Are You Ready for the COVID Regulatory Wave?

April 2, 2021 at 9:40 am Leave a comment

Recent announcements by the CFPB underscore that the next COVID regulatory wave is coming.  In addition to familiarizing yourself with the most recent guidance, now is the time to double check all your files and make sure you can explain to your examiner why you took the steps you took during this very unique time in banking history. 

The trigger for this somewhat paranoid opening paragraph is recent announcements by the CFPB.  On March 31st the Bureau announced that it was rescinding a previous guidance which relaxed various regulatory expectations and requirements during the pandemic.  In effectively announcing that it was putting the gloves back on, the Bureau explained in the accompanying press release that “Providing regulatory flexibility to companies should not come at the expense of consumers.” 

The funny thing about this comment is that the Bureau prides itself on being a fair, objective, data driven regulator.  I’m curious what evidence it has to suggest even indirectly that this regulatory flexibility has come at the expense of consumers? I would suggest that a relaxation of regulatory mandates provides a mechanism for small to medium size financial institutions to put their resources towards helping members on a case by case basis rather than checking off regulatory boxes.  But then again, I don’t have the resources to do that kind of analysis. 

Then yesterday, the Bureau issued this strongly worded admonishment warning mortgage servicers against being unprepared for an anticipated wave of troubled mortgages as forbearances come to an end.    In states like New York which already have imposed rigorous forbearance requirements, this warning comes across as somewhat duplicative, but you should still take the time to read it.  Again, I can’t help escape the feeling that financial institutions are being assumed guilty until proven innocent. 

Is there any way to prepare for the regulatory wave?  Document-document-document what you have done and why you have done it.  In addition, double check to make sure your policies and procedures are up to date; after all, between the GSEs, federal legislation, state legislation, the CFPB and state level regulators, there has been no shortage of regulatory mandates with which you must demonstrate familiarity even as you try to help out your member.      

While the vast majority of credit unions aren’t large enough to be directly subject to its supervisory oversight, as the ultimate interpreter of virtually every significant federal consumer protection law, the Bureau sets the tone for examiners throughout the country, particularly in states like New York which have developed state level consumer bureaus. 

What has me ticked-off this morning is that the Bureau has proclaimed that this avalanche of regulations is more important to enforce than allowing institutions to continue to work through the pandemic in good faith. 

Maybe the Bureau hasn’t read the news in the last couple of days, but the virus is still spreading.    

Entry filed under: Compliance, COVID-19, Regulatory. Tags: .

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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