Top 5 Best & Worst of 2014
Published January 7, 2015 1:42 PM
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Updated June 1, 2021 1:20 PM
1 Min Read
Credit Union Journal outlines the best and worst happenings in the credit union community in 2014. Interestingly, some of the best things were also some of the worst.
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The Best: No. 5 Momentum in Congress
Even under the best of circumstances, shepherding bills through Congress takes a lot of time (most often measured in years, not days) and effort. That goes double for a Congress marked by extreme partisanship and the ensuing gridlock. But credit unions were able to move the needle on a number of initiatives.
CUNA CEO Jim Nussle cited passage of the IOLTA (interest on lawyer trust accounts) as the first piece of legislation solely for credit unions to be passed in more than decade. "Passing this law will set the stage for more regulatory relief," he said, "A directive was passed through the U.S. House for a study on expanding or eliminating the automatic cap on transfers from savings to checking accounts under the Fed's Reg D. We're heading into the 114th Congress on a positive note."
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The Best: No. 4 Momentum with Consumers
CUNA trumpeted when its data suggested that credit unions counted more than 100 million members, and while there was some debate as to the accuracy and significance of that tally, it is not the only evidence that "the best-kept secret in financial services" is starting to gain real momentum with members and potential members.
"In the Washington context, credit unions really do make their own case by providing fairly-priced, member-focused financial services," said John McKechnie, partner at Total Spectrum, a political consulting firm in Washington. "The high-regard in which credit unions are held by consumers, reflected year after year in survey after survey, is no accident. This provides a powerful counter-argument to the banker claims that 'credit unions are just like banks.'"
CUES CEO Chuck Fagan agreed, citing a "continuing trend of consumers having more confidence in credit unions than banks," as one of the best happenings in 2014.
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The Best: No. 3 Risk-Based Capital
A little surprised to see this one make it to the "best" list? Industry stakeholders suggested that while it easily also belongs on the "worst" list, NCUA's proposed rule on RBC has come a long way already, and that's even before the agency releases its revised rule for a second comment period. Indeed, it's that second comment period, among other things, that lands RBC on the "best" list.
"The concept of risk-based capital is sound, and NCUA wisely decided to listen to over 2,100 commenters about the weaknesses in their original proposal and agree to put a revised proposal out for another comment period in 2015," said Dennis Dollar, Dollar Associates LLC, Birmingham, Ala. "Making some significant changes to both the risk weights and the unnecessarily high triggers could make what many credit unions expected to be a truly negative regulatory action into a much more positive one. The credit union industry had a responsible outcry of reasoned suggestions to improve the proposed rule, and NCUA seems to be listening. This is positive movement and one of the best series of events in 2014 with long-term ramifications for 2015 and beyond."
CUNA CEO Jim Nussle agreed: "More than 2,000 comment letters were filed in 2014 by credit unions and their supporters in opposition to the NCUA's RBC proposal. Included in that effort: more than 75% of the member of the U.S. House... and dozens of senators weighed in with their own concerns, which helped convince NCUA to retool its proposal."
The Best: No. 2 Mobile Banking Innovation
Even before Apple Pay was launched, credit unions were seeing robust movement on the mobile banking and payments front. "Apple Pay was a great thing for credit unions because it accelerated investment in mobile," suggested CUES CEO Chuck Fagan.
Dr. Brandi Stankovic, partner at Las Vegas-based CU consultancy Mitchell, Stankovic & Associates, agreed. When asked to suggest one of the best things of 2014, she said, "the pace of change with payments. Hello, Apple Pay!"
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The Best: No. 1 Economic Growth
A better, stronger economy was reflected in better, stronger numbers at credit unions. "Loans continue to grow," said CUNA CEO Jim Nussle. "Credit unions continue to increase small business lending, auto loans, mortgages and others due to their lower rates on loans."
But it wasn't just loan growth. "It was another year of good earning for credit unions," said CUES CEO Chuck Fagan. There was strong net income, fueled in large part by strong loan growth."
