For more information:
Rick Uhlmann 608/231-8940 rick.uhlmann@cunamutual.com
Phil Tschudy 608/231-7188 philip.tschudy@cunamutual.com
June 19, 2008
Regulatory Changes Add To Tough Lending Landscape
Be Aware of Pending Changes and Adapt for Future, Discovery Attendees Told
HOLLYWOOD, Fla. – Credit unions can continue to expect regulatory changes while in the throes of a difficult lending environment and though some changes may have a profound impact on their business, others present opportunities, attendees of CUNA Mutual Group’s Discovery Conference were told Thursday.
“The lending environment is difficult now and part of that is increased regulatory scrutiny, but there are some positives,” said Bill Klewin, associate general counsel, CUNA Mutual. “First, with 11 percent capital, credit unions have money to spend. It’s an excellent time to invest in technology to take apps, close loans and embrace electronic signatures to meet the needs of your next generation of lenders.”
Klewin provided an update of the looming regulatory issues vitally important to credit union lending, including:
Truth in Lending (Regulation Z) – The Federal Reserve Board’s 2007 proposal could have a harmful effect on multi-featured open-end lending. It would change the way approximately 3,500 credit unions do lending based on Truth-in-Lending. CUNA Mutual and Credit Union National Association officials have proposed alternatives to the Fed proposal, emphasizing the harm this proposal would cause credit unions.
RESPA – Housing and Urban Development’s (HUD) Real Estate Settlement Procedures Act would result in significant change to how the closing process works. The regulation would likely result in a requiring a capability to do underwriting earlier in the lending process and assumes closings would occur in a face-to-face environment. Final regulations are expected in early 2009.
Unfair Deceptive Acts and Practices Rule – The regulation would prohibit certain activities with credit cards and overdraft protection programs. A component that would affect credit unions would be the inability to raise rates on existing balances based on changes in a member’s creditworthiness. “This could be a big deal from a safety and soundness standpoint,” Klewin said. “The net result is a credit union may not get the kind of return on its portfolio that it is today.”
Legislation that passed in 2000 but the financial services industry has not fully embraced, is e-signatures, Klewin said. The e-commerce legislation provides e-signatures with the same force as a paper contract. However, uncertainty over the technology and security has limited its use by many banks and credit unions. Klewin added the legislation affords credit unions an opportunity to prepare for the expectations of future borrowers.
“The new generation of borrowers, Gen Y and younger Gen X’ers, will insist on this technology. It would behoove credit unions to look into how this technology can be integrated into their future business plans.
“With continued lending uneasiness, increasing competition and a dynamic regulatory environment, changes will keep challenging your operations, marketing and sales,” Klewin said. “Be aware of some of those changes that may be coming and take action that will prepare you better for the future.”
Recognized as a premier hands-on professional development conference for credit union leaders, CUNA Mutual’s Discovery Conference offers more than 55 work sessions that deliver relevant content and actionable takeaways. Credit union leaders also benefit from the extraordinary networking and hands-on learning opportunities.
CUNA Mutual Group is a leading provider of financial services to cooperatives, credit unions, their members and valued customers worldwide. With more than 70 years of market commitment, CUNA Mutual’s vision is unwavering: to be a trusted business partner who delivers service excellence and customer-focused, best-in-class products and market-driven innovation. More information on the company is available on the company’s Web site at www.cunamutual.com.
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