Being prepared for enhanced compliance starts with an examination by the CFPB, according to Dennis Dollar, president/CEO for Dollar Associates.

“The biggest thing is to expect a CFPB examination versus just having to live by their regulations,” Dollar said.

In addition, the larger credit unions are subject to the NCUA's stress-testing model. Further, they are subject to the Durbin Amendment in that debit interchange decreases from an average of 42 cents per swipe to about 24 cents, Dollar added.

PenFed Credit Union President/CEO James Schenck advised credit unions approaching the threshold to go to the CFPB's website and review the Supervision & Exam Manual.

“It contains all the templates for the examination process, and they adhere to that religiously,” Schenck said. “The first exam will likely be a baseline review that focuses on the Compliance Management System. The exam manual contains a full template that you can follow in preparation for the exam – use it, and you'll know what's coming.”

Cann offered the same suggestion of reading the CFPB exam manual.

“It has most of their expectations but not all of their expectations,” Cann added.

The Alexandria, Va.-based PenFed has $19.5 billion in assets, according to the NCUA's December 2015 Call Report, but the credit union said it expects to surpass the $20 billion mark in the coming months.

Rounding out the remaining three credit unions above the threshold are the Vienna, Va.-based Navy Federal Credit Union with $73.3 billion in assets; the Raleigh, N.C.-based State Employees' Credit Union with $31.8 billion in assets and the Santa Ana, Calif.-based SchoolsFirst Federal Credit Union with $11.7 billion in assets, according to the latest figures from the NCUA.

Meanwhile, four credit unions are closing in on the $10 billion threshold. According to NCUA Call Reports, the Sacramento, Calif.-based The Golden 1 Credit Union has $9.7 billion in assets. 

The San Antonio-based Security Service Federal Credit Union has $9.2 billion in assets, according to its latest Call Report.

“In advance of reaching and surpassing the $10 billion threshold, we engaged the services of external advisers to identify adjustments to our compliance program prior to the arrival of the CFPB on our doorstep,” Jim Laffoon, president/CEO for Security Service, said. “In general, the CFPB requirements will mandate some changes to policy, procedure, technology and organizational structure. These tasks are not difficult, but obviously it takes some time, expense and effort – and if regulatory relief could be achieved, so much the better.”

Rounding out the four is the Mountain View, Calif.-based First Technology Federal Credit Union with $8.6 billion in assets, followed by the Chicago-based Alliant Credit Union with $8.7 billion in assets.

“Once you get to the $10 billion threshold, you are just looked at differently in the marketplace,” Dollar, who consults with credit unions both above and below that asset line, said.

He explained that the enhanced scrutiny does not just come just from regulators – it also comes from a credit union's members and its competitors. Further, he said, “The litigious nature of society today becomes even more litigious when you become that size.”

He added that a large credit union's board is placed under additional scrutiny and will more likely be named in any legal actions against the credit union.

“There's a psychological line, not only for you, but for your members and your competitors and others when you get to that point,” he said.

For credit unions preparing to cross the threshold, lowered debit interchange could impact their bottom line. Dollar encouraged those credit unions to begin a checking account promotion in order to try to make up for, in volume, what they may lose in the actual fees. He said the good news is that 46% of credit union members use their credit union checking account as their primary checking account.

The promotional efforts could bring the 46% penetration rate up to 55%.

“You can very likely make up that difference,” he said. “The rest beyond that is gravy.”

Laffoon recognized the difficulty that crossing that path may bring in regard to the credit union's fees.

“The impact of reduced interchange income is a tougher problem to solve both strategically and tactically,” he said. “Do we reduce member benefit from rewards programs to lower expense? Do we attempt to generate more revenue from a fee increase? Do we accept the reduced revenue and continue providing the same level of service? Do we shift our strategy to promoting credit? We are currently considering these and other strategic questions.”

In addition to being examined by the CFPB, credit unions with more than $10 billion in assets continue to be examined and supervised by the NCUA through the Office of National Examinations and Supervision. Further, these credit unions continue to submit Call Reports to the NCUA.

SECU President/CEO Jim Blaine called the enhanced scrutiny equivalent to having to change all four tires on a car while driving 90 miles per hour down a road.

Blaine said his credit union was well past the threshold when the Dodd-Frank Act was passed and that he was aware of the changes coming down the pike.

He said criticism of the CFPB has resulted from the short memories of politicians and others who have since forgotten that there was mismanagement and inappropriate behavior by those that caused the financial crisis and problems for everyone involved, including the institutions that did not cause the financial crisis.

He added that he supports the intent of the CFPB.

“The intent in the Dodd-Frank Act is to make sure that what went on, leading up to the financial crisis of 2008, doesn't happen again and I will support that forever,” he said.

SECU was examined through the Home Mortgage Disclosure Act and it was an eye-opening experience, Blaine said.

“What we found was [the CFPB was] at a whole different, a higher level of explicit exactitude than we were,” he added.

The examination was very technically oriented and as a result, the credit union found it had much to improve on, according to Blaine.

Ultimately, the differences in terms of compliance for larger credit unions become apparent as the examinations progress.

“We worked on the basis that as long as errors or mistakes are few, when they appear, we fix them and go on,” Blaine said.

However, the level of scrutiny can reach a whole new level.

Cann explained that when he started at BECU in May 2009, there were four staff members in the compliance department who were also tasked with other assignments. Now, the department has 14 staff members devoted solely to compliance, and a host of other staff members with compliance expertise are housed in other departments.

The CFPB encouraged BECU to embed compliance experts into its departments, according to Cann.

“If the CFPB was coming into my institution, I would contact my local CFPB office and ask for a time to talk in advance,” Blaine said, adding that asking for guidance in advance of a formal visit would be especially helpful.

Examinations can take longer, too. Schenck said the exam could take between two and three months; Cann cited a shorter timeframe of up to eight weeks.

Schenck cautioned credit unions to budget for the significant increase in regulatory costs.

“About a year in advance of our first exam, we contracted with some external firms to review some of our key products and processes in depth and to provide recommendations for strengthening our programs in advance,” he added.

Cann said the days when credit unions waited for regulators to criticize and make changes are long gone.

“In today's world, you can't afford to do it that way,” he said. “You have to understand their expectations before they come to do the exam and build out your programs to meet those expectations.”

Cann added, “It's a big job. Do not underestimate it.”