What lending compliance issues will have the biggest effect on credit unions this year?
Bill Klewin, director of regulatory compliance for CUNA Mutual Group, cites three:
1. Truth in Lending. The greatest challenge for credit unions will come on the mortgage side, he says, particularly regarding “ability to pay” and escrow rules.
“And later in 2012 we’ll likely see proposed rules regarding new disclosure regimens, both for initial and final disclosures,” Klewin says, “which will essentially take all of the [Truth in Lending] disclosures credit unions currently use and throw them out the window.”
2. Fair and Accurate Credit Transaction (FACT) Act. Credit unions have struggled with disclosures related to risk-based pricing, Klewin says.
3. Equal Credit Opportunity Act. This concerns the effect of lending on certain protected groups. “The Justice Department has been very active in making sure discrimination isn’t happening in lending programs,” Klewin says. “Although we haven’t seen this in credit unions, it’s an area credit unions need to be concerned about.”
He adds that the increased emphasis on these issues will cause credit unions to re-examine their processes, disclosures, and training.
“Credit unions will have to change how they implement rules, and they’ll have to replace old disclosures with new ones,” Klewin says. “This will cause a burden on staff education and training. Obviously, if you change processes and disclosures, you’ll have to educate employees about what the new rules are and how to carry them out.”
This will put a premium on staff who are experts in regulatory compliance, he adds. “This is a specified talent, so finding staff who are competent in regulatory compliance will be a challenge. All of these things will cost credit unions money.”