With the ever increasing amount of compliance burdens, credit unions are feeling the pressure to tighten their belts to ensure they have enough capital to take on the expenses new regulations may bring.The primary focus on recent regulations is centered around lending practices (HMDA) and accounting standards (CECL), adding in cybersecurity and documentation leaves most areas of your credit union unaffected from scrutiny. It's hard not to feel overwhelmed, but don't despair, with careful planning and management your efforts can continue, while still lessening the stress of handling credit union compliance and regulation.
Most credit unions' first response to new or changing regulation is to look outward for help and then ask 'at what cost?' There is not doubt that meeting compliance regulations, on time, is a difficult challenge. Here are 5 ways to put a cap on compliance burden stress and hopefully compliance burden cost.
1. Look Inward Before You Look Outward: As the pace of new government regulations continues unabated, an increasing number of credit unions are seeking to outsource their compliance operations to third-party vendors as a means relieving the burden of immense paperwork and man-hours. There is no doubt that third-party vendors have expertise in areas that credit union staff do not and often can be the right choice. However, this doesn't mean you don't have someone qualified (or who can become qualified) on your management team to lead your credit union through new rules & regs. Keep in mind, when a credit union unloads its compliance responsibilities onto a third-party vendor, it is the credit union itself (not the vendor) that remains vulnerable to all risks and penalties that may arise if compliance is not performed satisfactorily. Remember, you can't 'outsource' risk!
2. Don't Ignore Your Core: In many cases new regulations require nothing more than programmatic changes and/or enhancements. This is particularly true for regulations such as the recent Military Lending Act. While some credit union core software providers supplied an Excel spreadsheet to satisfy the requirement, other core systems made the necessary programmatic changes to ease the burden of reporting. Other regulations such as the 2005 Guidance on Authentication in Internet Banking Environment (Multi-Factor Authentication) require much more work. Credit union core processors that seek to be partners with their credit union customers understand the value of building regulation into the core platform. Choosing a credit union core system that guarantees regulatory compliance can significantly ease the burden and stress of regulatory change.
3. Embrace Technology: Technology can help streamline credit union processes, while ensuring regulations are enforced. A good example is electronic signatures. In the branch, members have become accustomed to being handed a series of forms to read and authorizations to sign. These do not translate well to the mobile environment. Especially inhibiting is any step that requires visiting another website. The E-Sign Act, which permits electronic information to replace physical documents, protects consumers with required disclosures and consent forms, and ensures they have access to all the relevant details about their accounts and fees. To step up the process, best practices indicate streamlining, using email, one-time verification codes, which are familiar to most consumers, a single consent to receive information electronically, and a consolidated confirmation they have done so.
4. Process Improvements: Improving your processes will make it easier for members to do business with your credit union, while avoiding the risk that out-of-compliance programs introduce. Reg-E is a great example. Regulation E outlines the rules and procedures for electronic funds transfers (EFTs) and outlines guidelines for those who sell and issue electronic debit cards. Specific to this rule is ensuring proper opt-in verification has been received for courtesy pay/overdraft privilege services, which can benefit both the member and the credit union. Improving process can ensure that members have the opportunity, whether in-branch or electronically, to 'opt-in' to a program that helps bridge the gaps of their financial lives.
5. Focus on Curbing Costs: Regulations are not going away anytime soon for credit unions, right? Always look for ways to curb compliance costs, which will put your financial institution in a stronger position when the inevitable next round of regulatory changes arrives. Automation of certain tasks and processes is one way to prepare for what lies ahead. Automation can help enhance and increase your efforts, while reducing the time it actually takes to distribute the material/documentation and most importantly can ensure your compliance.