Compliance Demands Drive Automation, Side Benefits
Whether it's as simple as updating on Excel or as sophisticated as Web-based automation, keeping in compliance has become a major task and topic of conversation at credit unions small and large.
Compliance is a catch-all term, referring to the myriad rules and regulations covering everything from Internet security to SAS70 compliance at core processors to consumer lending protection to lists of telephone numbers for the electricians and plumbers.
And staying in compliance has become a cottage industry, giving rise to full-time specialists in-house-with titles like chief risk officer, for instance-and a cottage industry of vendors who offer to automate the process.
A major area of that niche is vendor management itself, said Tripp Johnson, a partner and senior consultant with Catalyst Consulting Group in Scottsdale, Ariz. "That has become a huge ticket item for regulators-whether FDIC or NCUA-and there are still a lot of credit unions we see that don't have a centralized place where they track all the their contracts with third-party vendors," Johnson said.
An effective tracking system-whether a simple Excel spreadsheet or a Web-based software service-has a number of positive effects, Johnson said, including on the bottom line. He said he has worked with clients that were letting expensive contracts with vendors roll over without negotiation or even close examination. The simple act of keeping track of them in an automated fashion helps set the stage for cheaper contracts.
"Everything's negotiable nowadays," Johnson said. "Why pay 40 cents per loan transaction when you can pay a nickel? Letting contracts roll over without being watched is a good way to leave a lot of money on the table."
Besides basics like emergency contact information for key technology and physical plant providers, credit unions also are increasingly responsible for being aware of the financial health of key suppliers, something some of them relish.
"I know it sounds sort of crazy, but we welcome the due diligence that our clients now require of us," said John Levy, executive vice president of Integrated Media Management in Linden, N.J.
Levy added that proving his imaging technology company's financial and security mettle to each of its more than 600 credit union clients "takes a lot of work."
"But, that's OK," he said. "It weeds out the competition."
He said he sees his clients of all sizes increasingly having to use automated compliance solutions-whether in-house or outsourced-for a growing number of applications.
So does William DiPaolo, chief executive officer at Cogent Road Inc., a La Jolla, Calif., provider of Web-based compliance and control solutions to mortgage lenders. "There has to be a stronger priority in 2010 among credit unions for automated solutions with all the ever-changing regulations, such as RESPA's new good faith estimate disclosure laws, Regulation B and Regulation Z."