Beware Three Emerging Loss Trends

Employee dishonesty, wire transfer scams, and lender liability claims are on the rise.

April 12, 2011
KEYWORDS liability , risk , transfer , wire
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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.

Action steps

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.

BRAD MUNDINE is a senior manager, Credit Union Protection Risk Management, for CUNA Mutual Group, Madison, Wis. Contact him at 800-356-2644, ext. 5100.

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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