There’s precious little that’s predictable in the world of regulatory compliance. Gone are the days when you could implement new rules one at a time, at a deliberate pace. The current regulatory environment is fast-paced and unrelenting.
You need a comprehensive compliance strategy to keep up with regulatory changes from multiple state and federal agencies. Without one, it’s easy to fall out of compliance and threaten your credit union’s safety and soundness.
But a regulatory compliance strategy is difficult to pin down in the midst of so much change and uncertainty.
Consider, for example, the Consumer Financial Protection Bureau (CFPB). The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created the bureau, but it remains without a confirmed director due to political gridlock in Washington, D.C.
The CFPB has a daunting task under the Dodd-Frank Act. It must provide supervision and enforcement authority of consumer protection laws governing financial institutions with more than $10 billion in assets. It also has supervision and enforcement authority for consumer protection laws over nondepository institutions offering financial products.
But without a director, the CFPB can’t yet exert its authority over the nondepository institutions. So, the focus for now is on financial institutions.
Also, the lack of a confirmed director at the bureau is keeping the CFPB’s regulatory floodgates closed—for now.
But three questions loom in 2012:
1. When will these floodgates open?
2. What will be the results when they do?
3. And how prepared will credit unions be?
Credit unions’ concern isn’t necessarily over the CFPB’s examination authority (even though the bureau may join NCUA during an examination). The concern has to do with the bureau’s authority to issue new regulations or amend existing regulations relating to consumer protection.
The bureau’s ability to expand or change credit unions’ regulatory requirements that govern loan and deposit products creates anxiety. Credit unions have little choice but to expend valuable financial and staff resources to understand and implement regulatory changes.
Credit unions must read the rules, develop new forms and disclosures, communicate with vendors, update policies and procedures, and hireand train staff.
As if that’s not enough, regulatory changes often result in lower credit union fee income. That’s what happened with the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 and the Dodd-Frank Act’s infamous Durbin amendment, which reduced the amount of interchange income financial institutions receive.
Even if some of the consequences are unintended, your board and management team must be aware of and plan for all consequences as you implement your compliance strategy.
NCUA’s Office of Consumer Protection
The CFPB isn’t the only agency overseeing consumer protection. NCUA’s new Office of Consumer Protection (OCP) also will play a role.
The OCP came about as a result of the Obama administration’s regulatory restructuring plan, titled “Financial Regulatory Reform: A New Foundation.” The OCP has two divisions: Consumer Access, and Consumer Compliance and Outreach (CCO).
The Consumer Access division oversees:
The CCO division is responsible for:
In addition to the above duties, the CCO division processes member complaints filed against federal credit unions. Federal credit unions should be familiar with how this process occurs under the CCO. When a member complaint is submitted to the CCO, the CCO sends a letter to the supervisory committee chairman, requesting a response within 21 days from the date of the letter. When the CCO receives the supervisory committee response, it will review the response and ensure all issues are addressed.
Then NCUA will notify both the federal credit union and the member of one of five actions:
1. The federal credit union has resolved the issue to the member’s satisfaction and the case is being closed;
2. The federal credit union didn’t violate either a consumer protection law or consumer compliance regulation, and the case is being closed;
3. One of the twoparties initiated litigation, so the courts will decide the outcome and the case is being closed;
4. Upon further investigation, the issue doesn’t involve either a consumer protection law or consumer compliance regulation, so it doesn’t fall under NCUA’s purview; or
5. A violation of either a consumer protection law or consumer compliance regulation has occurred. CCO cites the specific violation, or the law or regulation, and required corrective action the federal credit union must take.
Next: Fair lending and home-secured loans