Consider Yourself Warned

September 12, 2016 at 8:37 am 2 comments

As the saying goes “problems” flow downhill, so as I started reading the details of the Wells Fargo account opening scandal and the $100 million fine imposed on it by the Consumer Financial Protection Bureau, I wondered how this might impact the operations of credit unions.  The Bureau has already had an interest in account issues and, suffice it to say, you can bet that examiners and regulators will be taking a closer look at how your credit union opens and manages member accounts.

In case you missed it, on Friday the Bureau That Never Sleeps announced that it had imposed a $100 million fine on the bank.  Employees opened up to 2 million accounts without customer permission and shifted funds into these accounts on behalf of customers without their knowledge or approval in order to meet cross selling targets and get bonuses. Frankly, what the Bureau describes goes beyond civil misconduct and I hope its allegations are being investigated by prosecutors.  This is identity theft on a grand scale.

First some practical advice.  The Federal Credit Union Act requires supervisory committees – or their designated representatives – to verify member accounts with your credit union’s records at least once every two years.  As explained in Chapter 24 of NCUA’s Supervisory Committee Guide – which I strongly suggest all supervisory committee members take a look at – “the purpose of the verification is to detect errors and it is also a good control to prevent fraud.”  You can either verify all accounts or rely on a statistical sample, but the basic idea is that you send selected members a confirmation letter or request in their monthly statement asking them to confirm their account status. 

Another thing I would consider reviewing are your abandoned property procedures.  Members are expected to use accounts and you have no obligation to keep inactive accounts open indefinitely.  Fee orphaned accounts out of their misery.  They are costing you money and are ideal for abuse.  Here is one of my favorite opinion letters on the topic.

Finally, do you have a culture that emphasizes doing the right thing?  I can’t stand it when I give advice and I’m told that it’s not what everyone else is doing. We owe it to ourselves and the people we hire to make sure that we have a culture that, in the immortal words of Vince Lombardi, encourages people to play to win but to play within the rules.  Wells Fargo employees were in a culture where breaking the rules was the norm.

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

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2 Comments Add your own

  • 1. Metz, Regina M  |  September 12, 2016 at 10:35 am

    Hello- Thanks for the shout-out for that opinion letter!

    Regina M. Metz | Attorney, FOIA Officer, Deputy Ethics Officer | Office of General Counsel | National Credit Union Administration
    1775 Duke Street, Alexandria, VA 22314-3428 | Office: 703-518-6561 | email: Rmetz@ncua.gov
    Work cell 571-882-3066

    SENSITIVE ATTORNEY COMMUNICATION: This transmission contains confidential information intended only for the addressee(s). This information may also be privileged and/or subject to attorney work-product protection. If you are not the intended recipient, any use, dissemination, distribution or copying of this transmission, including attachments, is strictly prohibited. If you received this transmission in error, please contact the sender.

    Reply
    • 2. Henry Meier  |  September 12, 2016 at 1:24 pm

      Nice to know I’m being read in high places. It really is one of my favorite letters and very under used

      Reply

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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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