Credit Union Compliance: Always Changing

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Compliance always seems to be the elephant in the room amongcredit union discussions. It can be found in just about every boardmeeting, conference and executive luncheon. There is good reason,too. Just a few years ago, compliance threatened to close down manycredit unions.

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The Elephant, or Grim Reaper, in the Room?

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In 2013, more than 800 credit unions had closed their doors overa four-year span. Contribution to this was partially the Dodd-FrankAct, which many institutions found to be cumbersome. The regulatoryburden was too much for them. Other credit unions were swallowed upin mergers, just so they could survive. Times were scary anduncertain. During this time, compliance was not an elephant in theroom; instead it was the Grim Reaper.

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Even today, compliance has a big impact on credit unions,according to Utah Credit Union Advocacy and many other creditunions. Here is how regulatory compliance is impacting creditunions:

  • Regulation motivations are large factors in 50% of all creditunion mergers.
  • Many credit unions view compliance as a means tomicromanage.
  • Compliance inflates personnel costs.
  • Since 2010, credit unions have seen compliance costs balloon upto $2.8 billion.
  • In 2017, compliance costs account for an average of $71 percredit union member per year.

Yet, fast-forward four years and things are beginning to change.Take for instance the recent membership rule change, whichbroadened field of membership requirements. Credit unions are nowable to focus on serving members again. Compliance is now viewed aspart of the credit union management landscape, rather than athreat.

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That’s not to say compliance is easy, though. The rules arealways changing. Take the change to Regulation CC earlier this yearfor instance, involving Warranties, Indemnities and Remote DepositCapture. The final rule was more than 230 pages long. Then thereare procedural changes like the latest one regarding external auditreports. These will not make any Top 10 lists for Summer Book Clubreading, yet compliance must be maintained.

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Failure could cost thousands. All it takes is one complianceexaminer to walk through your doors and find an infraction. Fines,credit union industry standing and possible closure could be theend result. To minimize compliance is a mistake. And while you maybe on top of every rule change and procedural tweak, some areas canstill be overlooked.

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The flow of credit union compliance concerns is nonstop. Forexample, the current version of the Military Lending Act becameeffective on Oct. 1, 2015 with the release of the new rule.Compliance was required by Oct. 3, 2016, except to the extent thatcompliance for credit cards was delayed until Oct. 3, 2017 whichwill go into effect soon. Consequently, creditors should: Beprepared to conduct the necessary due diligence; ensure that theMilitary Annual Percentage Rate does not exceed 36.00%; and providecovered borrowers with an appropriate MAPR and Payment ObligationDisclosure.

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When going through your compliance checklist, make sure to payattention to your forms and disclosures. They are easilyoverlooked, but must be up to date in order to be compliant. Manymajor regulatory changes will have an impact on your credit unionforms and disclosures. Another example, the recent changes to HMDAwill mean a necessary update to Home Equity Lending documents. Thisis just one example of the continual changes to forms anddisclosures that need to be taken care of. Don’t let yourout-of-date forms be the elephant in your credit union.

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Richard Gallagher is CEO of Oak Tree Business Systems,Inc. He can be reached at 800-537-9598 [email protected].

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