Six Challenges + Opportunities Facing Credit Unions in 2014

Kegler Brown Creditors' Rights + Bankruptcy Alert

For years, Kegler Brown has offered representation in all facets of commercial lending with a focus on the unique issues that credit unions face. Based on our extensive experience partnering with institutions like this, we’ve outlined six key challenges that we see for credit unions and their in-house professionals in today’s environment. We know the value that a credit union offers to its members, and we leverage our expertise to assist these clients in achieving success.

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 (aka Obamacare), the Consumer Financial Protection Bureau, and the Servicemembers 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

Though the economy has certainly improved since the economic downturn, 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.

If you’re searching for more information about these critical issues facing credit unions or have any questions about this article, we’d love to hear from you.

Contact Stephanie P. Union and Christy A. Prince