As the growing compliance burden "chokes off" sources of income one by one, credit unions and their CUSOs are looking to create new growth opportunities in everything from investments, to some untraditional lending activities and even collections.
That was the message from Jack Antonini, president and CEO of the National Association of Credit Union Service Organizations, who said regulations on mortgages and member business lending are stifling those previously lucrative areas for CUs. "What were really good areas for credit unions and places they could grow are being choked off," he asserted, citing
As a result, credit unions are looking to new and untraditional sources of income. One such idea: making loans on timeshares. Antonini said he was a bit dubious when he first heard about this idea, but coming out of the recession values of timeshares are low enough consumers can finance a purchase-and there is a CUSO filling that niche.
"There probably will be more of these nontraditional opportunities as our mainline revenue generators are under attack," he said. "People are giving new ideas more consideration than they would have a few years ago."
The collections area likewise is seeing innovation, Antonini said. Charge-offs usually are money gone, but he noted a CUSO named CU Revest LLC is creating an asset on what used to be a zero value.
The participating credit unions will share in any collections that are realized, and the members get to re-establish their credit and become a part of the credit union again. "I am seeing more innovation than in the past," he added.
But it can be hard to innovate in new areas when credit unions are so busy trying to keep up with regulations coming out of both CFPB and NCUA. At NACUSO's recent annual conference here, Antonini told Credit Union Journal that a particularly sticky compliance situation is coming as a result of guidance letters to credit unions, which can become de facto regulation without the benefit of a public comment period, citing a recent guidance letter about MBLs.
"One example is a business owner has to be a member of a credit union for five years to not be required to give a personal guarantee," Antonini offered. "NCUA is trying to protect the industry, but they are hurting it by reverse selection. This limits the types of loans credit unions are going to get because they only are going to get the people who cannot get a loan elsewhere. The people who are running successful small businesses know they do not have to deal with having to give a personal guarantee if they go to a bank."
