Collaboration Eases Compliance Burden for Wisconsin CUs

League program provides comprehensive compliance knowledge at a part-time expense.

April 4, 2013

When Jack Gill testified recently before the Wisconsin State Assembly’s Financial Institutions Committee, Exhibit A in his argument against crippling compliance rules was a 10-inch stack of new mortgage regulations. The stack represented more than 2,500 pages.

“Regulatory burden is killing these small credit unions,” says Gill, president/CEO of $88 million asset First Community Credit Union in Beloit, Wis. “That is the death knell for the movement. It has nothing to do with profitability or credit unions’ ability to serve members—it’s the regulatory burden.”

Given all the final and proposed Consumer Financial Protection Bureau mortgage regulations introduced in January, and continued scrutiny of the financial services sector, that burden won’t lighten anytime soon.

But the Wisconsin Credit Union League devised a program it believes will prevent the bell from tolling on the state’s sturdy but overstressed small credit unions. Wisconsin is one of many leagues offering programs to assist with credit unions’ regulatory burden.

Realizing that staff resources could no longer match compliance needs in a sizable share of its member institutions, the League Services Corp. in January 2011 assembled a pool of specialists available for hire on a shared annual basis.

Typically, one compliance specialist covers four credit unions in the same part of the state. The officer spends one week per month at each, although some institutions pay for a half-time specialist and others just one-eighth.

It’s a win-win situation: Credit unions save on personnel and training costs, and the League covers the program’s expense without relying on dues money.

“What those credit unions are getting,” says Jo Whiting, the league’s executive vice president and chief advocacy officer, “is a part-time person with full-time compliance knowledge.”

The idea has been a big hit in Wisconsin, where 23 of the state’s roughly 190 credit unions (12%) enrolled in the first two years. No credit unions have left the program, Whiting says, and the league will add six more when new “pods” can be formed and new compliance specialists hired.

The clients range from less than $20 million to more than $200 million in assets. Some shift the bulk of their compliance workload to the specialist, while others aim to ease the burden on in-house staff.

“Between the staff and the board, we think this is one of the best decisions we’ve made in some time,” says Rex Fair, president of $89 million asset Sentry Credit Union in Stevens Point, Wis.

All the specialists have a background in compliance and operations, but have different areas of expertise, Whiting says. For instance, one has dealt primarily with mortgage lending, another is a certified public accountant, and another has extensive knowledge of the Bank Secrecy Act and other anti-money laundering regulations.

That breadth of experience allows the specialists to collaborate when unfamiliar issues arise. But they’re also cognizant that confidentiality is paramount, and they must broach issues only in general terms.

Developing trust through this program might open the door to additional collaborative efforts. Gill, who serves on the league board, says the league recently surveyed members on their interest in shared human resources and internal audit services. He’s excited by the prospect.

“When you talk about collaboration in the credit union movement,” Gill explains, “it’s sort of about trust: ‘I don’t want to share the same data processor or collectors,’ people say, but compliance is perfect because there’s no sharing of trade secrets.

“If we can build on this, maybe the spirit of trust can take us further,” he adds.

For now, addressing one of the most stressing needs of the league’s member institutions is satisfying. “We see this as a long-term program,” Whiting says. “Compliance is not going away.”