After months of preparation, writing, and research, our new compliance whitepaper is now available! Our most in-depth whitepaper to date, “6 Long-standing Compliance Issues You May Want to Revisit” is a must read for anyone who touches compliance at his/her credit union. The whitepaper addresses six compliance issues credit unions may not have given thought to in a while – and discusses why you should pay attention to them today, including:
- Adverse Action
- Reg E Error Resolution
- Military Lending
- Overdraft & Courtesy Pay
- ID Theft/Reg Flags Program
- Reg D
In this month’s newsletter, we would like to share a snippet of the paper with our readership. Below, we address the first issue, Adverse Action, which was one of issues NCUA noted as an examination focus for 2019. If you would like the whole paper, simply click here or visit the link at the bottom of the article. We hope you like it!
Compliance officers are some of the busiest employees in the credit union. Just keeping up with the new rules and regulations is a full-time job. In smaller credit unions, where there often isn’t a dedicated compliance officer, the juggling act is even more extreme. It is easy to ignore the older compliance issues when managing the tsunami of new information and requirements, but this method is guaranteed to come with critical, damaging errors in due time.
As an outsourced compliance partner and national compliance trainer, we have seen hundreds of credit unions’ compliance functions – what they do right, and what they do wrong, and what is just plain ugly. Read on to see what areas you may want to revisit sooner rather than later.
Adverse action notices are a part of the Equal Credit Opportunity Act (ECOA), which was created in 1974. As lenders, credit unions must provide Adverse Action Notices (AAN) whenever they deny a loan application or make an unfavorable change to an existing loan account. The requirement hasn’t changed much since the law was enacted over 40 years ago and is often a prime candidate for being overlooked by compliance departments, leading to embarrassing errors.
A common issue we encounter among credit unions is out-of-sync technology that causes their adverse action notices to go haywire. An example: One credit union’s data processing system performed a routine update, causing data fields to change. Without realizing it for over two years, the credit union was sending out adverse action notices that their updated system generated – and “action taken” sections were blank. No one noticed because the beta testing went smoothly and staff got busy doing other things, so no one was looking at the finished notices that were being sent. We discovered the error during a Fair Lending review, and the credit union ended up resending 2 years’ worth of AANs. Interestingly, not a single member called about it either, which makes you wonder.
We know of another credit union who used a mortgage CUSO to send out required ECOA mortgage documents. In the section that provided information on whom to contact if members felt they’d been discriminated against in the mortgage process, the CUSO listed the FDIC instead of the NCUA.
Why Revisit It
One of the issues NCUA noted as an examination focus for 2019 was adverse action notices. In NCUA Letter to Federally Insured Credit Unions, 19-CU-01, NCUA indicated that examiners will review credit unions’ compliance with Regulation B’s notification requirements following adverse action taken on consumer credit applications. Additionally, fair lending continues to be a focus of both the CFPB and NCUA, and adverse action notices play a huge role in a lender’s compliance with fair lending laws. If you haven’t reviewed your credit union’s AAN process in a while, now is a good time to do this, especially if your credit union uses an automated system.