We all know that ignorance is no excuse for failing to obey the law. Yet maintaining razor-sharp knowledge of the rules governing financial services is a fulltime job. To really do it right, credit unions need a person — sometimes many people — to create and follow a calendar of proposed and final rules, train staff on the ins and outs of compliance, and make all the program and operational changes necessary to follow the rules.
But for many credit unions, a staff person to do that fulltime job just isn't viable. Those of us at the league level have witnessed first-hand the struggles faced by credit union executives who want to play by the rules, but aren't entirely confident they know what the rules are.
Where most credit unions and league personnel get stuck isn't necessarily in the reading of the rules. After all, they are generally written in black and white and publicly accessible. Rather, we want to understand exactly how those rules will be interpreted and what steps need to be taken at the credit union to ensure compliance by any number of deadlines.
A good example is the recent changes requiring financial institutions to disclose credit scores and related information when a credit score is used in taking adverse action. Determining when a credit score is used is fuzzy, tempting some to disregard the rule if a credit score was not the key factor used in denying credit. A simple word like “used” can be interpreted in so many ways.
To help Nebraska credit unions decipher the rules, the Nebraska Credit Union League has partnered with PolicyWorks, a compliance consulting firm with a focus on credit unions. The consultants in this group have agreed to field NCUL members' compliance questions as they arise. They provide this on-demand compliance assistance for federal regulatory issues.
To date, our members have relied on these experts for the answers to questions like: “My examiner made a finding regarding the use of a tax assessment. What are the new appraisal rules, and why can't I use a tax assessment?”
Or, “we understand that the risk-based pricing rule has changed. What form do we need to provide our members and when is that change effective?” And, “what if a credit score was not the main reason we denied a loan? Do we still have to include the credit score on the adverse action?”
Beyond simply following the rules, Nebraska credit unions are like many others in the country; they want the opportunity to help shape the rules. But to take a proactive role in development of the rules, credit union executives need to understand and follow the timetables set forth by federal agencies.
Again, we're facing a resources challenge. If a credit union does not employ a full-time compliance officer, who at the credit union has the bandwidth to own this task? Who will rally the right people, gain a complete understanding of the credit union's position, and then author and submit comments?
With the support of third-party consultants knowing policy and rule-making inside out, our league is able to help member credit unions keep watch over rules as they develop. We're able to communicate not only the when, but the why, of commenting on proposed final rules. We're able to do this for many credit unions at once – giving our state the best chance possible for proactively shaping policy and maintaining efficiency inside our own organization.
Surround yourself with experts is the rule of thumb followed by many small businesses. This should also be a guiding principle for credit unions, especially for those who don't have in-house resources.
Scott Sullivan is president/CEO of the Nebraska Credit Union League.
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