Google the word “compliance” and you get about 362 million results, which seems like the number of regulations credit unions are expected to comply with today.
Credit unions’ current compliance environment makes us want to define “kәm-pli-әns” this way: “continually changing requirements; piecemeal action; mind-reading required.”
Let’s break down the word “compliance” letter by letter to better understand the regulatory challenges credit unions can expect to face in 2012 and beyond.
The immediate regulatory priorities of the new Consumer Financial Protection Bureau (CFPB), which officially began operations in mid-2011, are:
The bureau has launched “Know Before You Owe” projects on each of these subjects.
Based on public outcry about fees, expect the CFPB this year to also look at account-opening disclosures. This means reviewing Truth in Savings, overdraft, and check-hold rules.
What else? The agency has asked for public input through March on exactly that question: What other consumer financial laws should the bureau focus its attention on this year? Find CUNA’s comment letter at cuna.org under “regulatory advocacy.”
Office of Consumer Protection and consumer complaints
The very first mission of the CFPB listed in the Dodd-Frank Act is “to collect, investigate, and respond to consumer complaints.” The bureau started with complaints about credit cards and has added mortgage loans. Consumers can file complaints via a website, but soon they may have a toll-free number to call. Because only the three largest credit unions are under CFPB’s direct supervision, complaints about all other credit unions will be sent to NCUA.
NCUA has created an Office of Consumer Protection that, among many other duties, handles member complaints. For years, NCUA has asked supervisory committees to investigate and respond to members. Now, NCUA is asking supervisory committees to investigate and respond to NCUA, which in turn will respond to members. This is explained in NCUA’s Letter to Credit Unions No. 11-CU-17.
Financial institutions are understandably concerned that complaints about a particular institution’s financial product could result in burdensome revisions of consumer regulations affecting every financial institution. Bank of America’s short-lived plan to institute monthly debit card fees has undoubtedly moved up a review of account disclosures on the CFPB’s priority list.
Mortgage compliance burden
Ideally, the greatest regulatory relief that credit unions could receive in 2012 would be for the CFPB to look at mortgage lending in its totality and issue a comprehensive package of regulatory revisions that affect consumer mortgages. Although CUNA has asked for exactly that relief, it won’t happen. Credit unions will continue to see revisions in mortgage lending regulations done on a piecemeal basis.
In mid-2009, the Federal Reserve Board proposed a major overhaul of the mortgage lending rules in Regulation Z (which implements TIL). These changes have never been finalized. In 2010, the Fed issued additional proposed Reg Z amendments, but then announced that all the comments it received would be transferred to the new CFPB. In 2011, mortgage lending programs were subject to a head-spinning number of piecemeal compliance changes affecting disclosures, appraisals, escrow, and staff registration.
As mentioned above, the bureau is reconciling the TIL-RESPA disclosures into one form. While it might complete that project this year, compliance won’t be expected until sometime in 2013.
The Dodd-Frank Act also amended TIL to require new “ability to repay” rules for consumer mortgages. These rules are likely to be the first major Reg Z rules the bureau adopts. Other proposals affecting mortgage lending—credit retention, additional escrow rules, and servicing—will be under active consideration this year.
Next: Protection of electronic transactions