Next Steps To A True Compliance Program

August 23, 2013 at 8:25 am Leave a comment

imagesHere’s your pop quiz for today.  Where is your credit union’s manual on policy and procedure?  Is it on that dusty bookshelf right next to the floppy disks?  Or do you quickly update your manual with a new policy reflecting the latest regulatory mandate, pop it in to your binder and go on with your day?  Let’s face it, for many credit unions, particularly smaller ones, their compliance regimen consists of generic policies and a lot of finger crossing that the examiner doesn’t ask how these things are actually implemented.

Larger credit unions have a different kind of problem.  As the CFPB explains in a recent issue of its supervisory highlights, larger institutions sometimes delegate so much of the compliance responsibilities to specific departments that they lose sight of common problems cropping up throughout the organization.

You may not like to hear this, but compliance is an integral part of you business, so groan as you might about Dodd-Frank, you should use the opportunity to reassess your compliance system irrespective of your credit union’s size.  The CFPB identifies four components of a successful compliance management system and these elements can be adopted to fit the unique circumstances of just about any financial institution.

Specifically, a successful compliance program includes policies and procedures, training, monitoring and corrective action.  In addition, compliance starts at the top.  The Board of Directors is the entity ultimately responsible for mandating that policies and procedures be put in place and that appropriate resources, not just lip service, be allocated to compliance.  Remember that even though the CFPB does not directly supervise credit unions, the tone it is taking in criticizing the compliance regimens of the large financial institutions it does oversee is going to influence the approach taken by other regulators.

This is particularly true in the area of mortgage servicing.  The CFPB’s regulations mandate loss mitigation efforts and less bureaucratic customer service and if your procedures don’t reflect what your policies say, you won’t be in compliance with the law.  Now I know smaller credit unions are saying Henry, this is all very nice, but I don’t have the time or resources to dedicate to this nettlesome compliance stuff.  But that simply isn’t true.  First, how much time would it take to ask each of your employees to describe the steps they take in underwriting a loan or responding to a call requesting mortgage information.  If you really are as small as you think you are, it shouldn’t take much time at all and you’ve just created your credit union’s procedures.

As for training, there are loads of resources from our Association and others providing you cost-effective ways of keeping up to speed with the latest requirements.  For instance, Mike Carter from our Compliance Department offers a Webinar program that translates regulations into the practical responsibilities required to be carried out by front-line staff.  If you haven’t taken it, you should.

Finally, compliance is just too important not to have an employee whose primary responsibility is coordinating your regulatory efforts.  I know this cost money but it actually is an investment in better, more efficient service and fewer sleepless nights.

Entry filed under: Compliance, Regulatory. Tags: , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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