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Business Lending Rule Changes

The 2016 NCUA final rule on Member Business Lending recently took full effect.  It is the largest change to the commercial lending rules the credit union industry has seen in several years. The rule change modernizes NCUA’s member business lending regulations and will allow credit unions to expand their commercial lending efforts.

The most fundamental change is a shift from the old prescriptive approach to a more flexible principal- based approach.For example, when it comes to collateral, the regulations no longer impose specific maximum LTV ratios or require the personal guaranty of a business principal.  Instead, the regulations require that a credit union must adopt policies and procedures that require collateral sufficient to ensure adequate loan balance protection together with appropriate risk-sharing with the borrower and the business principal(s), which may be in the form of a personal guaranty.  Some of the other changes include: exemptions for smaller credit unions (less than $250 million in assets) with limited commercial loan exposure from some of the more labor-intensive requirements of the new regulations; changes to the aggregate lending limit rules; and the elimination of previously required waivers.

How the Rule Changes Impact Your Credit Union

So what does this mean for your credit union?  The new rules allow the potential for increased commercial lending growth.  Industry leaders are cautiously optimistic. Dan Sumner, president and CEO of the consulting firm DFTC sums up the mood when he says, “Be as open-minded as possible, but don’t take this lightly. NCUA will hold our feet to the fire regarding the business loans we do, and we’ll have to understand the rules very well.” He also admitted to having butterflies in his stomach when the rule change was announced.

This kind of optimistic enthusiasm is spreading throughout the industry landscape as credit unions prepare themselves for growth. Other changes will come as a result, too.  Of course, as regulations change, your forms must follow suit. Are your forms in need of a compliance update? If you are unsure, Oak Tree can help. We have been serving credit unions for more than 3 decades, recognized as one of the leading forms providers in the industry. We will make sure your forms are up to date and compliant with all state and federal regulations, allowing you to focus on keeping pace with the industry at large. Contacting us is a sound investment in your credit union’s future. We look forward to serving you.

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How Many Credit Cards Do Americans Have?

Americans use a lot of credit cards; the facts don’t lie. According to Federal Reserve data from 2014, 72% of consumers held at least one credit card. That’s a lot of people with a lot of plastic. That purchasing power has to originate from somewhere, and oftentimes that somewhere is your credit union. If you market your credit card services on a consistent basis, you have contributed to these stats. If not, let the data sink in. You might be missing out on some market share.  

Credit Cards by the Numbers

Here is the most recent data, pulled from a couple of different sources.

Federal Reserve data from 2014 found the following:

roughly 30% of Americans held 1 to 2 credit cards

almost 20% claimed to possess 3 or 4 credit cards

around 10% held 5 or 6 credit cards

7% of Americans had 7 credit cards or more

Data from Experian shows an increase in the number of credit cards per person, from 2.09 in 2013 to 2.24 in 2015.

What This Means for Your Credit Union

What all of this means is really simple. Consumers want credit, and they want multiple credit cards or lines of credit. The demand may increase in 2017 as well thanks to a change in credit score reporting. The Consumer Data Industry Association is implementing new standards effective July 1st. The change is in response to complaints filed by consumers over disputed items on their credit report. The Consumer Financial Protection Bureau initiated a call for investigation which uncovered some reporting problems with the big three. As a result, the CDIA updated their standards as a proactive measure. The resulting change could see some civil debts and tax liens fall off of certain consumer’s credit report.

Higher credit scores could encourage those consumers to seek other forms of credit in an attempt to push their score higher, or help improve their score over time as they responsibly maintain the new accounts. For this reason, your share secured members may seek a migration towards more traditional forms of credit. Credit cards will certainly be on their radar. This could see the number of average credit cards per person increasing even more over the next few years.

In the meantime, make sure you visit your consumer lending forms package. Compliance is key, and your forms need to be up to date as well. If you have any questions about your forms, we can help. Reach out today and let us show you how Oak Tree can make a difference at ClientServices@oaktreebiz.com.

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How Online Shopping is Changing the Retail Environment

The face of retail is changing, thanks to online shopping. Over the past few years, online retailers have captured a lot of market share. What may have looked like a failed venture or a trend at first, has significantly impacted retail environments. Just how large is the impact? Well, according to RBC Capital Markets Reports’ September Newsletter, Sears Holdings may lose as many as 50-60 stores next year. Many other retailers have made tough decisions to shut their doors as well.

How Online Shopping Is Changing the Retail Environment

People like the “no line” experience they receive from retailers like Amazon and eBay. So what does this mean for the future of credit cards?  Will this affect cards offered by your credit union? Will members even need a credit card in the future?

The short answer to all three questions is “sort of.” While online shopping is very popular, there are many other retail stores for customers to choose from. Also, things like grocery shopping and haircuts will require trips to physical locations. Commodity-based products will still also be sold through a physical space.

However, that’s not to say the landscape couldn’t change at some point. We may very well see a card-less society in the future. However, even at that, entities like PayPal and Apple Pay will be necessities. Methods of payment must be tied to the payment service in order for them to be accessed. So, while a card may disappear, access to the credit account must originate from somewhere.

The Verdict? A Continually “Shape-Shifting” Retail Environment

Also, the “expense” of things is rapidly being converted to profit. As retailers discover the willingness of the consumer to buy in this way, they are absolutely taking advantage of the moment by dumping overhead expenses and converting them to cold, hard CASH. Expect this trend to continue as long as the consumer is okay with a virtual buying experience. As soon as the pendulum begins to swing in any direction, retailers will absolutely respond to the desires of the marketplace, and, in many cases, drive the marketplace in new directions. As the shopping pendulum begins to swing toward a more online-friendly environment, new measures for security will be implemented.

In any environment, you can be sure of Oak Tree’s products and services being always compliant and always in line with state and federal regulations with every form we issue. So while the retail landscape may change, you can rest assured that our forms will remain compliant and secure. Get your compliant document package at www.oaktreebiz.com/products-services/consumer-lending-forms.

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Are you wondering if your #forms are ready for the Reg. CC changes effective July 1 and if your #creditunion needs to be concerned about the Reg. CC changes effective this summer? 📄💼

Read the rest HERE: https://www.oaktreebiz.com/industry-news/how-the-taxpayer-first-act-affects-credit-unions

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