Interior FCU & Evergreen CU: What CUs Want from a Compliance Partner

These two credit unions chose Aux for their flexibility, intimacy, and credit union-centric values

There is a famous quote from Henry Ford: If I had asked people what they wanted, they would have said a faster horse.

His quote is uttered throughout boardrooms and classrooms alike, shining as one of the finest quotes in modern times. It is the phrase that comes to mind when I ask Kristen Tatlock, Senior Compliance Manager at Aux, what she does differently for her credit union clients. Without hesitation she responds, “We help them identify what they need, instead of them telling us what they need. Because sometimes, they don’t know what they need.” Essentially, you don’t know what you don’t know.

Tatlock continues to explain in a sweet southern drawl: “We don’t just give our clients a checklist that says ‘Here’s what you need to do.’ We hold our clients’ hands.”

For anyone who is familiar with outsourced compliance offerings, this practice may come as a surprise to you. The compliance services market is certainly not lacking in competition – I can think of nearly a half dozen providers off the top of my head. But the concept of a “hand-holding” approach, if you will, is very unique.

And as it turns out, credit unions like Portland, Maine-based Evergreen CU and D.C.-based Interior FCU have been asking for it.

🤔 The Challenge:

Outsourced compliance services don’t offer what credit unions need, and they desperately want an offering that is more credit union-centric and supportive.

“They help us to be proactive with our policies. The feedback isn’t just ‘Well you are doing this wrong.’ They are part of our credit union family. They are here to support us.”

–  Mike Merryman, CEO, Interior FCU

Introduction

What do credit unions really want out of a compliance service? What is lacking in the industry? Aux surveyed 60 CEOs of credit unions ranging from $30M to $1.6B in assets on their pain points. The results across the board were staggering. 98% of respondents said that staying compliant was a hugely critical issue for their credit union in the next 3-5 years, if not the most critical. They lamented that outsourced compliance services didn’t offer what they needed, and desperately wanted an offering that was more credit union-centric and supportive.

After years of research, Aux had narrowed down what was lacking in credit union compliance into three main issues, which we will be discussing in this paper:

  1. Clarity – Credit unions are often left confused with the answers they receive from their vendors. They have expressed a strong desire for detailed citations, phrases, and sources to back up answers.
  2. Intimacy – Credit unions feel that their compliance resources keep them at arm’s length. There is a lack of deep understanding about individual credit union needs, and this translates to a passive and lofty relationship.
  3. Flexibility – Compliance service contracts have notoriously rigid terms. Commonly, credit unions are not able to cherry pick what fits their needs, or receive “on-call” style compliance services, both of which are desired.

Read on to take a deeper dive into each of these three areas, hear examples from credit unions, and see how Aux is leveraging their knowledge to redefine how compliance services help credit unions.

Concern 1: Clarity

Obtaining clear answers from your compliance provider is a passionate concern among credit unions. It is imperative that compliance officers are able to trust the answer they receive is correct, and that they are able to communicate to both their team and managers why a decision has been made a certain way. After all, it is their job on the line in the end.

$270M Evergreen Credit Union is tucked away up in Portland, Maine, and has four branches in the region. Progressive and open-minded, the credit union has been voted one of the best places to work two years running by the Maine State Council. We interviewed Laura Briggs, VP of Compliance at Evergreen Credit Union, about the concerns she has with the inherent ambiguity of compliance.

“You end up asking yourself, ‘Did I interpret this wrong? Am I biased with the answer or am I looking for the answer objectively?’’ Briggs mulled over the complexity of being a compliance officer, and raised a fascinating point about the benefit of having deeply knowledgeable compliance assistance.

Briggs appreciated that Aux’s compliance services team was willing to spend the extra time describing precisely how they understood the regulation, where they pulled sources from, and why. She described experiences with a previous compliance vendor: “If I came back and had a follow up question, their response was, ’Well…that’s just how we see it.’ That doesn’t help me. Can you explain to me why you feel this way? I need someone to articulate why. I need to be able to provide answers to staff – not just mumble, ‘Well that’s just what I think and that’s that.’”

