Automating Compliance Offers Gain Without Pain
Effective Jan. 10, 2014, mortgage lenders will be required to write their loans in compliance with new regulations from the Consumer Financial Protection Bureau. The transition could be easier on credit unions than the CFPB’s 3,500 pages of requirements suggest.
“There is a huge amount of noise in the industry and the situation has been wildly overblown,” said Andy Greenawalt, CEO and co-founder of Continuity Control, a New Haven, Conn.-based compliance software provider. “A lot of credit unions believe they won’t be ready, but in reality they already are and just have to work through the details.”
Managing compliance is one of the biggest challenges facing financial institutions, according to Sam Whitehurst, president and CEO of $150 million Summit Credit Union in Greensboro, N.C., and a Continuity Control client. The software provider’s automated approach makes addressing the challenges on an almost daily basis relatively easy, he said.
“We receive information in a to-do item list that lands in our email box,” Whitehurst said. “If it’s pertinent we can read the materials and digest without having to sort through hundreds of pages of reg information that may not relate to us.”
Valerie Marsh, president and CEO of $33 million Acclaim Federal Credit Union, also in Greensboro, said she sees the automated compliance services offered by Continuity Control and others as a lifeline that makes it possible for her credit union to continue serving members in the face of rapidly growing regulatory burdens.
“In a small credit union with just 14 employees it’s hard to give compliance the attention it requires,” Marsh said. “We can’t keep up with it, but Continuity Control has helped us because they’ve streamlined the process. That takes a lot of work off of us.”
From policy management and risk assessment to governance and front-line execution, the system takes a holistic approach to managing compliance burden that provides clients with a more comprehensive solution, Greenawalt said.
“We’ve imported the entire regulatory code to our system,” he said, adding that his system addresses more than just NCUA and CFPB regulations. “Our vision has been to build something that is complete because only through completeness can you truly reduce the burden.”
Continuity Control clients pay an annual subscription fee of $10,000 to $120,000 per year based on asset size, for which they get tailored access to the system, as well monthly and quarterly action plans and their own compliance expert with whom they can plan their compliance strategies and troubleshoot issues as they arise.
Currently, Continuity Control serves 30 credit unions and 70 additional community financial institutions ranging in asset size from $15 million to $1 billion.
Other software vendors have also taken steps to automate compliance software, particularly as it relates to CFPB mortgage regs.
QuestSoft, based in Laguna Hills, Calif., in June introduced Compliance RELIEF, an all-in-one product that helps credit unions and other mortgage lenders meet the majority of their compliance needs. The software system combines QuestSoft’s HMDA Relief and CRA RELIEF programs and enables users to focus on specific regulations that relate to the credit union with data sharing from each module.
Compliance RELIEF features a single interface that provides access to the modules, an approach that lessens the training burden and establishes uniform data integrity standards. It also allows the program to easily accommodate future compliance regulations at the federal and state level.
NeighborBench utilizes cloud-based technology to create an interactive relationship with credit union clients in terms of regulatory compliance monitoring, including CFPB mortgage rules and several other areas. The firm, based in Frederick, Md., conducts an audit of credit union client documentation uploaded to secure cloud-based platform, designates compliance areas it deems risky and concentrates greater efforts on addressing more heavily risk-rated areas.
The Internet-based application saves consultants from having to visit the credit union, thus reducing both costs and staff interruptions, said Jane Pannier, SVP and in-house counsel for NeighborBench. The service, priced by credit union asset size, can be as little as $400 per month for very small institutions, while credit unions with more than $1 billion in assets who opt for all the bells and whistles can pay up to $50,000 per year, she said.
“Even at the top end that’s still cheaper than a compliance officer and the system never gets sick or goes on vacation,” Pannier said.
NeighborBench currently serves 40 credit unions.
Next Page: The Only Way
For a credit union the size of Acclaim, automated compliance is the only way to manage the burden, Marsh said.
“Compliance has always been overwhelming for me,” she said. “When I heard what they could do for us, it kept us from hiring a full-time compliance staffer. If I ate and breathed compliance I might be able to keep up on my own, but otherwise, no.”
Summit Credit Union faced a similar situation when its longtime compliance officer retired, Whitehurst said. In addition to staffing savings, he said automating the process allowed him to gain access to financial audits the credit union formerly had paid the North Carolina Credit Union League to conduct.
Automating compliance procedures through Continuity Control has saved credit unions an average 60% of their compliance management costs, Greenawalt said. When broken down, compliance management can be a lengthy process.
“NCUA wants credit unions to manage policies as they relate to operating areas,” Greenawalt said. “Credit unions officials must remember what the institution needs to do, what reg changes apply to policy at hand, then provide a risk assessment to see if there are changes needing to be made.
“Then there are adjustments, board signoffs and employee training of new reg requirements,” he added. “If you estimate 6-10 hours for managing one policy and an estimated 70-100 policies within the organization, that’s a lot of time.”
Regulatory burdens will continue to increase, both in terms of new regulations and well as increased enforcement of existing ones, Greenawalt said.
“With NCUA, regulations had formerly been a light burden relative to laws on the books. NCUA enforcement was relatively lax by comparison to banking industry,” he said. “That’s changed, and now there is a shift to normalization at NCUA to bring it more in line with other regulators.”