Crises Create Compliance Burdens, and 'This One's a Doozy'

July 14, 2010

Board members should ask "piercing questions" about compliance issues, says Kathy Thompson, CUNA's senior vice president for compliance and legislative analysis (far right).

Other speakers during this breakout session were Alan Cameron, president/CEO of the Idaho CU League, and Donna Chardeen, director of compliance and fraud mitigation at SEFCU, Albany, N.Y.

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Every financial crisis in the past has led to more regulation, but “this one's a doozy,” with 61 regulatory pronouncements made in 2009 and more expected in 2010, said Alan Cameron, president/CEO of the Idaho Credit Union League, and chairman of the Credit Union National Association's (CUNA) Consumer Protection subcommittee.

Cameron was one of three panelists who spoke about coping with a growing compliance burden in a breakout session Monday at The 1 Credit Union Conference in Las Vegas. Others were Donna Chardeen, director of compliance and fraud mitigation at SEFCU, Albany, N.Y., and Kathy Thompson, CUNA senior vice president for compliance and legislative analysis.

Regulations help ward off crisis, help organizations follow the straight and narrow, protect consumers, and ensure fair competition, Cameron said. However, they bring an immense burden in learning and costs.

Regulations mean credit unions must look at new compliance software, forms, and training. And all these cost money that would go to the members. "It takes the focus away from service," he said.

The complexity of regulations can create a chilling effect on attracting new board members. "It puts a premium on hiring a senior manager with compliance knowledge" who survives day to day, instead of a visionary, Cameron said.

Credit unions need to create a culture of compliance. “Get the big picture,” he advised. “Understand the effects of laws and the fiduciary duty to comply. Make time for compliance in every board meeting. Make compliance part of the job description and ensure staff are fully trained.”

Chardeen echoed those sentiments: “Compliance is 100% of my job. I have staff, expertise and training, and attend conferences. The credit union board supports this.

“Knowing the credit union understands the importance of compliance means I don't have to sell it,” she continued, although getting staff to follow new regulations is more challenging. “We have compliance requirements for all individuals on staff. Compliance is built into their job descriptions.”

She also noted that the board agenda often covers compliance. "The topics are built in over 12 months so the board's not tackling all the new rules all at once."

Thompson agreed that a best practice is to get in a regular review cycle because examiners want to make sure credit unions are on top of compliance.

She advised credit unions to monitor the National Credit Union Administration's letters to credit unions. The letters indicate what the agency is thinking about, and examiners will often monitor the issues discussed.

Thompson also recommended reviewing annual reports and the "Compliance Matters" section of Credit Union Magazine.

“Boards should ask really great questions,” she said, adding that asking piercing questions shows that board members are on top of compliance issues.