Interior FCU is located in Washington, D.C., some 500 miles down the Atlantic coast from Evergreen Credit Union. They too valued that their compliance provider cited sources and offered clear answers. “We had questions about offering custodian accounts, such as who can sign for them, and so on. The Aux Compliance Team sent their specific wording and also cited the regulation. They didn’t just give us a ‘he said she said’ reasoning,” said Vicky Doyle, VP of Member Services at Interior FCU. Doyle is a 37-year credit union veteran and worked as a compliance consultant for many years. That being the case, she has a unique, outside perspective on what credit unions want from a compliance vendor. “The Aux Team provides facts to back up their answers. I don’t have to question what they have given me,” Doyle said frankly.

“When looking for a compliance vendor, you need someone who understands the credit union movement. Now, I still call it the credit union movement, not industry,” Kristen Tatlock of Aux said. She has been involved in credit union compliance for nearly 30 years and has old-school credit union blood running through her veins. Tatlock emphasizes that, in their search for a compliance provider, credit unions need to find someone who understands credit unions, before anything else. We’ve found that credit unions are easily frustrated and dismissive of compliance vendors who treat them like banks. One key to a fulfilling compliance partnership is to communicate on a level where there is no “bank speak.”

👏The Benefit:

“Having someone that you can bounce an idea off – ‘Am I right? Am I following the right track? Am I even looking in the right area?’ In most credit unions, it’s just one person running compliance, and where else can you go?” – Laura Briggs, VP of Compliance at Evergreen CU

Concern 2: Intimacy

A compliance vendor relationship works optimally with a high-level intimacy and knowledge of the workings of the specific credit union. Credit unions have shown to be exasperated with the impersonal service from compliance providers, and this is one area in particular where Aux improves the customer experience. Tatlock comments, “It is important that we take a deeper dive into their operations, their policies, and their personnel to get a more thorough picture of what the client needs. Consequently, we can offer much more robust assistance catered specifically to each credit union’s unique profile.”

Interior FCU has been a client of Aux’s Compliance Service for 7 years. “I view them really as our compliance department. Any new product or service, we vet through them first,” said Mike Merryman, President/CEO of Interior FCU. Merryman has been CEO of the credit union since 2000, and has grown them from $48M to $185M in assets – a whopping 385%. “They help us to be proactive with our policies. The feedback isn’t just ‘Well you are doing this wrong.’ They are part of our Credit Union family and the team. They are here to support us.”

Doyle, who is Merryman’s Assistant BSA Officer, tells me she works very intimately with her compliance partner. “We recently had a deposit account review. Aux asked for our Truth in Savings policy and they came back with quite a few changes,” said Doyle. “The first thing the examiners ask is where your policies are and it’s nice to have the confidence that Aux has reviewed them.”

Laura Briggs of Evergreen Credit Union agrees: “I can go to the staff at Aux and say, ‘I am struggling how to interpret this regulation and translate it to staff in a way they can understand.’ And they will actually translate it for me. I’d argue that other compliance providers would not provide this level of service.”

👏The Benefit:

“It’s critical to have a compliance resource that not only can review policies, but provide recommendations specific to our credit union.” – Vicky Doyle, Assistant BSA Officer at Interior FCU

Concern 3: Flexibility

Credit unions have voiced that flexibility in compliance services is a massive area for improvement. A compliance officer’s job is notoriously stressful, and a one-size-fits all mentality among vendors adds fuel to the fire. Credit unions feel trapped by the rigidity of their contracts. There is no room for customization, side projects, and one-time marketing reviews. Furthermore, they are confined by the strict contact rules that the vendor employs. It is not surprising that many are frustrated.

Evergreen Credit Union was frustrated with how often compliance vendor pricing was ambiguous. “I still struggle to understand how previous compliance vendors billed us,” said Briggs, bluntly. “They would bill us for an estimated number of days that reviews were expected to take – say 2, 5, 22 days, you name it. But what happens if we go over in time; what about under? Does the contract change?

Credit union professionals are far too busy to be hunched over a contract, trying to figure out how many compliance visits, hours, and reviews they can afford each year, and how many they have already used. They also don’t want to have to make a decision on whether an item is worth calling their compliance service, and getting billed for it, or to just try to figure the issue out for themselves. “We have some clients we hear from 2-3 times a week. We also have some we hear from 10 times a week – especially the ones we do marketing compliance for,” says Tatlock, when asked how often she talks with her compliance clients.

