Credit Union Exam Solutions Presents With Flying Colors

Speaker: Hey everyone, this
is Mark TriCal with another

episode of With Flying Colors.

Happy 2026.

I'm recording this on January 11th.

Went to bed last night.

The Green Bay Packers were up 21
to three, woke up and they'd lost.

But I'm a Viking fan, so I don't care
if the Bears are Packers won that game

as long as they lose the next game.

All right, that one's for Todd.

But it is 2026 again, recording
this January 11th two days ago was

Friday, January 9th, also known
as the second Friday of January,

also known as Quitter's Day.

So I haven't quit my new
Year's resolutions yet.

I hope that yours are still on track.

And while I'm trying to look at
social media less as one of my.

One of my new Year's resolutions.

I did see something yesterday that
maybe wanna do a podcast today, and

that was from President Donald Trump who
said on the White House press release.

And also I saw it on XAKA Twitter.

It says, please be informed that we will
no longer let the American public be

ripped off by credit card companies that
are charging interest rates of 20 to 30%.

And even more, which festered unimpeded
during the sleepy Joe Biden administration

affordability, all in caps, exclamation
point, and then highlighted in yellow.

Effective January 20th, 2026, I
as president of the United States

am calling for a one year cap on
credit card interest rates of 10%.

Coincidentally, the January 20th
date will coincide with the one year

anniversary of the historic and very
successful Trump administration.

Thank you for your
attention to this matter.

Make America great again.

President Donald J.

Trump.

I'm not gonna get into the politics
of all that, although calling for

is different than implementing.

And why is that?

Because he really doesn't have the
authority or the power, but this

cre, this action would create.

Have many unintended consequences.

And this morning I got up and
looked at my Wall Street Journal.

There has an article on it titled Trump
calls for 10% cap on interest on credit

card interest rates with a subheader of
previous proposals to cap interest rates,

haven't gained much traction in Congress.

And then on my Bloomberg
subscription, the title of the.

Article is Trump's call for 10% credit
card cap aims at banks, crown jewels.

And anyway that article was a little bit
better, had a little bit more depth to

it, and then I put some thoughts together.

From those two and my general thoughts on
how this could impact credit unions for

the podcast that I have for you today.

So again, what does it really
mean when President Trump is

calling for a 10% credit card cap?

Why is he doing it?

And again, what are the
parameters of what he's saying?

He's saying a one year 10% cap
on credit card interest rates.

The articles point out that the
average card a PR today is 21%.

By the way, obviously if you're a federal
credit union in particular you know that

the Federal Credit Union Act caps rates
at 18% caps at lower than its two A has

to renew the 18% but it is capped at 18%.

So credit union members by
definition already get a better.

A better rate at the max than
is the average elsewhere.

Something that is something that
makes me proud to be in the credit

union industry in the movement.

So this targets one of the most profitable
products in banking, although for

credit unions, it's probably not as.

Profitable as it is for the big banks just
because of the volume and the challenges

of having a huge, big program like that.

Similarly, they can do a lot more
with their program than a lot of

credit unions do, and a lot of credit
unions have sold their portfolios.

But it's a politically popular message.

Why?

Because it helps consumers who are
quote unquote drowning in interest.

But is it financially op,
financially and operationally doable?

That would be very complicated.

So as a primer, why are
credit card so profitable?

Credit cards obviously are unsecured debt.

There's no house, no, no car to
repossess charge off rates are

historically much higher than mortgages.

Post-crisis cards charge off rates
are 10% versus mortgages, which

are substantially lower than that.

Banks and credit unions price in defaults.

They price in fraud.

They price in reward programs, they
price in servicing at compliance costs.

And as you see, as we layer on, as
better than I as you layer on all the

things that you have to factor into
the cost, it becomes very difficult

to make money at a 10% limit.

Now, an example would be JP
Morgan's card portfolio data.

I pulled off the web
must be accurate, right?

Maybe it's accurate, but JP Morgan's card
portfolio, roughly $200 billion in loans.

Their net yield after everything is 9.7%.

They off of $25 billion in
revenues and oh, by the way,

they charge off $7 billion.

So there is a margin and it's not.

All profit if you go at 10%.

So that's where the misnomer is.

That's where this is more of a
political Yeah, it would be great.

I'll throw this thought out there so
people think that I'm doing something

good for them, which is my take
on what president Trump is doing.

Do I think it will happen?

No.

Do I think he thinks it will happen?

No.

Is he just making a headline?

Yes.

But let's walk through why the
whys of this not making sense now?

The other challenge is if if such a
cap was going to go in place, you'd

see credit tightening, you'd see
fewer approvals, you'd see lower

lower credit limits, so smaller loans
to everybody or to most everybody.

Closure of riskier accounts and
fed data estimates that 14.3

million people could
lose access to credit.

Again, these are from the articles.

14.3

million people could lose access
to credit if this went into place.

There would be a re-engineering
of products, right?

So there'd be higher minimum
payments, there'd be fewer grace

periods, fewer promotional 0% offers.

