Since the beginning of 2015, the NCUA has placed a final ruling on 14 regulations. Tim Smith had to think hard when asked how his credit union has benefited from the additional regulatory burden.
“I sat down with my risk officer to talk about this,” says the CFO, treasurer, and senior vice president at Workers’ Credit Union ($1.3B, Fitchburg, MA). “We figured we could point to some process improvements we’ve developed while working to comply.”
One example is the credit union’s basic account opening form that had grown to require three different signatures and more than one dozen pages. While accommodating new identify verification and similar rules and regs, the credit union improved its workflow here.
CU QUICK FACTS
WORKERS' Credit Union
Data as of 12.31.15
HQ: Fitchburg, MA
12-MO SHARE GROWTH: 14.56%
12-MO LOAN GROWTH: 13.66%
“We now have one signature and two pages,” Smith says.
A similar backhanded compliment comes from Mike Salamena, compliance officer at Ent Credit Union ($4.4B, Colorado Springs, CO):
“The only reasonable benefit I can imagine is picking up some efficiency through process analysis and modification to implement new requirements,” Salamena says.
He also points to the benefit of the collaborative work needed to meet new requirements, which can involve compliance, lending, IT, marketing, and outside vendors.
Together, Salamena says, these entities can challenge the status quo of how things have been done, changing or eliminating processes and tasks while deploying new tools and techniques. That happened at Ent during the extensive work needed to comply with the new TRID disclosure documents. Another example is a software solution Ent found that improves anti-money laundering reporting without adding staff.
CU QUICK FACTS
ENT Credit Union
Data as of 12.31.15
HQ: Colorado Springs, CO
12-MO SHARE GROWTH: 7.27%%
12-MO LOAN GROWTH: 18.36%
“Increased regulatory requirements, to an extent, push credit unions to evaluate technology solutions they might not have reviewed if expectations had not changed,” the veteran compliance manager says.
Salamena’s advice for dealing with regularity burden is to educate personnel and accept that compliance is important and a matter of planning.
“Our attitude is ‘deal with it,’” he says. “It is what it is when it comes to regulations and compliance expectations.”
The Power Of Partnerships
Even those credit unions that can afford internal specialists — Workers’, for example, has an FTE devoted to Bank Secrecy Act and AML compliance — still find themselves partnering with peers in the form of CUSOs, leagues, vendors, and even regulators.
“We rely heavily on our vendors to provide the technology we need to make changes,” Smith says. “TRID is a good example of that and of what can happen. It got delayed by a few months because the vendors weren’t able to get everything ready by the deadline.”
He also points to trade associations, CUNA, and his state league as sources for training, webinars, and other information to help his team keep up.
Kim Zelna, director of compliance services at the Pennsylvania Credit Union Association, helps credit unions do just that. She says the work on TRID is a good example of the power of partnerships.
“It helps when everyone is trying to get credit unions to the same place, especially in regards to safety and soundness,” Zelna says.
Safety and soundness, in fact, are areas where credit unions can particularly benefit from adhering to the rules, says Rick Wargo, the PCUA’s senior vice president and general counsel.
“If a credit union immerses itself in the compliance discipline, no matter these new rules, it is going to have long-term savings,” Wargo says. “That’s because the better you are at compliance — identifying pitfalls and avoiding them — the better you’ll be at limiting consumer complaints.”
Good compliance means fewer fees waived, rates adjusted, and, ultimately, lawsuits filed, the PCUA attorney says.
“Unfortunately, more and more we’re seeing where members are suing a credit union because they say the credit union didn’t take all the proper steps from origination to bankruptcy,” Wargo says.
Following all the steps along the way can improve internal processes, which will help make sure the credit union doesn’t have any reputation or financial risk.
Effectively setting policies and procedures to avoid that begins with the board and the C-suite, he says, and then moves to the staff.
“Following all the steps along the way can improve internal processes, which will help make sure the credit union doesn’t have any reputation or financial risk.”
Riding Shotgun With The Regulators
Trade associations, vendors, and leagues are a few resources, but what about the regulators themselves?
“For the past 20 years our credit union has maintained a responsive and collaborative attitude toward regulators and the exchange of information that occurs between and during examinations,” says Salamena, the Ent compliance chief and former examiner.
According to Salamena, this “positive exchange of information” has allowed his credit union to define processes that are conducive to meeting regulations, which has equated to reduced costs in planning and future adjustments.
“You don’t have to have an adversarial relationship [with your examiner],” says Zelna, who was a credit union auditor, CFO, and CEO before joining the PCUA last year. “We all have the same goal of protecting the member.”
Find more compliance best practices in "How To Ace An NCUA Exam" and "How These Credit Unions Learned To Love TRID."
She advises keeping the lines of communication open, including advising examiners about new products and services the credit union is considering or has begun offering.
“There’s nothing wrong with calling your regulator and running it by them,” she says. “I found them to be more of a help than a hindrance.”
Such back and forth will help when the next wave of possible problems rolls through. A good example might be the Qualified Mortgage ability-to-repay rules that are only about a year old.
“We’ll have to see how those shake out in terms of consumer complaints, especially if there are defaults in connection with these kinds of loans,” Wargo says.
But if credit unions have done their homework, like they did with PCUA staff who went across the Keystone State going over TILA/RESPA changes line by line with member credit unions, they should be OK.
“I think the more credit unions embrace change, rather than fight it, the better they’ll be in the long run,” Zelna says.