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The reality of constantly changing regulations is hitting home for many credit union lenders and executives. They are complex, voluminous, tortuous, and frustrating.
Even more importantly, these regulations are unavoidable and, like death and taxes, inevitable. The critical task facing executives and lenders is to respond appropriately to the flood of new regulations.
As I speak to groups of executives and lenders around the country about the specifics of the new regulations and the need to prepare and respond to the new rules, I see three general reactions:
Of these three reactions, I am most concerned about the second. Let me explain.
How can a well-run credit union prepare for and comply with the new rules? Here is a road map to follow:
►Pay attention. You are in the first group mentioned above if you haven’t been paying attention.
Whereas in the past your state examiner or NCUA was an agency to which you paid the most attention, the Consumer Financial Protection Bureau (CFPB) is the driving force behind most of the changes today, and other regulators follow its lead.
You need to pay attention not only to the rules CFPB promulgates, but the direction and interest the agency takes in certain kinds of financial services.
Take, for example, the significant new rules regarding mortgage lending. Even if your credit union is smaller doesn’t mean it’s not affected by the rules. All the talk about “small institution” exemptions doesn’t get you off the hook.
There are numerous sources of information about the rules and CFPB’s direction. Check first with CUNA or your league.
►Understand the impact of the rules. For almost all credit unions, the rules will have a real, substantive impact on your operations, product offerings, and budgets. If you think the rules will have little impact on you, you are in the second group.
As I mentioned earlier, this is the group that concerns me most.
The rules are created to change your behavior as a financial institution. They are designed to change the way financial services products and services are offered, the types of products offered, and how they are serviced.
If you believe the rules won’t change your credit union’s lending program, you are wrong. If you change nothing, it’s likely you are not complying with the new rules.
►Make a plan and execute. If you are trying to figure out what you need to do and how to make it happen, you are in the third group. This is where you need to be.
You need to allocate sufficient resources in many areas, including lending, marketing, and information technology (IT). Be prepared to have the projects last a long time—likely months—for each new set of rules. Be prepared to then move those resources to address the next new set of rules.
In other words, it will be an ongoing process for years. Plan for it now.
In summary, CFPB will have a major impact on your business for years to come. Just as IT became a large part of a credit union’s operations years ago, regulatory compliance now is a major strategic issue you will need to deal with on a multiyear basis.