How 22 Checklists Help Service Credit Union Stay Compliant

The NCUA wasn’t updating its questionnaires for internal compliance reviews fast enough. So the New Hampshire credit union created its own.

 
 

In the wake of the recession, credit unions fell under greater regulatory scrutiny, and ever-evolving compliance requirements grew more complex. Simply keeping up with the speed of regulation change posed challenges.

CU QUICK FACTS

Service Credit Union
Data as of 09.30.16

HQ: Portsmouth, NH
ASSETS: $3.0B
MEMBERS: 239,082
BRANCHES: 51
12-MO SHARE GROWTH: 11.8%
12-MO LOAN GROWTH: 10.2%
ROA: 0.77%

The NCUA offers questionnaires for internal compliance reviews, but at least one credit union felt the regulator wasn’t updating them fast enough. Then Congress passed Dodd-Frank. That’s when Patrick Harrigan, chief risk officer and general counsel at Service Credit Union ($3.0B, Portsmouth, NH), took it upon himself to create a review tool relevant to the new rule.

Harrigan cut and pasted from the regulation with the goal of creating a checklist-questionnaire hybrid to simply display regulatory requirements and the credit union’s associated disclosures.

That was in 2011. Today, the credit union has created 22 in-house compliance reviews it evaluates on a rolling, 18-month basis to track how well Service is meeting compliance standards.

 

 

 

“He wanted something he could create and control that was tied back to the regulations,” says assistant vice president of regulatory compliance Stephanie Kinnett, who now oversees the completion of the questionnaires. “He didn’t want to miss any details when reviewing the regulations.”

What’s An In-House Compliance Review?

Service’s compliance reviews are Excel files written like a questionnaire and used like a checklist. Each review tackles a different act or regulation, including Truth in Lending, Truth in Savings, Fair Credit Reporting, RESPA, Equal Credit Opportunity, Fair Housing, Military Lending, BSA, Children’s Online Privacy Protection, and more.

See it in action. Click here to view Service Credit Union’s compliance checklist for the Fair Credit Reporting Act.

The checklist contains a listing of different compliance questions — the number of which depends upon the complexity of the rule — a citation for where in the regulation the answer is found, a yes/no/not-applicable field, evidence of compliance, and comments.

Reviews can range in length from a handful of pages, as is the case with Service’s Fair Credit Reporting Act checklist, to 36 pages for the credit union’s Truth in Lending Act checklist.

To complete these, Kinnett starts by erasing the answers to the yes/no/not-applicable field. Then she reviews the credit union’s policies to find the answers. In some instances, the checklist calls for the review of a specific disclosure.

“I also double-check with the department that uses the disclosure to make sure it’s up to date,” Kinnett says.

For example, with the Fair Credit Reporting Act, Kinnett looks for the credit union’s disclosure that allows Service to obtain credit reports. She then makes sure every loan application channel has that up-to-date disclosure. Kinnett visits several different departments to complete the process, including consumer lending, real estate lending, and quality assurance — who controls the credit union’s online loan application system.

The reviews also require Kinnett to know and review the institution’s new products and services that weren’t active during the previous review.

“It requires a little bit of brain power to consider whether we added new products and services that we now need to add to the questionnaire,” Kinnett says.

How Do In-House Reviews Benefit The Credit Union?

As a time commitment, the reviews are substantial. Kinnett estimates reviews require between one and three weeks to complete, simply because it takes time to track down the answers and meet with employees in different departments who have their own day-to-day responsibilities on which to focus. She typically works on more than one at a time for this reason.

“It’s a little bit time consuming,” she says. “But it’s worth it.”

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The completed reviews themselves aren’t passed along outside the compliance department, but Kinnett does report on their status to the credit union’s Consumer Compliance Committee. This includes any issues she’s found along the way.

Issues could include, for example, inconsistencies among departments or inaccuracies in the disclosures. When she discovers something, Kinnett works with the offending department to resolve the issue.

For example, if Kinnett discovered an incomplete courtesy pay disclosure, then she would work with the credit union’s Shared Draft team as well as Administrative Services to update the form.

The reviews give Kinnett, who’s been in charge of them since fourth quarter 2015, a birds-eye view of all the areas of compliance within the institution. But it also provides the credit union with peace of mind.

The reviews do not factor into the NCUA’s annual examination process, Kinnett, an ex-NCUA examiner herself, says. Rather, they act as a well-researched affirmation for the credit union that, yes, the institution is compliant.

“If something ever came up, I could say I’ve done that questionnaire,” Kinnett says. “I’ve looked at that rule and tied it back to our procedures. We’re definitely compliant.” 

 

April 3, 2017


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