Early in 2010, Belvoir Credit Union ($304M; Woodbridge, VA) was considering new ways to generate non-interest income amid a tightening loan and investment market. Belvoir's CEO, Patricia Kimmel, suggested the credit union launch a compliance-focused CUSO to help credit unions manage regulatory requirements. By August of that year, Belvoir launched COMPASS 4 CUs.
“Rules and regulations have become thick, deep, and vast in terms of what they cover,” says Jason Lindstrom, chief marketing officer at Belvoir.
To lead the new CUSO, which would focus on NCUA exams, Belvoir tapped its chief administrative officer, Gaye DeCesare, a 30-year industry veteran with experience in compliance solutions.
Initially, Belvoir’s wholly owned CUSO consisted solely of DeCesare and the credit union’s own compliance officer. Today, the staff includes four full-time employees as well as a marketing officer who are all dual employees of Belvoir and COMPASS. And although some employees have specialized areas of expertise, every employee must be knowledgeable about all areas of compliance so the CUSO avoids situations where clients can talk only to one person to satisfy a question.
3 Compliance Solutions
COMPASS offers three approaches to compliance. First, it can serve as as an external compliance officer on retainer. In this capacity, it reviews policies and procedures, conducts required independent tests, and trains volunteer staff. It cannot, however, act as a Bank Secrecy Act officer.
Second, it can serve as a marketing compliance officer on retainer. In this capacity, COMPASS reviews promotional material, website landing pages, and assorted marketing materials before clients distribute them. According to Lindstrom, this is a major asset for Belvoir’s own marketing.
“To have COMPASS or a compliance team here looking at everything we send and [telling us] that it’s wrong, or we want to change this language, or the font needs to be larger, all those things make a difference,” he says. “Especially when there is someone out there watching you.”
Third, COMPASS offers à la carte services to credit unions that can’t afford or don’t need a retainer contract. The CUSO offers this one-off service model as an affordable alternative for smaller credit unions. The CUSO’s smallest client holds $35 million in assets, but despite its third option, the average asset base of the 20 credit unions that hold it on retainer is $150-$300 million.
“When we initially had the idea of this CUSO, our thought was that most of the credit unions would be small and wouldn’t have a compliance officer on staff,” DeCesare says. “But we are finding that small credit unions can’t afford us even though we are more affordable than a staff person.”
DeCesare declined to reveal the cost of COMPASS’ services, other than to liken a 12-month contract to the cost of an entry level teller, and estimated the CUSO’s services are no more than a quarter of the cost of one full-time compliance officer.
Although those costs are not insignificant, they are a necessary evil to which every credit union must acquiesce.
“You have to spend money on compliance,” Lindstrom says. “There’s just no way around it. If you don’t, you are going to end up in trouble.”
“It always costs less to do it right the first time,” she says.
More Than Money
Compliance is an ever-evolving, convoluted area in which credit unions must invest valuable time and money. As regulations change, officer training and credit union policies become irrelevant. However, as much as regulatory compliance affects back-office business practices, it also has a measureable impact on credit union membership.
“Compliance officers get a bad rap sometimes — and some of them deserve it because they are very black and white and didactic,” DeCesare says. “Our approach is to keep a message in mind: Make it easy for the member to understand. Make it easy for the credit union while at the same time keeping them out of jail.”
The CUSO would not be able to achieve its goals without the collective expertise of its team, which Lindstrom describes as, “100 years of experience for the price of a teller.” COMPASS’ solutions start with them, without their qualifications, experience, and knowledge of the credit union industry, the CUSO wouldn’t work. They stay up to date on compliance, pass on their knowledge to their credit union clients, and the members reap the benefits.
COMPASS is not the only compliance services CUSO; nevertheless, DeCesare believes it serves a distinct niche. COMPASS works only in credit union regulatory compliance, while other compliance services providers merge into banking and trade associations.
“None of us has worked anywhere but credit unions for our entire adult lives,” DeCesare says. “So we talk the talk, we walk the walk, [and] we don’t quote bank [regulations].”