So every action has a reaction
and all these other things.

Theoretically, if a 10% cap was
to go into place, these other

things could come into play.

Credit card rewards would get cut.

I'm a big fan of credit card rewards.

The cards I'm loyal to.

I really enjoy getting the perks.

Whether that's for flying, whether
that's for gift cards for restaurants,

whether that's for discounts at other
organizations, et cetera, et cetera.

A 10% cap doesn't leave a lot of leeway
for the funding of rewards programs.

And again, it would be those.

Low income, middle income people
would be hit higher than the people

at the other end of the spectrum.

And it also then would impact the
profits because the people at the higher

income levels pay off their loans.

And it gets into more of an
interchange income thing than it

making money off the interest.

So who would get who
could get hit the hardest?

Not, not all.

Lenders would be impacted evenly.

Some banks do more than others.

Some credit unions do more than others.

You've got Capital One, you've got
Synchrony, which is store cards.

Those could be impacted big least
affected would be prime borrowers,

high-end consumers, and people who
pay their balances in EV every month.

Now, the irony oftentimes when you
see people taking actions that.

You think will help people
on the lower income spectrum?

It has the exact opposite.

And the reality is that this is supposed
to help those folks and they're the ones

most likely to lose access to credit if
such a action were to come into play.

Now, the un another unintended
con consequence would be the

payday loan program problem.

If main mainstream credit
dries up, consumers don't stop

needing money, they shift their.

Requests their desire to go get
those loans to payday lenders,

to pawn shops, to rent, to own.

And that's not good for anybody.

So the policy trade off becomes, is a
10% card cap better than someone moving

into vastly more expensive alternatives
which can range up to 300% for some of

those programs that I mentioned there.

The reality is there is no free lunch.

And the 10% cap would co it cause far
more problems than it might create.

So the political and regulatory reality
check, how could this even be implemented?

Congress has debated this for years.

Sanders and a LC have proposed a 15% cap.

Sanders and Holly have proposed a 10% cap.

None of these have passed.

The Trump tool set right now is public
pressure, regulatory persuasion,

but not a clear statutory authority.

As I said, credit unions under the Federal
Credit Union Act can go up to whatever,

NCA approves up to 18%, and it's been 18%.

Since at least 1986 when I started
in the credit union industry.

Banks are also si simultaneously
seeing capital rules, ease, stress

tests softened and a general
deregulatory posture overall, which

is what credit unions are also seeing.

Those things are pro bank and
this credit card movement would

be anti-bank or credit union.

Now the challenge that credit unions.

Would have.

And there's I saw in an email that
America's credit unions is doing a

conference call on this tomorrow,
but they've already come out and

called a 10% cap devastating.

Many credit unions couldn't
offer cards at that rate at all.

I'm sure some of you listening
might actually offer that to your

top end people, and that's great.

And it will ultimately in
their opinion force some credit

unions out of the card business.

And they'll have members pushed
to non-regulated lenders.

So it's not just an issue of Wall Street.

It's a main street issue.

Now the.

What theoretically could help
consumers if the goal is affordability

without killing access some would
argue that there'd be some consumer

compliance type things that could be
done better disclosures, et cetera.

I wouldn't go down that rabbit hole.

So the big picture takeaway on this is
the proposal taps into a real frustration.

People hate paying 20% and balances
that are at a record level.

But blunt tools create blunt damage.

There'd be less access, there'd be
higher fees, there'd be fewer choices.

There'd be more fringe lending.

And while it's good politics and
it's good headlines, it's dangerous

to be contemplating putting this
in place because it would, again,

have many unintended consequences.

So that's my take on the 10%.

Trump, desire to change rates.

I'm looking forward to some exciting
episodes we've got coming up.

As I said, this is January
11th this past Thursday.

Had NCA been planning a board meeting
this coming Thursday, they would've

had to announce what the agenda was.

And I did not see that
come out in my emails.

I did not see it on their website.

They're skipping a January meeting and
as they did last year with only one board

member with not a lot of regulatory.

Desire from the administration and
from board Chairman Kyle Halman.

They're just skipping this board meeting.

I am hearing rumblings that NCUA has
told their staff that there's material

changes coming to the structure of
NCUA possibly dissolving the Office

of National Exam and Supervision,
possibly dissolving some other offices.

That will ultimately impact credit union.

I am really looking forward to when
NCA is gonna be transparent about

this and tell the industry about it.

And it, they just deserve
the right to do that.

These things should be done in the
sunshine and the fact that it's being

talked about in NCA, it should be
talked about in the public, but they're

not having a board meeting this week.

Don't expect it in January,
possibly in February.

Maybe there'll be some big reveal
before they go to the America's.

Credit unions.

GAC.

I'm planning on going to GAC
again this year as a member

of the press for the podcast.

So if you go there and wanna
catch up, you let me know.

And again, 2026, hard to believe.

We're in the second week of it.

Very excited to have this first
episode of the year up and running.

And we'll see you again here soon.

As always, I wanna thank you for watching.

For listening, this is Mark Kel
signing off with flying colors.