AUSTIN, Texas—The Texas Credit Union Department is expressing concern over early-stage delinquencies among CUs in this state.
The department, in its April newsletter, notes that after several years of strong loan growth some credit unions have begun to experience an increase in early stage delinquency, particularly in the 30- to 59-day category.
“Early stage delinquencies can be an indicator of future increases in reportable delinquency and higher loan losses. In conjunction with delinquency reporting at board meetings, credit union management is encouraged to provide its board members with monthly trend reports for past due loans in the 30- to 59-day delinquency category, and engage in a discussion of collection efforts on these loans,” the department stated.
This isn’t the first time the Texas CU Department has raised concerns over areas where it sees potentially increased risk. As CUToday.info reported here, in late 2018 it also cautioned state-chartered CUs over indirect auto loans.
Taking Appropriate Action
In its statement related to delinquencies, the regulator stressed credit union officials have a responsibility to provide “adequate administrative oversight of operations,” which includes ensuring that appropriate action is taken to identify and address any adverse loan quality trends.
The department noted that if loan quality ratios decline, identifying and addressing the primary causes—loosened underwriting standards, limited collection activity, increased lending to lower credit tiers, and/or indirect lending issues—is essential to control and manage credit risk.
“The officials and management of a credit union should ensure that lending activities are monitored and consistent with the credit union’s overall business strategies and risk tolerances,” the department said.