Today at the Rules of Thumb blog from MoneyThumb, we would like to address a topic that is of special interest to credit unions. We know among our readers are many of you who work at and/or own so type of financial or personal interest in this type of banking establishment. What we have done below is to outline the six key challenges that we see for credit unions and their in-house professionals in today’s environment.
1. Member Retention + Engagement with Incentives and Promotions
Credit unions operate in a fiercely competitive market and member retention and engagement are crucial elements for their long-term viability. Our experience shows that strategic advice with respect to incentives and promotional programs can highlight your unique products and services to new and existing members.
2. Potential Interest Rate Increases Leading to Borrower Financial Fatigue
Credit unions are on the front lines for addressing economic downturns in their members’ lives. And given today’s low interest rate, some borrower members may have become overextended on projects. When the Federal Treasury interest rate increases, it is likely that these borrowers will encounter financial fatigue. Finding unique solutions and workouts is critical in addressing this issue.
3. Appropriate Loan Structuring to Fit Individualized Needs
Credit unions offer individualized products to demonstrate value to their members. A fully integrated legal services partner should take the time to understand all the players in each transaction to ensure the best outcomes for their clients. In-house professionals should seek a law firm with experience in risk assessment and mitigation for real property lending, construction loans, asset-based lending, floor plan financing, and other forms of collateral.
4. Mergers + Acquisitions among Credit Unions
Increasingly, credit unions are examining possibilities for streamlining operations and taking advantage of economies of scale achieved through partnerships and merger transactions. Our role focuses on guiding clients through the analysis of whether a merger or acquisition is actually the right path and, if so, the mechanics of merging with or acquiring another credit union while minimizing disruption in your daily business operations.
5. Regulatory Compliance with the Affordable Care Act and other Developments
Recent developments through the Affordable Care Act, the Consumer Financial Protection Bureau, and the Service members Civil Relief Act have led to avoidable missteps in compliance. Because these regulations can be highly complex, it is advisable to consult with legal professionals dedicated to understanding these acts comprehensively. A compliance audit can be all that is needed to help insulate credit unions from falling out of line with federal, state and local requirements.
6. Creative Solutions for Loss Mitigation + Workouts
Non-performing loans are still weighing heavily on the books of many credit unions. Potential solutions might include restructuring, auctions, receivership, asset surrender, or other remedies, but each circumstance is unique in its relationship and financial dynamics. Creativity and a strict focus on your company’s level of risk tolerance should be the focus of your legal services partner.