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Maintaining Compliance in a Complex Regulatory Environment
Tuesday, December 27, 2016 6:45 AM

Steve Gibbs, CUCE, BSACS, AVP Shared Compliance, Credit Union Resources

As a new administration is on the verge of taking charge, we need to remember that the regulatory agencies, including the Consumer Financial Protection Bureau, are still on the job and will be enforcing regulations to the letter of the law. Credit unions must stay diligent in addressing the regulatory requirements issued by NCUA, changes in the “alphabet” regulations by the CFPB, and complying with ADA requirements along with a variety of financial institution–related regulators.

Although we’ve heard promises of a Dodd-Frank repeal, the reality is that we must live with those regulations until we see the changes in writing. You can blame it on the volatile economy, financial institution failures, or abuse of consumers by credit card and mortgage companies, but the changes keep coming. There’s no escaping the fact that our new normal is an environment of new and changing regulations.

There are a variety of tools available to management and compliance professionals to aid in coping with this environment. Our challenge for 2017 is to implement those resources that best complement our individual compliance programs in the most effective and efficient way. The following represent some methodologies and avenues open in attempting to manage these seemingly overwhelming obstacles:

Create a Compliance Culture
We’ve spent years developing marketing, sales, and lending cultures. How do we develop a compliance culture? Primarily, this requires education of staff and management. Everyone must buy in to establish the importance of the program. Once this is accomplished, it’s much easier to solicit information, cooperation, and assistance in sorting, gathering, and collecting necessary information and data.

Once the compliance culture is created, it must be maintained. This means ongoing training, interaction, and supplying up-to-date information. The compliance officer and area must be a visible function of operations and establish communications and relationships with other credit union departments. 

Dedicating time to researching new and potential regulations and laws is an absolute necessity to being proactive—ideally, a stand-alone person to perform research functions. In the present environment, this is not always possible. Subscribing to services such as LexisNexis Research, as well as Sheshunoff, provides in-depth legal and regulatory facts and data. Often overlooked are the research services provided by state and national trade associations. Additionally, agency websites (NCUA, Federal Reserve, FDIC, IRS, U.S. Treasury) are a gold-mine of historical and numeric data.

The quality of information we receive and disburse establishes our credibility with staff, management, regulators, and peers. Maintaining reliable sources provides this security. 

  • Agency issuances. Maintaining a database of agency issuances provides an excellent foundation on which to build research and proactively plan compliance strategies.
  • Don’t rely on one resource. Concentration risk assessment has taught us that “putting all our eggs in one basket” centralizes risk and leaves us vulnerable to anything that might compromise that single resource. Regulatory websites, industry periodicals and digests, nationally recognized business and financial industry news sources, as well as attorneys and consultants, can provide information that can be compared and contrasted to make intelligent judgments and decisions. A very good rule is to always obtain at least three resources when assembling facts and figures.
  • Internet Resources. There are literally thousands of compliance resources on the internet. Here are just a few:
  • Trade association white papers and information pieces. National and state trade associations provide some of the most reader-friendly materials for understanding and taking action with regard to new regulations, laws, and directives. 

Another element to proactivity is forecasting changes in the regulatory environment and recognizing trends in how this is applied. 

Active Communication with Your Examiner
Your primary regulator can be an excellent source of guidance and information. Many of us are hesitant to contact the regulator, afraid that we will “red flag” a problem area by asking about it. Examiners and field supervisors have become more open to taking questions and providing information that will allow the inquiring credit union the opportunity to become less apprehensive about sharing operations information. 

Compliance networks can be found through national and state trade associations, online, and local groups. Many leagues have set up compliance committees that allow for training, exchanging information, and providing professional communication. In addition, chapters may provide networking opportunities through meetings as well as committees. Several major cities have set up compliance associations or network groups to allow for a broader exchange among credit unions, banks, and mortgage companies. 

We’ve established that networks are very important, and many are originated through industry schools, seminars, and conferences. Trade association’s schools and conferences are abundant during the calendar year. In addition, numerous schools and seminars are presented by accounting and consulting groups. Even regulatory agencies sponsor occasional workshops to serve the needs of small- to medium-sized credit unions. 

Outside Support
Outsourcing has become an effective tool in dealing with the onslaught of required policies, procedures, and training. “Having insufficient time” seems to be the main complaint of credit unions in dealing with the regulatory avalanche. Whether writing policies and procedures or performing training, outsourcing has proven to take much of the increased burden off of management and officers.

Is it possible to accomplish all of these items in controlling our compliance position in the current regulatory environment? Absolutely not. Some items are important, but they don’t work for everyone. The smart compliance officer will use what’s reasonable and comfortable for the type of credit union they serve. Aside from all of the areas referenced, they key is recognizing that compliance is a serious component of credit union operations and strategy for 2017 and years to come.