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The Worst: No. 5 The Great Divide
A phenomenon that started long before 2014, the growing divide between "the haves" and "have nots" in the credit union community made it onto many CU advocates' lists of "worsts" for 2014. For all that the strengthening economy has led to a new vitality among credit unions that is reflected in everything from loan growth to credit unions surpassing the 100 million-member mark, much of that largesse is being felt at larger credit unions, while their much smaller brethren continue to languish and are disappearing through mergers with larger credit unions.
Dr. Brandi Stankovic, partner at Las Vegas-based credit union consultancy Mitchell, Stankovic & Associates, cited "mergers as a result of regulatory pressure," as one of her "worsts" for 2014. "Small credit unions are being forced to think merger. Big credit unions are being told bigger is better to gain economies of scale. Some merger liaisons are raking in the money with approaches that are suspiciously self-serving. Not in the members' best interest."
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The Worst: No. 4 Key Initiatives Stalled in Congress
Yet another "best" that, oddly enough, also makes it into the "worst." While credit union advocates were pleased to note some good momentum on some things In Congress, there are still a number of key initiatives that have stalled in or, in some cases, haven't even been taken up by Congress.Among them, removing (or at least raising) the cap on member business loans, creating secondary/alternative capital for credit unions and the lack of action to curb data breaches were all cited by a number of credit union advocates.
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The Worst: No. 3 The New Competition
Sure, Apple Pay was cited on the "best" list for how it has pushed credit unions to invest in mobile payments and mobile banking, in general. And even though a number of credit unions have already signed up to participate in Apple Pay, seeing a major technology company that previously wasn't considered a part of the financial services marketplace enter that marketplace also gives some credit unions pause. And it's not just Apple Pay. CUES CEO Chuck Fagan counted "non-traditional players moving into the space, including Moven and Simple" on his "worst" list. Others also pointed to Walmart's increasing encroachment of financial services, including its deal with Green Dot, among other initiatives, as a potentially scary addition to the organizations that credit unions must now face as competitors.
The Worst: No. 2 Compliance, Compliance, Compliance
Sure, NCUA's eventual movement on its proposed rule on risk-based capital put it on the "best" list, but given the sheer amount of angst and anger the original rule provoked, it also lands squarely on the "worst" list, as well, but only as part and parcel with the whole host of other new rules and regulations that got thrown at credit unions during 2014. The "worst" list could easily have been populated entirely by new regulations. Indeed, former NCUA Chairman-turned-consultant Dennis Dollar cited the Consumer Financial Protection Bureau's proposed rule on prepaid cards as one of the worst things that happened in 2014 because it may serve as a precursor to that regulator's approach on overdraft fees. While ACUMA CEO Bob Dorsa pointed to CFPB's qualified mortgage rules.
"Credit unions didn't cause the financial crisis, but they're still being punished for it," said CUNA CEO Jim Nussle. "Credit unions continue to be burdened by regulations imposed on big banks and other bad actors that triggered the financial crisis. By lumping credit unions in with these other financial institutions, the new regulatory mandates by Congress and harsh examination experiences with NCUA hinder credit union service to members."
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The Worst: No. 1 Data Breaches
The onslaught of data breaches at high-volume, big-box retailers has gotten to the point where they barely make headlines anymore but they're still causing big headaches (and mounting costs) for credit unions.
"Data breaches have cost credit unions at least $90 million from Home Depot and Target alone," said CUNA CEO Jim Nussle. "Unfortunately, the number of data breaches and their impact on credit unions will likely continue to grow in 2015 because merchants are still not held to the same data security standards as credit unions and other financial institutions."
John McKechnie of political consultancy Total Spectrum, concurred. "Breaches are occurring with an alarming frequency, consumer information continues to be compromised, and credit unions (and other financial institutions) are left holding a very heavy bag, containing financial and reputational losses," he said. "The worst development for credit unions in 2014 as the disturbing number of data breaches, and the corresponding failure of Congress to take any serious steps to change the law and better protect consumers."
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