Compliance with the myriad laws, rules, and regulations that affect credit union operations is no longer a one-person job. The old adage “compliance isn’t my job” has gone by the wayside. It’s vitally important for senior management to recognize that compliance is the job of every area and every employee in the credit union. When it comes to regulatory compliance, “business as usual” doesn’t cut it.
When a new law or regulation is issued, credit unions work diligently to ensure their policies, procedures, and practices meet the new requirements. They train staff; they notify members; they set things in motion. And then they forget about it. They move on to the next new thing that needs attention. Over time, forms change, data processors change, people move on. Credit unions assume they are still in compliance because the law hasn’t changed. But are they? “If it ain’t broke, don’t fix it” only works if you know it ain’t broke. If no one is monitoring for ongoing compliance, your credit union could be in trouble.
Regulators’ renewed focus on fair lending illustrates this point. Although there have not been significant changes in the rules — Equal Credit Opportunity Act, Fair Housing Act, and Home Mortgage Disclosure Act (HMDA) — both the CFPB and the NCUA have issued guidance indicating they feel these laws are still important and they are concerned that discrimination still exists.
NCUA has announced plans to conduct fair lending examinations at a limited number of credit unions this year. At CUNA's April 2014 Regulatory Compliance School Update in Hollywood, CA, an audience member asked COMPASS 4 CUs vice president Kristen Tatlock, "If NCUA only plans to do 40-50 fair lending exams this year, why do we need to worry about it?" The answer is simple: Because we've gotten sloppy.
In response to the new guidance, COMPASS team members have been performing fair lending risk assessments for credit unions. The results have been eye-opening. The good news is that we have yet to discover evidence of illegal discrimination in any credit union reviewed. The bad news? It could just be dumb luck because there is a severe lack of documentation showing clear intent to provide fair and equal treatment. Typical findings include:
No written procedures for HMDA.
Incomplete and/or inaccurate HMDA reporting.
No written policy for loan exceptions, such as who can make them and under what circumstances?
Adverse Action forms provided at the right times but not completed correctly because of a programming change that was overlooked by staff.
No written guidelines to ensure loan workouts are applied fairly and consistently.
No reference to fair lending compliance in job descriptions for lending and collections personnel.
No internal monitoring to ensure programs and practices are working as intended; too much reliance on automation.
No fair lending training for front-line staff.
Inadequate fair lending training for lending and collections staff.
In an enforcement action, there is no testimony. The documents entered into evidence must make the credit union’s case. A risk assessment performed by internal staff or a qualified third party provider like COMPASS will help credit unions identify and correct weaknesses so they’ll be prepared in the event of an exam or court case.
Staying on top of compliance with the various laws, rules, and regulations takes the cooperation of ALL departments in a credit union. It takes management buy-in, and that means more than just talking the talk. It means committing resources — time, money, and people — to ensure ongoing compliance. It might also mean looking to outside sources for assistance. Dave Cocci, President of Apex Community Federal Credit Union in Stowe, PA, told COMPASS, “We're a full service credit union, but we're only $38 million in assets. We're surrounded by giants and it's hard to keep up. We need help."
Whether your credit union distributes duties internally or teams up with trusted partners to share the burden, collaboration has to be the new business as usual.
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