In mid-October, Whatcom Educational Credit Union in Bellingham, Wash., will undergo one of the Evergreen State's first separate examinations for consumer compliance, now required of all Washington state chartered credit unions with more than $500 million in assets.

According to Wayne Langei, president/CEO of the $950 million institution, Whatcom volunteered for the exam, part of a new approach by the Washington State Department of Financial Institutions' Division of Credit Unions to ensure state-chartered credit unions meet federal standards.

“We offered ourselves as a starter,” said Langei, who has been with Whatcom since 1973. “We have so many auditors looking at us anyway, what's one more?”

Credit unions will receive a consumer compliance rating separate from its other exam scores. The exam will cover operational areas such as deposits, consumer lending, mortgage lending and servicing, privacy and consumer information. Additionally, credit unions could be grilled on compliance with as many as 24 different federal and state statutes that include the Bank Secrecy Act, Truth in Lending and Unlawful Internet Gambling Enforcement Act.

The new exams are expected to bring state-chartered credit unions in line with Consumer Financial Protection Bureau laws and other federal guidelines, according to Linda Jekel, DCU director.

“The Washington Division of Credit Unions already has been examining for federal consumer protection and regulatory compliance as part of its safety and soundness examinations,” said Jekel, who sits on the NASCUS board. “The only change in 2013 is separating the compliance exam from the safety and soundness exam for large credit unions. A separate compliance exam report will provide more effective communication with the largest credit unions to better protect consumers, to reduce potential liability and fines at state-chartered credit unions, and to work with credit unions on new federal regulations.”

The separate exam helps maximize examiner resources, only two of whom have specialized training in complex consumer compliance issues, Jekel said.

Mary Martha Fortney, NASCUS president/ CEO, said she doesn't think other state regulators will follow suit and implement separate consumer protection exams.

“Most states perform consumer protection compliance reviews during regularly scheduled safety and soundness exams,” Fortney said. “Rather than characterizing Washington's compliance exam program as a trend, we think this program speaks to the diversity of the state credit union system.”

The Northwestern Credit Union Association, which represents institutions in Oregon and Washington, said it has supported efforts to bring greater consistency to consumer compliance.

“The DFI has been working on this for the past couple of years,” said John Trull, NWCUA's director of regulatory affairs. “The association has supported the delays so that the launch of the program goes as well as possible and that the process is in the best interests of credit unions and regulators alike.”

Currently, 16 Washington state chartered credit unions have more than $500 million in assets, making them subject to the separate exams, Jekel said. In addition to Whatcom Educational, the regulator plans on scheduling exams with the $11.5 billion BECU beginning Sept. 23.

“The new procedure is more applicable to credit unions not under CFPB oversight,” said Todd Pietzsch, BECU's public relations manager, referring to CFPB's $10 billion asset cutoff for CFPB supervision. “If we weren't under CFPB we might have to take a closer look at things here.”

The new exams will be completed over a 20-month period, a cycle that will be ongoing for future exams. Credit unions with assets fewer than $500 million will be rated on consumer compliance issues as part of their regular safety and soundness exams, the bulletin said.

Instant Insights /

Washington State Launches Separate Consumer Exams

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