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Maintaining Compliance: A Lesser Burden, a Real Threat.

Byline: Richard Gallagher

Credit Union Compliance: Always Changing

Compliance always seems to be the elephant in the room among credit union discussions. It can be found in just about every board meeting, conference and executive luncheon. There is good reason, too. Just a few years ago, compliance threatened to close down many credit unions.

The Elephant, or Grim Reaper, in the Room?

In 2013, more than 800 credit unions had closed their doors over a four-year span. Contribution to this was partially the Dodd-Frank Act, which many institutions found to be cumbersome. The regulatory burden was too much for them. Other credit unions were swallowed up in mergers, just so they could survive. Times were scary and uncertain. During this time, compliance was not an elephant in the room; instead it was the Grim Reaper.

Even today, compliance has a big impact on credit unions, according to Utah Credit Union Advocacy and many other credit unions. Here is how regulatory compliance is impacting credit unions:

* Regulation motivations are large factors in 50% of all credit union mergers.

* Many credit unions view compliance as a means to micromanage.

* Compliance inflates personnel costs.

* Since 2010, credit unions have seen compliance costs balloon up to $2.8 billion.

* In 2017, compliance costs account for an average of $71 per credit union member per year.

Yet, fast-forward four years and things are beginning to change. Take for instance the recent membership rule change, which broadened field of membership requirements. Credit unions are now able to focus on serving members again. Compliance is now viewed as part of the credit union management landscape, rather than a threat.

That's not to say compliance is easy, though. The rules are always changing. Take the change to Regulation CC earlier this year for instance, involving Warranties, Indemnities and Remote Deposit Capture. The final rule was more than 230 pages long. Then there are procedural changes like the latest one regarding external audit reports. These will not make any Top 10 lists for Summer Book Club reading, yet compliance must be maintained.

Failure could cost thousands. All it takes is one compliance examiner to walk through your doors and find an infraction. Fines, credit union industry standing and possible closure could be the end result. To minimize compliance is a mistake. And while you may be on top of every rule change and procedural tweak, some areas can still be overlooked.

The flow of credit union compliance concerns is nonstop. For example, the current version of the Military Lending Act became effective on Oct. 1, 2015 with the release of the new rule. Compliance was required by Oct. 3, 2016, except to the extent that compliance for credit cards was delayed until Oct. 3, 2017 which will go into effect soon. Consequently, creditors should: Be prepared to conduct the necessary due diligence; ensure that the Military Annual Percentage Rate does not exceed 36.00%; and provide covered borrowers with an appropriate MAPR and Payment Obligation Disclosure.

When going through your compliance checklist, make sure to pay attention to your forms and disclosures. They are easily overlooked, but must be up to date in order to be compliant. Many major regulatory changes will have an impact on your credit union forms and disclosures. Another example, the recent changes to HMDA will mean a necessary update to Home Equity Lending documents. This is just one example of the continual changes to forms and disclosures that need to be taken care of. Don't let your out-of-date forms be the elephant in your credit union.

Richard Gallagher is CEO of Oak Tree Business Systems, Inc. He can be reached at 800-537-9598 or
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Publication:Credit Union Times
Date:Aug 22, 2017
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