Compliance Blog

Posted by Anthony Demangone

A loyal reader let me know that he didn't mind my "This and That" posts.  But when he later tried to find something, he had to sift through 30 emails with the subject line of "This and That."  Opening emails one-by-one is not a great way to spend one's time, especially as a credit union compliance person in 2011.  Thanks to that input, I'll now try to draw attention to the subjects covered in the email in the...well, subject line. 

Mortgage Servicing. Yesterday, I mentioned how State AGs have issued a major proposal that outlines what they want changed in the mortgage servicing arena. Cheyenne Hopkins at American Banker produced this stellar piece of journalism that includes an overview of the issues, as well as a link to the AG proposal itself.  Could this be a big deal?  Read this part of her story and judge for yourself:

The term sheet, obtained by American Banker and available here, is just the opening bid in an ongoing negotiating process between the servicers and various state and federal agencies attempting to punish them for significant issues uncovered in the foreclosure process. While some of the details of the term sheet have been made public already, the sheer breadth and depth of the proposed requirements were not clear until now.

The term sheet covers virtually every detail of how servicers operate, laying out new requirements for mortgage documentation, interaction with borrowers, relationships with active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems.

This is one story to watch.  Mortgage servicers don't get a lot of love these days, especially with stories about how major servicers are foreclosing on homes with no mortgages.  I worry that new draconian measures meant to punish the bad actors will also affect the good guys.  AKA, us.

Complaints.  We've written a bit about complaints recently.  Hat tip to Van Beek for forwarding this annual list from the FTC - The Top 10 Consumer Complaints of 2010.   I wonder if folks at the CFPB and NCUA would look at this? If they did, they'd see the following in the top 10.

1.      Identity theft.
2.      Debt collection.
10.    Credit cards.  

What are the top 10 complaints you've received from your own members?  What if an examiner asked you that question?  Would you be able to pull that data?  

CFPB.  Richard Cordray, the former Ohio Attorney General who now heads up enforcement at the CFPB spoke yesterday to the National Association of Attorney Generals.    And he asked for their help. While I view the alignment of the CFPB with the state attorney generals to increase compliance risks for credit unions, Mr. Cordray did talk about the ability of AGs to level the playing field between credit unions and non-bank companies against which we compete.

Of course, State attorneys general also know that leveling the playing field across different kinds of financial providers and products and services is essential and will require sustained resources. Tens of thousands of so-called “non-bank” companies offer consumer financial products and services – they just don’t take deposits like a bank or thrift. These companies need to be subject to similar oversight and enforcement as banks if they are competing for customers with similar products and services in the same marketplace. Our nation has always maintained independent funding for bank regulators apart from the political process – and the consumer bureau, charged with regulating both banks and non-banks, has been set up the same way.

The consumer bureau will depend on the expertise and experience of State attorneys general as we work together to protect consumers. We will be more effective and efficient because of this partnership, and I know my visit with the State attorneys general today is another step toward a sustained effort to insist on fairness in the marketplace.

Interchange. The credit union's position on interchange made the front page of the New York Times.  

 â€œI am appalled that our members will shoulder tremendous financial burden and still be on the hook for fraud loss while large retailers receive a giant windfall at the hands of the government,” John P. Buckley Jr., the president of Gerber Federal Credit Union of Fremont, Mich., told a House of Representatives subcommittee last week.

Amen, Mr. Buckley.  Even the OCC weighed in with its sister agency on the Fed's debit interchange proposal.  

The impact of a revenue reduction of this magnitude has not been studied, but it is clear that it will change how financial institutions, both large and small, will do business, with obvious negative impacts on their ability to recover their costs of operation and unpredictable collateral consequences to their customers. We therefore urge the board to reconsider its rate-cap based approach in light of the flexibility it acknowledges it has to pursue other choices.

To be fair, not everyone is on our side.

UDAP.  As a reminder of how powerful UDAP can be in the hands of a regulator who wishes to use it, read this story about a Nebraska credit card issuer who settled with the FDIC for more than $10 million.