By Gaye DeCesare, VP of Compliance and Kristen Tatlock, Senior Compliance Manager at Aux Compliance
NCUA Chairman Todd Harper recently spoke at CUNA’s Governmental Affairs Conference and what he said should be of special interest to anyone involved in compliance. Chairman Harper stated that credit unions will need to give much consideration to consumer protection issues as the CFPB has new leadership that will likely be focused on protecting the American consumer. As any compliance officer knows, consumer protection issues equal regulatory compliance.
Harper noted that NCUA examiners have found weaknesses in credit union’s compliance management systems. Specifically, examiners have found significant gaps in credit unions’ compliance with three of the most consumer-friendly regulatory issues – Fair Credit Reporting Act (FCRA) and Regulation V, Electronic Fund Transfer Act (EFTA) and Regulation E, and Truth in Lending Act (TILA) and Regulation Z.
Let’s look at the problems NCUA identified with each of these issues.
FCRA
First, Chairman Harper mentioned that credit unions had inadequate policies and procedures regarding furnishing information to consumer reporting agencies (CRA). Under the FCRA, credit unions are required to establish reasonable written policies and procedures about the accurate reporting of member information to a CRA. This is about making sure that the credit union has procedures in place to ensure any information reported to a consumer reporting agency accurately reflects the member’s situation with the credit union. In FCRA reviews Aux has conducted for credit unions, we have also noted many credit unions lack even a basic policy about this issue, much less having procedures for how the credit union provides information to CRAs.
So, what can your credit union do? First, develop a policy that says the credit union will comply with the Act’s provisions regarding accuracy and integrity of information provided to consumer reporting agencies. Next, write procedures that address furnishing accurate data that identifies the appropriate member, reflects the account terms and liability, and reflects the member’s performance on the account. Designate which area will be responsible for updates, deletions and corrections to the credit union’s records being sent to CRAs. Include in the procedures where the information will come from, most likely your core processor, and address how the credit union will confirm data being reported is in the proper format.
Regulation E
The second concern Chairman Harper noted was Regulation E and the fact that some credit unions are failing to promptly investigate errors or provide appropriate disclosures. Again, this is something that we have also seen when doing Regulation E reviews for credit unions. The source of the problem here is a lack of procedures for the investigation of alleged errors and unauthorized EFTs.
If your credit union does not have EFT error resolution procedures, give serious consideration to putting some together. Your procedures should address receipt and processing of alleged errors, timeline for investigation, provisional credits, communicating the results of the investigation, debiting of provisional credit if no error is found to have been made, and recordkeeping. Regulation E imposes strict deadlines for error resolution, so be sure to train all staff on the proper routing and handling of alleged errors.
Loan Disclosures
Finally, Chairman Harper indicated that some credit unions were not providing complete and accurate loan disclosures. He also noted that there may be instances when credit unions are not calculating finance charges correctly.
Again, does your credit union have procedures for providing disclosures? Do those procedures indicate who is responsible for confirming all calculations are correct? Periodic review of the systems used to calculate the information that goes on a TILA disclosure should be done. Another good idea is to do some quality control reviews to make sure disclosures are printing correctly.
Fair Lending
Chairman Harper also indicated that fair lending will be a focus. Although he didn’t give examples of specific weaknesses, he did say examiners will be looking at credit unions’ fair lending programs during the exam cycle this year.
Review your loan program through a fair lending lens. One of the deficiencies the Aux Team has frequently noted is lack of even a mention of fair lending in credit union loan policies and job descriptions. If nothing else, your loan policy should state the credit union’s intent to comply with all fair lending laws and regulations including the Equal Credit Opportunity and Fair Housing Acts. Compliance with the fair lending laws and regulations should be made part of every job description for employees who touch loans in any way.
Complying with consumer protection laws and regulations will continue to be a focus for NCUA and the CFPB. How confident are you that your credit union is prepared for a review of the issues Chairman Harper discussed?
Conclusion
We hope you found this article helpful. The Aux Compliance Team can help you address any concerns you have with these changes (and we are sure there will be plenty more!). In addition to comprehensive compliance reviews, we offer staff training to ensure your policies, procedures and practices are aligned.
We are proud to announce that we received a 5 star client satisfaction rating in 2020. We’d love to be your partner in tackling the compliance challenges in 2021 and beyond.
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