More work preparing for exams and additional compliance requirements throughout the year.
Those are among the changes credit union executives have to deal with as the Obama administration begins implementing the financial regulatory overhaul bill that went into effect this summer.
Though the new consumer agency is only in the set-up stage, the NCUA and the trade associations are already getting ready for a myriad of new rules and regulations.
Credit unions are sufficiently concerned about the new burdens that during his presentation to NAFCU's Congressional Caucus, NAFCU Director of Regulatory Compliance Anthony Demangone cited Nobel laureate Mother Teresa's comment that:
"I know God will not give me anything I can't handle. I just wish that He didn't trust me so much."
The Consumer Financial Protection Bureau, an independent agency to be housed in the Federal Reserve, is likely to be the primary rule maker on consumer finance issues. However, most credit unions won't have direct contact with it, and the NCUA will be enforcing the CFPB's rules.
"The law's language requires us to coordinate with the CFPB to ensure that the part of the exams that focuses on consumer protection is thorough. In some cases that means the examination teams will be larger because the CFPB has back up examination authority," said Tim Segerson, the director of supervision in the NCUA's Office of Examination and Insurance.
He noted that because his agency does blended exams-covering safety and soundness and consumer protection-with the new set of consumer rules, examinations will "become more comprehensive."
The CFPB only has direct examination authority over credit unions with assets of $10 billion or more assets, and those currently are Navy FCU, Pentagon FCU and State Employees Credit Union. However, the CFPB will also join the NCUA on examinations of some other credit unions based on a statistical sampling model devised by the agencies.
Elizabeth Warren, an adviser to President Obama and Treasury Secretary Tim Geithner, who is helping set up the agency, hasn't given many details about what the agency's rules will look like. She said, however, that two of its key goals are to increase the transparency of financial institutions when dealing with consumers and to create a level playing field among all institutions that lend money and offer credit to consumers.
The agency is likely to begin operations sometime in 2011. But Geithner, whose department is responsible for setting up the agency, has some flexibility about when that will occur. The NCUA will keep its Office of Consumer Protection, which began operating this year. But some of the agency's staff members will likely be transferred to the CFPB, though NCUA officials have said it is too early to say how many staff members they will lose.
CUNA Senior Vice President and Deputy General Counsel Mary Mitchell Dunn said the additional regulatory hoops have the potential to make what is already a confusing process even worse.
"Many of our members are raising concerns about exams already, including their complexity and the lack of consistency between what the agency's leaders say and what actions examiners sometimes take," she said. "We also want to be sure that the CFPB's priorities in interpreting rules with regards to credit unions are in line with those of the NCUA."
Dunn said the CFPB's new office dealing with minority and women's issues could generate additional rules about the makeup of a credit union's workforce.
Another area that examiners will be scrutinizing is executive compensation. They want to ensure that compensation packages at credit unions with more than $1 billion in assets don't encourage excessive risk taking.
"The goal is not to pass judgment but identify those plans that could hurt the credit union. Some [compensation] plans emphasize productivity rather than quality and that can cause problems. Initially, the CFPB will spend time figuring out what kinds of plans are dangerous and then write rules. There will also be a data collection component," said the NCUA's Segerson.
The NCUA's examinations will also pay greater attention to the market risk posed by certain loans and investments because the new law mandates that regulators monitor the connection between risk and consumer protection. This will include the risks that credit unions face to their bottom line if the Federal Reserve raises interest rates, he added.
NAFCU's Demangone advises credit unions to establish teams that will be responsible for devising and implementing the steps to take to comply with the new rules. He added that this would require additional money for training and staff support.
He also contends that executives can avoid certain problems by "building risk management into the fabric of your credit union."