Regulatory burdens stemming from the Bank Secrecy Act,Dodd-Frank Act and the Department of Housing and Urban Development,among others, add another layer of responsibility to credit unions’day-to-day operations. Complaints of rising compliance-relatedcosts are common, but just how much is compliance costing CUs, andhow are they paying for it?

Credit unions have found themselves hiring new employees,implementing new software and bringing in third parties to conductreviews and audits in order to ensure compliance. And many say thevalue derived from these investments is low.

San Diego Medical Federal Credit Union, which has $73 millionin assets and serves around 6,300 members, is forking out between$4,500 and $5,000 per month to keep up with regulations and NCUArequests, according to Jonathan Zide, the credit union’s complianceofficer and director of marketing and online services.

Zide said as the CU’s compliance officer he spends approximately20% of his time poring over regulatory documents and implementingchanges throughout the credit union, while frontline staffersdevote around 10% of their time to related compliance work. Sincethe CU lacks the staffing to handle every compliance task onits own, it has also been forced to hire a shared complianceofficer through the California and Nevada Credit Union Leagues’CUSO, CURoots Cooperative.

“We simply don’t have the time, nor the expertise, to keep upwith all of the changes and new requirements,” Zide said.

San Diego Medical FCU also implemented a compliance managementsoftware system, which enables the CU to automatically monitor wiretransfers, large transactions and potentially suspiciousactivities. Software purchasing and maintenance costs have taken ahit on the credit union, and Zide said while the software’sautomated processes save time for staff members, they’re stillrequired to monitor and evaluate the results.

Third-party compliance reviews have also incurred costs for theCU. It’s had to hire outside companies to review its Bank SecrecyAct procedures and ACH and ATM processes. Zide estimates that intotal, the credit union spends $3,500 per month, in addition to theburdens of increased labor, to comply with regulations.

As a result of NCUA requests, the credit union is also spendingapproximately $1,000-$1,500 per month on loan and investmentportfolio reviews and an annual audit, Zide said. He added that theCU’s CEO and chief financial officer each now spend around 30% to40% of their time complying with new NCUA requests–a significantchange from several years ago.

“Although we are a leading credit union in regards to return onassets, the NCUA has significantly scrutinized us, like they havewith many of our peers,” Zide said.

Mark Willer, chief operating officer for the $1.3 billion,140,000-member Royal Credit Union said it’s hard to attach amonthly dollar amount to his Eau Claire, Wis.-based credit union’scompliance costs, but the increased costs are hurting membersbecause the CU now spends less time on member service and newproduct development.

Willer delivered testimony on rising compliance costs at a Housesubcommittee field hearing in Wisconsin in October in which helisted specific actions his credit union has had to take inresponse to regulations. These include training and education forCU personnel, forms or form revisions to reflect rule changes,brochure development, new software programming, compliance reviewsand audits. Royal CU has also hired a full-time compliancespecialist and multiple third-party vendors to help ensurecompliance with regulatory requirements, Willer said.

“These regulations have good intentions behind them, but they’vebecome overwhelming,” Willer said. “They’re impeding our ability toserve our members to a certain extent.”

Willer argued that many regulations were developed to correctunethical practices in the financial marketplace. He also said somenew requirements, such as multiple pages of disclosures in mortgageloan documents, have left members confused.

“You’ll get frustrated members saying, why do we have to do allof this?” Willer said. “Well, it’s because it’s imposed by thefederal government. If I saw value in it for the member, it wouldbe different, but I really don’t see any value.”

Pat Wesenberg, CEO for the $179 million, 22,000-member Central CityCredit Union, said between hiring a full-time complianceexpert, training staff and making updates to software, forms andprocedures, her Marshfield, Wis.-based credit union has beenspending roughly $18,000 per month on compliance.

“The tough thing about compliance is whether you’re a $20million credit union or a large bank, the fixed cost is about thesame,” Wesenberg said. “The burden is much heavier for the smallerinstitutions.”

Wesenberg, who also testified on compliance costs at October’sHouse subcommittee field hearing, said it’s the combination ofregulations, not one in particular, that has incurred costs andtaken time away from member service for Central City CU.

“The totality of regulations is worse than a single regulation,”she said. “Right now, I don’t see an end in sight. We’d much ratherdevote our attention to how we can help members during this tougheconomic time.”

Zide concluded that while bringing awareness to risingcompliance costs is not likely to lower them, it might raise thepoint that CUs have not made any of their regulation-relatedchanges by choice.

“I can only assume that more attention on the issue won’tdecrease costs,” he said, “but hopefully it will trickle down toconsumers so they realize that we aren’t all greedy bankers.”