NEW ORLEANS-Regulatory change is coming, but this time it's going to be bigger-and different-than what financial institutions have ever experienced.
Bill Klewin, lending compliance leader for CUNA Mutual Group, told Credit Union Journal that while regulatory change is something CUs are familiar with, what's coming down the pike from the Consumer Financial Protection Bureau will be "nothing close" to what credit unions have ever seen from Washington (
"It's a remarkably different approach and the old way of doing disclosures may go right out the window," Klewin said. "It used to be relatively simple-here are the new rules, here are why we have the new rules; it was fairly clear what we needed to do. Now we will face rules that will be extremely complicated and don't necessarily have all the information you need to make decisions."
The regulations on their way will impact all areas of a credit union's operations, including debit and credit cards, home equity and consumer loans, tellers, mortgage processing, HR compensation plans, and auditing, to name a few, Klewin said. He added that the "old regulatory scheme" asked for CUs to disclose a lot of information. Now, requirements will also delve into matters such as what does the CU's comp scheme, underwriting or mortgage lending staff look like.
"It will take a lot of flexibility away from credit unions," Klewin told Credit Union Journal during the 2011 CUNA Lending Council Annual Conference. "They won't be able to experiment and try different ways of doing business."
Hiring More Compliance Officers
It also means credit unions will have to increase their compliance expertise. "Collectively they will not only have to hire a large number of people, but people with the requisite skills," said Klewin.
Skills needed are great attention to detail and the ability to see the big picture to make accurate assumptions. "I think the most important skill is being able to take what the new rules say and then understand how to implement them," noted Klewin.
But not knowing for certain how much regulatory change is coming, what changes are coming and how difficult it will be to address the new rules is forcing credit unions to "staff for uncertainty," reminded Klewin. "That is a difficult thing to do."
Klewin advised credit unions to form more compliance CUSOs or outsource some of the work. "Like your documents business. You can put it in the hands of a provider that's been in the business and knows the regs. It can take a huge burden off your shoulders."
But Klewin advised that if credit unions choose to turn to a lawyer for help, they simply not choose just any lawyer. "People tend to think lawyers can do everything, but they can't. You need to find regulatory counsel that knows what they are talking about, and that is not likely your collections lawyer. It is a specialist."
The bottom line, concluded Klewin, is "we're operating in a new world, where you have to think of compliance organizationally, because it will affect almost every aspect of your business. "The pace of new regulations is daunting. Not only will credit unions be challenged but regulators will be, too."
