While sitting on my mythical mountaintop with my mythical beard flowing, some mythical predictions for 2017 have come to me and I feel compelled to share them (Denise told me I had to).
The New MBL Rule
For credit unions that have experienced business lenders, the new MBL Rule will enable them to customize their loan offerings that will make them very competitive with the community banks and annoy the banks even more. For credit unions that do not have experienced business lenders but still make business loans, there will be many deer in the headlight moments as the credit unions try to explain why they made a loan to a member who convinced the credit union that the pet rock business was coming back and no security and guarantee was needed for the loan.
The community bankers trade association’s law suit against NCUA will fail but not before the trade association receives increased dues to fund their Don Quixote mission and not before their attorneys upgrade their boats from the fees earned.
This also is a loser for the community bankers. The current rule is less expansive than the membership rule enacted during the time Dennis Dollar was Chair of NCUA and the bankers lost that court battle. I need to get to know the attorneys for the community bankers. They are going to have really nice boats.
The CFPB
Will President Trump give Mr. Cordray the Apprentice treatment? If the Republican Congress and President Trump can get along (and that is not a given), my prediction is that the CFPB will no longer be run by a single person but will be run by a board which will provide more balance and perspective. The courts will continue to push back on the CFPB when it oversteps its Congressional or Constitutional authority. Pendulums swing in government and the pendulum that swung to over regulation after the financial crisis will now swing back.
The Internet, FinTech and the Credit Union Business Model
To state that the credit union business model is under stress is an understatement. The Internet provides a staggering number of choices in financial service providers. Many FinTech providers are more convenient to use and offer lower costs to consumers as compared to credit unions. Credit unions that do not adapt to using FinTech tools or partner with FinTech providers will risk becoming irrelevant to their members and suffering a slow motion liquidation. The threat has increased now that the OCC is offering a bank light charter for FinTech firms. The FinTech train is leaving the station and credit unions have to have a strategy to deal with it to remain relevant to their members. In 2017, we will see which credit unions get on the train. My prediction is those credit unions will be the long term survivors.
Taxation
With a Republican Congress and Republican President who campaigned on tax cuts, we can expect to see tax rate cuts this year. There will be pressure to offset those cuts with other changes to the tax code. I predict that the credit union tax exemption will survive the revisions in the tax code but not without a fight.
Economy
My fellow gurus all see a good economy in 2017. I agree but I caution that too many tax cuts and not enough growth will create higher deficits. The world is not in a position to buy more of our products and President Trump will be aggressive on trade policy which could result in trade wars. So for 2017, I think we will be fine but squirrel away some chestnuts as there could be rocky times coming.
Credit Union Collaboration
You didn’t think I would miss this, did you? The pressures on the credit union model will drive more and more credit union collaboration in 2017 as the need to generate additional income and reduce operating costs will take center stage. The credit unions that are flirting with doing deep dives on back office collaborations will increase. The percentage of non-interest income will increase even as interest rates rise.
Closing Comments
Those credit unions that take advantage of increasing opportunities in 2017 will have a great year and will build a base for future success. Those credit unions tend to use CUSOs and are members of NACUSO. In high school parlance, they would be considered the cool group. So hang with the cool group with NACUSO. For you nerds out there, no worries, nerds are welcome in this cool group.
ABOUT THE AUTHOR: Guy Messick, the CUSO Guru, is General Counsel to NACUSO and a partner in the law firm of Messick & Lauer P.C. Guy and former NCUA Chairman Dennis Dollar will join again this year in what has become one of the most popular panel discussions of the NACUSO conference. With a special emphasis on regulatory actions both current and anticipated, Messick and Dollar team up to provide over fifty combined years of insight into what is happening at NCUA, CFPB and other agencies with an impact on credit unions and CUSOs.
