President and CEO of OSU Federal Credit Union
OB: What is the biggest challenge facing credit unions today?
RH: The biggest challenge facing credit unions, as well as all the financial services industry, is overregulation. When the Dodd-Frank Act passed, it was to address shortcomings in some of the large financial institutions, especially those over $10 billion. But now almost every regulation that comes out from that act is being considered best practice and is expected to be implemented by most financial institutions. We had plenty of regulations to address issues that arose; we just didn’t have regulators enforcing the regulations we had.
OB: Which of the new regulations are you finding it hardest to comply with?
RH: The biggest challenge is that the regulations are far reaching. The regulations hinder our ability to serve members. Credit unions were not the financial institutions that caused the financial crisis. We got caught up in the backwash. The regulations and best practices that have been implemented actually place restrictions upon how we can serve members, and they make it more costly for the member.
OB: How do the regulations place restrictions on your credit union and make it more costly?
RH: It places restrictions on what types of loans we can provide the members. We had to change the way we process loans and how we issued loans to members, even though our loans were not the ones that caused the financial crisis. We have to do certain things to comply with the new regulations that add cost to the member.
OB: Why do you think credit unions remain only a small share of the financial services industry?
RH: The financial services industry continues to become larger and larger. Right now credit unions have about $1 trillion in total assets. That is probably around 6% to 7% of the business for financial institutions. In Oregon, we have a bit more of the marketplace than the 6% or 7% nationwide. We have 15% to 16% of the marketplace. We were not created to be the primary force in the financial services industry. We were created to provide a choice and to stabilize the credit structure of the United States. We supplement and provide choice to consumers who feel they don’t have a choice in the financial services industry.
OB: How did the economic recession affect your business?
RH: We definitely saw an increase in deposits mostly because of a flight to safety. Credit unions were generally well capitalized and remained healthy during the financial downturn. Members also decided to pay down debt, and many of the members have tried to stay out of debt. We have seen recently a small increase in loan demand. We saw some foreclosures during the economic downturn. But now our delinquencies and charge-offs are under historic lows. Foreclosures remain constant. In Benton County, we are one of the largest writers of first mortgage loans, yet we see fewer than seven foreclosures a year.