Compliance Blog

Written by Steve Van Beek

Last week, I shared two slides from my upcoming presentation How the CFPB Impacts Your Credit Union at NAFCU's Directors Conference in Asheville, NC. One of the key takeaways will be the idea of Three-Dimensional Compliance.

So, what is Three-Dimensional Compliance? In short, it is a new way to think about the role compliance plays in the credit union. Here is a snippet from my article in the May/June The Federal Credit Union magazine:

"Beyond the Checklist

The creation of the CFPB means that credit unions need to review the role compliance plays in the credit union. Often the compliance officer is brought into a discussion late in the process, and her job is to approve or disapprove a particular action based on the regulatory requirements. Going forward, this “yes or no” approach to compliance will need to change. The CFPB’s focus is principle-based as well as requirement-based. Not only will credit unions need to determine if their product or service is compliant with laws, regulations and guidance, but they will also need to expend resources to document that the product or service provides a benefit to members.

When new requirements are issued, credit unions won’t be able to simply work through a checklist of new requirements and make tweaks to their products and disclosures. They will also need to undertake a three-dimensional analysis of the product or service, asking: 

• Why is the regulator taking this action?

• How were consumers impacted by the prior practices?

• How do consumers view the product or service?

• How does the credit union market the product or service?

• Does the credit union’s marketing of the product or service correspond with how the product or service is used by members? 

In other words, when regulators identify a product or service that has been abused (by either consumers or financial institutions), credit unions need to complete a full 360-degree review of their offerings in order to reduce their compliance, reputation and strategic risks."

You can find the full article here.

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Reading the CFPB's Tea Leaves. If that message sounds like something your senior managers or Board needs to hear, be sure to pass along information about NAFCU's Annual Conference - specifically our Regulation & Economy Track. We'll be meeting in Boston from July 9-13 and you can see the description of my talk below:

The pace of the Consumer Financial Protection Bureau’s rulemaking has put credit unions on the defensive. For example, the CFPB’s final mortgage regulations will require a complete overhaul of credit unions’ mortgage operations. Hear which requirements will need special time and attention from your staff and gain best practices to stay on track with your implementation plan. And, just as importantly, hear which areas the CFPB is looking at next. Today’s scrutiny leads to tomorrow’s regulatory requirements. We’ll discuss the CFPB’s focus on prepaid cards, private student lending, overdraft protection programs and checking account disclosures – including what steps your credit union can take now to prepare for new requirements. 
Steve Van Beek, Esq., NCCO, Director of Regulatory Compliance, NAFCU

Full information on the conference can be found here.