringing in younger consumers who can grow with the credit union and support its future success.

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

Anticipate More Member Business Loans

A blossoming economy means greater business growth, and demand for member business loans will definitely rise, attorney Dustin DeVore, said. Credit unions will attempt to increase their business loan portfolios in order to increase revenues, as well as gain greater visibility in their communities

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

However, credit unions that pursue more MBLs must closely evaluate and analyze business lending opportunities using sound underwriting principles, consider and accommodate interest rate risk, accurately measure the strength of guarantors, assess available collateral and consider other factors, DeVore added.

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

Expect More Class Action Litigation

In 2015, expect increased consumer litigation, especially around key consumer statutes enacted by Congress, according to attorney Marc Darnell.

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

“Federal and state scrutiny of consumer issues continues to grow, and spin-off litigation for lenders will be a headache of growing proportions,” Darnell said. “And, to the extent that any systemic mistakes in the lending or asset recovery processes may have affected groups of members, credit unions can expect a continued rise in class action litigation.”

Understand That Credit Union Mergers Will Increase

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

With increasing compliance requirements and the corresponding increased liability, more credit unions will elect to merge in the coming year.

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

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

Expect Foreclosures to Increase

One would expect a strengthening economy to reduce the number of foreclosures, but attorney Brian Dolan predicts that in many areas of the country, the number of foreclosures during the first six months of 2015 will exceed the number of foreclosures during the first six months of 2014.

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

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

“As a result of the 120-day prohibition, by the time many members now seriously attempt to cure their default, the deficiency has become so large that they cannot secure the necessary funds,” Dolan said. “We predict the foreclosure rate during the first half of 2015 may be closer to the rate in 2013 than the rate in 2014.”

Instant Insights /

7 Credit Union Legal Predictions for 2015

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