Brad Smith, vice president of strategic development for the $612 million Pacific Marine Credit Union, said a loophole in Reg E opt-in requirements has resulted in a significant loss of fee income for his Oceanside, Calif.-based credit union. Smith said his members, half of whom are between 18 and 24, have discovered they can pump up to $100 worth of gas with only a $1 approval on their debit cards. The result is a negative checking account balance and no opportunity for Pacific Marine to recover the losses with fees.

"It's difficult to determine the exact financial impact because there have been so many other changes," Smith said. "But, we potentially lost between $700,000 to $1 million last year because of changes to fee income as a result of new regulations." 

Smith said it's frustrating to him that members who are knowingly gaming the system will have to be subsidized by other members who follow the rules in the form of higher loan rates or fewer free services.

"Every time the government tries to regulate financial responsibility, some people will still behave irresponsibly anyway, and now they can do it for free," he said.

Upgrading or replacing ATMs to conform to Americans With Disabilities Act standards will also take a huge chunk out of Pacific Marine's budget. Smith said the compliance cost for his 49 ATMs will run $1.3 million.

Even though Pacific Marine has more than 14% capital and can dip into its coffers to pay for compliance, new regulations have nonetheless changed the way it does business today and will do business in the future.

Rowe said he thinks the current amount of disclosures is overkill.

"In many respects, the consumer is now so overloaded with required compliance language that most of it is actually ignored," he said.

New regulations have also forced the vendors who support the industry to change their product and services offerings. CUNA Mutual Group has beefed up its staffing and resources to help credit unions address the complexities of today's regulatory environment.

"Regulations, coupled with the effect of the new Consumer Financial Protection Bureau, will impact all areas of a credit union's operation, including debit and credit cards, home equity and consumer loans, tellers, the way you process mortgage loans, HR compensation plans and auditing to name a few," said Bill Klewin, lending compliance leader for CUNA Mutual Group.

The Dodd-Frank Act alone has generated nearly 3,600 regulatory proposal pages, CUNA Mutual said in a release. Credit union executives reported to CUNA Mutual in a recent survey that they now spend an estimated 14% of total staff time on regulatory compliance issues. The vendor reported it currently answers nearly 11,000 complex compliance questions from credit unions each month.

Klewin, who has taught sessions at CUNA's Regulatory Compliance School for the past few years, said he's noticed attendees have grown beyond the usual internal auditors, compliance specialists and senior managers seeking division-specific compliance training.

"I'm a firm believer that one person has to have compliance accountability…and organizationally, that person has to have influence," he said. "Often times, it's a buried position."

Some credit unions are splitting internal auditor duties into two positions, Klewin said, and hiring a compliance officer to focus only on compliance issues.

While he hasn't seen a rush to discontinue products like credit cards due to compliance requirements, Klewin said he's concerned compliance could have a cumulative effect on the way credit unions do business.

"I think we need to keep an eye on mortgage rules," he said. "It will be interesting to see what medium size and small credit unions do, to see if they will say 'to heck with this' and get out of the mortgage business."

Lauren Calhoun, former senior attorney at the U.S. Government Accountability Office in Washington, joined CUNA Mutual Group in October of 2011 as a compliance manager. She provides regulatory compliance expertise on lending and deposit issues and assists credit unions in a compliance advisory capacity.

She said credit unions are not only struggling with existing regulations, they also face a lot of unknowns in terms of regulations  expected in the next year or so.

"For example, the Consumer Financial Protection Bureau put out a prototype of a new monthly checking statement they are considering that would put a penalty box on the document to show how much a consumer has been charged in overdraft fees and would give them more information on how to reduce those fees," Calhoun said. The CFPB is currently collecting comments on overdraft fees, she added.

In addition to adding new staff, CUNA Mutual is providing more compliance guidance online and has streamlined some compliance processes, like its new preapproved vehicle loan program.

"It allows members to be preapproved for a certain amount and take that check shopping for a car," Calhoun said. "The member simply hands the paperwork to the dealer and drives away in a new car."

The program is compliant with Truth in Lending regulations, providing disclosures up front to members.

"The underwriting is done up front, so rather than negotiate the car and return to the credit union for financing, the dynamic has changed," Klewin said. "The problem was members didn't want to go back to the credit union," he added, and they would agree to dealer financing because it was more convenient.