“If a credit union didn’t have a full service compliance provider, they might have to consult their legal counsel for certain items – and that is super expensive,” says Briggs. “You are paying them on an hourly retainer; that is anywhere from $200 to $500 an hour to do research for you. If you had a compliance partner that had a flat monthly fee, they could do research for 2 hours and you know it’s not going to cost you more.”

Tatlock laughs as she recalls a recent scenario: “We had a client who had a lending question we could not find an answer to in the state code. The code wasn’t clear to us. So I just called up the Bureau of Financial Institutions for that state and flat out asked them. I could have said to the credit union, ‘I don’t know, you need to call a lawyer.” Kristen reflects for a moment. “I don’t know how many other providers would make that call.”

👏The Benefit:

When it comes to contracts, “It was so much easier with Aux’s Compliance service. We don’t have to worry about the number of days we need them. It’s a flat monthly fee and we have access to everything they offer.” – Laura Briggs, VP of Compliance at Evergreen CU

Compliance Doesn’t Have to be a Core Competency

One thing that’s for certain is that credit union employees are known for wearing multiple hats. Another thing that’s for certain is that keeping up to date on compliance is a huge endeavor. More credit unions are realizing that they don’t have to be fluent in compliance, because having an outsourcing partner can do the job just as well. Credit unions are abandoning the notion that compliance “needs to be in-house.”

COO Hughes looks at a compliance officer like an attorney or auditor – something you can easily outsource. “I would outsource as much as humanly possible if I could, because being able to serve my members is most important. If managing compliance takes you away from serving your members or a valuable employee away from doing something that provides a better level of service, then outsource it. Compliance is compliance is compliance. All you need is an expert to guide you.”

Conclusion

It turns out there is no evidence to support that Henry Ford ever said that quote about the horses, despite how cool it sounds. No one really knows where it came from, but the meaning remain true: you don’t know what you don’t know.

We hope you found this whitepaper valuable. As the compliance landscape continues to sag with more and more regulatory burdens, it is critical that credit unions employ the assistance of a compliance expert, and find one that is effective. Nothing might be worse than expecting a compliance officer to manage countless rules and regs, except maybe paying a vendor who is not effective to help you to do it. Let’s revisit the three issues we found that credit unions were most concerned about with compliance offerings.

  1. Clarity: Unclear answers that put the compliance officer at risk
  2. Intimacy: Limited communication and detachment between vendor and client
  3. Flexibility: Inflexible one-size-fits-all services

Aux continues to research what credit unions actually want from a compliance vendor and solve their oft-ignored pain points. “We work with them to get it done. We help them GET IT DONE.” Tatlock’s southern drawl suddenly turns Rocky Balboa-esque. But after all, that is what credit unions need to hear.

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About Interior FCU

Interior Federal Credit Union is a member-owned and member-run financial institution committed to providing their Select Employee Groups, their volunteers, members and families with world-class banking, lending, insurance and investment products.

Interior FCU understands the complexities their members face every day, so they work hard to be a natural resource members can rely on. Since 1935, they have been promoting financial wellness and working hard to make their community a better place to live and work.

Purpose: To provide world-class financial products and services so that members can achieve their dreams.

Mission: To deliver excellent service to our members with financial products that meet their diverse needs.

Learn more at www.interiorfcu.org

About Evergreen CU

Evergreen was founded in 1951 as the S.D. Warren Credit Union located in Westbrook. The mission was to serve the employees and families associated with the S.D. Warren paper mill. Sappi later purchased the mill and continues to operate on the same site today.

Voted as one of the Best Places to Work in 2016, 2017, 2018, 2019, and 2020, Evergreen Credit Union is one of the largest credit unions in Maine, with $375 million in assets. They proudly serve individuals, families and local businesses throughout Southern Maine. Evergreen CU strives to benefit their neighbors and organizations by donating time and resources.

Vision: To be the most innovative Credit Union in Maine

Mission Statement: Evergreen Credit Union will provide world-class service to ensure the safety and soundness of our members, our employees and our environment.

Learn more at www .egcu.org

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Wondering if compliance assistance could help your credit union? Reach out to us for a zero-salesy, zero-pushy chat.👇

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