By Ray Birch
LAKEWOOD, Colo.—When it comes to their outlook on the future of the economy, credit union leaders are divided—much like Washington—along party lines.
But if there is any common ground, it is with concerns over the potential for an increased compliance burden under President Biden.
The findings are from a nationwide credit union survey conducted by Aux on the perceived effects on credit unions of the Democratic administration and the slight majority Democrats hold in Congress.
“D.C. is a log jam, and I would not say credit union CEOs are quite that divided. But I think their political tendencies are shining through in our survey,” said Doug Burke, president and CEO of the CUSO Aux. “There's not a lot of middle ground we found in the results. There is polarization here, and I think credit union CEOs will still work well together, but when it comes to their political opinions, their definitely is a divide. They are pretty much split red and blue.”
Burke said it was not that clear whether CU leaders think things will be better or worse under the Biden administration.
“Do they think it will be better than when they were under the Trump administration? It really depends on if you have Democratic tendencies,” said Burke. “If you do, I think you're excited about it and you're hoping for consumer protections.”
22 Questions
The 22-question survey explored a variety of topics for credit unions cross-departmentally, including:
- Student loan forgiveness, minimum wage increases, and marijuana legalization effects
- Compliance and accounting regulations
- New leadership and changes at the CFPB
- HMDA changes
- CECL changes
- General hypotheses on a negative/positive impact to the industry
The study was conducted February-March 2021 among 38 credit union decision makers within organizations ranging from $22 million in assets to $6.7 billion.
Burke acknowledged overall, whether CEOs have a Republican or Democratic leaning, there is concern about additional compliance burden coming from a Democratic administration.
“There is recognition that we got a bit of a compliance break with Trump,” Burke said of the study results. “I think both sides are realizing greater compliance is going to be coming back. By far, 75% indicated they see more compliance coming.”
What Credit Unions Fear Most
Doug Burke
And where most CEOs have their greatest fears of growing compliance, said Burke, is with the CFPB.
As CUToday.info has reported, acting CFPB Director Dave Uejio sent a message to staff indicating an aggressive posture for the agency in a number of areas.
“The CFPB, I read from the data, is a big area of concern from credit unions,” said Burke. “Nobody liked it under Cordray, and the pendulum swung the other way under Trump. But there is fear that we might be going back to some of what was experienced under Cordray.”
Aux asked participants if they thought new leadership at the NCUA and CFPB will result in
more or less compliance burden for credit unions. On a scale of -10 (much less) to 10 (much more), the responses averaged an 8, which shows a significant expectation across the board that there will be more compliance burden, Burke said.
Burke said that much of the concerns center on credit unions needlessly getting swept up under broad strokes rules by the CFPB, such as with payday lending. The additional burden, added Burke, has CU executives mostly concerned about how that will take away time and dollars from serving members.
Serving Cannabis Businesses
In terms of the legalization of cannabis and the ability to/interest by CUs in serving the emerging business, Burke said most credit unions are still in a wait-and-see mode.
“I think they will be this way until the federal government makes a change, and legalizes marijuana sales,” said Burke.
But Burke said CU leaders recognize the need to get all of that cash off the streets that marijuana businesses bring, and to make communities more secure and safe.
When asked if marijuana would become legal in all 50 states within the next two years, 32% of participants said yes, 55% said no, and 13% said other (five years or not anytime in the near future).
When asked what year national cannabis banking will be addressed and regulations drafted for its eventual adoption by bank and credit unions, 39% said 2022, while 2023, 2024, and 2025 were chosen equally around 17%.
Burke noted, however, that the U.S. is getting “squeezed” on both sides now, with Mexico legalizing pot sales and Canada already having done so.
Although split along party lines, Burke added that overall there is optimism among CU leaders for the future of the economy. He said that is being driven by distribution of vaccines and Americans showing a willingness to get back to doing many of the things they did outside their homes before the pandemic.
“I think credit unions believe things will get better,” he said.
Other survey results:
Student Loan Forgiveness
When asked to rate the likelihood of student loan forgiveness being passed in 2021, responses averaged in the middle at 53, on a scale of 0 (not likely at all) to 100 (extremely likely). Responses ran the full gamut, from 0 to 100.
Aux then asked if participants have included the possibility of student loan forgiveness in their risk assessment—61% said no, and 16% said yes. Nearly a quarter responded N/A because they currently do not have a student loan portfolio, Aux stated.
Minimum Wage
When asked about the likelihood of a national minimum wage increase to $15 per hour being passed this year, responses averaged 60, on a scale of 0 (not likely at all) to 100 (extremely likely).
Aux then asked an open-ended question regarding what the effect of such minimum wage increase would be on participants’ payrolls, ability to recruit and retain the talent, and/or fee income. The majority commented that they already pay more or close to $15/hour, so the effects would be immaterial. A few respondents from rural areas commented that it would hurt them.