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Business Growth

Embrace Change

It might be time to take a deep breath. There has been a tremendous amount of swirl lately in the economic and political headlines, but I’d like to put a little perspective on today’s business environment and encourage our credit union clients to optimistically plan for the second half of 2024.

Regardless of who we elect as our president, history shows that U.S. presidential elections have had little bearing on the trajectory of the economy and business, regardless of which party wins. Through all 46 presidencies to date, the U.S. economy has continued to grow. While there are some underlying economic macro trends, we agree with most experts supporting a continued decrease in inflation and interest rates, and projections reflecting a strong economy. In fact, The Conference Board recently issued its forecast predicting that GDP growth should pick up later in 2024 as inflation subsides and the Fed first signals and then actually cuts interest rates.

While The Conference Board did reveal that consumer spending decelerated in the first half of the year, prompting GDP to dip, the impact was softened by a continued strong labor market and strength in the stock market. As long as consumers believe their jobs are safe and they can make regular monthly payments easily, they will continue to spend and borrow throughout the remainder of the year.

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Business Growth

Going Green for EV Loans

Brien Joyce Author

We’ve all heard that sales of electric vehicles (EVs) have slowed over the past few months. While General Motors, Rivian and Toyota recently posted upbeat EV deliveries for the second quarter, EV manufacturers still face a bumpy road ahead. Demand for EVs has grown more slowly than expected due to high borrowing costs, economic uncertainty and consumer preference for gasoline-electric hybrids.

So, I was really interested to learn what some lenders are doing to boost their EV market share. In oil-focused Oklahoma, Tinker Federal Credit Union is offering EV buyers a 0.25 percent reduction in loan rates on both new and refinanced vehicle loans, with no prepayment penalties. In a post on its website, the bank encourages customers to “get behind the wheel of [a] green vehicle and enjoy better fuel efficiency, less pollution and lower loan rates.” This approach is in direct opposition to other lenders who are charging higher interest rates for EV loans.

According to research from the University of Pennsylvania Wharton School of Business, EV buyers face tighter financing terms compared to those who purchase conventional vehicles. EV auto loans are financed with higher interest rates, lower loan-to-value ratios, and shorter loan durations. Lenders tend to price in the risks they perceive in obsolescence caused by rapid advances in EV technology, leading to a steeper depreciation in value and reduced resale value.

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Categories
Compliance

Here to Stay

Recently, the Supreme Court reversed a decision by a federal appeals court in Louisiana, rejecting a challenge concerning the constitutionality of the funding structure of the Consumer Financial Protection Bureau (CFPB). The case originated from a challenge by industry groups to a “payday lending” rule issued by the CFPB in 2017. By approving the CFPB’s funding from the Federal Reserve, rather than through the congressional appropriations process, the ruling protects the agency from future funding threats.

Reinvigorated by the Supreme Court’s decision, the independent agency, which is responsible for enforcing consumer finance laws, has shown signs that it intends to move forward with all activities—rulemaking, investigation, and enforcement—at full speed. Agree or disagree with their role and existence, the CFPB is here to stay and credit union leaders should make sure they are in full compliance.

In a recent interview with NPR, CFPB director Rohit Chopra provided some insight into the agency’s mission, approach to consumer protection and fraud investigation. Born out of the Great Recession, the CFPB receives over 200,000 consumer complaints each month and works to address financial scams and fraud. In fact, the agency plans to issue a delayed auto lending report, outlining the results of its inquiry into the portfolios of nine auto lenders. While the specific details regarding the content of the report are not yet available, anticipated topics will include affordability, practices in loan servicing and collections, as well as competition among subprime lenders.

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