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3. Lender liability losses
These have increased significantly among credit unions over the last two years. The rise in delinquency, repossession, and foreclosure calls attention to the need to ensure compliance with applicable laws and regulations that govern these procedures.
Be particularly mindful of U.S. Bankruptcy code, Fair Credit Reporting Act, Unfair and Deceptive Trade Practices Act, and Fair Debt Collection Practices Act requirements in your collection and reporting procedures.
Consult with an attorney to ensure processes, procedures, and other member-facing documents (such as “notice of intent to sell”) are in compliance with these acts as well as other applicable statutory laws that may apply to your credit union.
Damages resulting from violations of these laws can be significant.
Take these steps to guard against fraud and other risks:
- Be proactive when addressing emerging loss trends such as employee dishonesty, wire transfer scams, and lender liability claims. Complacency can be costly;
- Conduct a thorough risk-benefit analysis before launching new products or services. While potential profits and losses are important considerations, don’t overlook compliance best practices;
- Conduct comprehensive internal audits to guard against employee dishonesty. Include a full scope of all credit union operations and report the results to the supervisory committee and board of directors regularly;
- Establish reasonable monetary limits for all member-not-present wire transfer requests. This will protect the credit union and members;
- Be particularly mindful of U.S. Bankruptcy code, Fair Credit Reporting Act, Unfair and Deceptive Trade Practices Act, and the Fair Debt Collection Practices Act requirements in your collection and reporting procedures. This will limit lender liability;
- Examine your credit union’s insurance policies to understand what’s insurable and what isn’t. Policy language varies by insurance carrier, so include your insurance representative in these discussions;
- Address risk assessment and planning, contracts, and monitoring when conducting due-diligence reviews of third-party vendors; and
- Integrate governance and risk oversight into your strategic planning sessions.