4 Ways To Glean Compliance Lessons From Other Credit Unions

Credit unions that build networks with to their peers can more easily tackle regulatory challenges.

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complianceCompliance officers have overwhelming jobs. Their roles span all departments and demand they be well-versed on how regulatory changes influence operations from lending to investing. They must be aware of their credit union’s marketing, forms, operations, and practices to ensure the credit union doesn’t run afoul of regulation.

Understanding new rules in a slow year can be burdensome, but this year the Consumer Financial Protection Bureau released or proposed approximately 40 new and amended regulations. NCUA released 15 of its own. Add to this state regulations many credit unions must adhere to and it’s no wonder compliance officers are turning to their peer networks for help in clarifying murky areas of the law or proposed legislation.

Credit unions are working with their peers to better understand the details behind regulatory changes. Peer collaboration is helping credit unions clarify confusing regulatory verbiage, save time in reviewing thousands of pages of documents, establish an edge during regulatory exams, and better leverage compliance staff.

Clarity: Collaborate Through A Muddled Regulatory Environment

Reading, distilling, and implementing new regulations is burdensome. It becomes even more so when the volume picks up and credit unions are left to fend for themselves. Many compliance officers are looking for outside assistance and connecting with other compliance officers to not only understand the details of pending laws but also learn how to apply them to their own operations.

coop-quick-facts“It’s valuable to have a community in which we can help one another understand what’s going on,” says Terri Nieuwkoop, head of operations for Western Districts Credit Union ($36.9M, Grand Rapids, MI). “It’s helpful to hear what the examiners are focused on and what other credit unions are doing to prepare.”

For Western Districts, cooperative-to-cooperative collaboration is an important tool in this regulatory environment because the credit union cannot allocate enough resources for a full-time compliance officer. Nieuwkoop must fulfill several roles in addition to juggling new regulations that even a full-time compliance officer would find difficult to manage. Nieuwkoop relies on the support of other compliance officers and regularly talks through common problems with them.

Many leagues and CUSOs are using forums or chat rooms to facilitate communication among compliance officers. Such cooperation generates a degree of comfort when participants realize other credit unions are experiencing the same issues, Nieuwkoop says. For Nieuwkoop, peer interaction is a valuable resource that helps relieve compliance confusion.

Schedule Saver: Connect With Other Credit Unions To Conserve Time And Energy

Growing compliance concerns detract management teams from concentrating on broader strategic considerations. The problem is exacerbated in the absence of a team that is solely dedicated to regulatory compliance. Although the time required to understand and address compliance issues is a major hurdle, the challenge doesn’t disappear when departments and staff have dedicated time to ensure the credit union is upholding procedures and standards. And the time issue grows even larger when a credit union is under the gun to respond to a regulator’s proposal for a new rule.

The procedure for new rules and regulations can take as little as 90 days or as long as a year. When a regulator  issues an advanced notice for a new rule, credit unions have the opportunity to express their concern or support. In theory, the regulator integrates credit union comments before implementing the final rule. Once the regulator implements the new rule, however, credit unions might have only a few months to ensure they are in compliance.

Complex rules can span hundreds of pages and include dense legalese. They also often require changes to forms supplied by a credit union’s vendor. For example, the Integrated Mortgage Disclosure rule under Regulation X and Z proposes to “simplify the technical nature of the disclosures” by replacing the current mortgage disclosure forms with two new model forms. Although over time the CFPB hopes the two models will jive, it nonetheless will cost time and money for credit unions to make their forms compliant.

To help mitigate these costs, many credit unions are leveraging the experiences of other credit unions. Holly Lane, compliance officer at Rocky Mountain Credit Union ($133.0M, Helena, MT), says she often shares how her credit union handles a particular problem or runs through various hypothetical regulatory situations with area credit unions. She also engages in compliance discussions through email distribution lists geared toward her role.

“I have contacts in a couple different states that I occasionally run scenarios past, and vice versa,” Lane says. “Credit unions are always looking for ways to connect with others to gain valuable insight and a better understanding of how rules and regulations apply to them. I’ve found any forum, Listserv, or trade association publication is a valuable tool in keeping compliance-related matters fresh in my mind.”

Credit unions are also sharing forms and procedures with one another so they don’t waste time drafting new language for every new form. And finally, credit unions are attending NAFCU and CUNA webinars for updates on regulatory changes and information on the most important components to implement in those forms.

An Exam Edge: Use Collective Knowledge To Better Satisfy Examiners

The sheer number and frequency of new regulation issuances can easily burden compliance. After a few rounds of issuances, it’s easy to become confused about which regulation is still in effect or what new regulation will supersede old ones. Despite best intentions, following the wrong regulation can have drastic consequences when the examiner visits.

To head off negative reviews, credit unions are sharing examination experiences with one another to better prepare for scheduled visits by the NCUA. They’re even swapping stories about specific examiners, as knowing if an examiner is likely to focus on a specific item helps credit unions gather the requisite information ahead of time.

Credit Union League meetings are a valuable opportunity to network with and learn from other credit unions. Leagues offer the opportunity for credit unions to join together and exert a stronger voice with regulators. For their part, state and national leagues can share individual credit union stories to advocate for consistent and fair exam experiences.

Leverage Staff: Create Shared Value To Improve Employee Performance

Hiring for experienced personnel in this environment is proving difficult. Skilled compliance officers are in limited supply, and credit unions that do find qualified candidates likely will pay a high premium to retain them.

But there are many opportunities for credit unions to leverage their existing staff. Compliance officers are constantly sharing insights, tips, advice, best practices, and internal policies with one another at trade meetings, via email distribution lists, and through networking events and forums, says Jessica Hillborg, a compliance officer at Frankenmuth Credit Union ($246.1M, Frankenmuth, MI).

It’s important for credit unions to educate their staff on why the institution is implementing new forms and procedures. It’s the staff that will be dealing with the members on a day-to-day basis, and they are an integral tool in meeting compliance standards.

To help ensure  her staff is well-equipped to meet compliance challenges, Hillborg always lets her staff know why there’s a new procedure or why the credit union is implementing a new form.

“When the staff has context and understanding, they’re more accepting to go along with the changes,” she says.

Collaborative Future: Other Trends And Regulatory Initiatives On The Horizon

Mortgages have been the focal point of proposed regulations, but other sectors will soon be in the spotlight. The NCUA is turning its attention to interest rate risk and enterprise risk management procedures while the CFPB has indicated it will exercise its power in overseeing card purchases, remittance rules, and student lending. Such looming regulations will impact many credit unions.

In the months and years ahead, credit union compliance officers should take comfort in the knowledge that they can rely on peers for clarity and support through networking, chat rooms, phone calls, and face-to-face interaction. Such peer support is important in a regulatory environment that is not likely to get any easier.

Want to learn more? Click on the articles in the Subscriber Package below for a deeper dive into Cooperative Solutions To Address Compliance Questions .

Subscriber Package: Cooperative Solutions To Address Compliance Questions
» How To Find An Ally To Meet Compliance Challenges
» 4 Ways To Glean Compliance Lessons From Other Credit Unions
» CUSOs Help Shield Credit Unions From Regulatory Infractions
» Leverage Leagues To Meet Compliance Needs