Credit union execs’ top compliance headaches

What keeps credit union leaders awake a night?

At the National Association of Credit Union Service Organizations’ recent annual conference at the Disneyland Hotel in Anaheim, Calif., the opening session featured four attorneys from the firm of Media, Pa.-based Messick, Lauer & Smith, which advises credit unions and CUSOs in all 50 states. The panel gave updates on several compliance trends – ranging from the status of the National Credit Union Administration’s field of membership rule to ADA website lawsuits to NCUA possibly increasing social media and website compliance to the tumult at the CFPB. Credit Union Journal asked attendees which of those issues is keeping them awake at night, or if there is another issue looming larger at their CU.

Doug Wolf, EVP and chief financial officer, $350 million Mid-Minnesota FCU, Baxter, Minn.

NCUA’s field-of-membership rule is important to us. Of the two provisions that were struck down, one affects us directly. We serve nine counties in Minnesota. If a credit union asks to merge with us, if they are not in one of those counties it is questionable if we can do it. In rural areas, everyone is connected. The connection covers a larger geographical area, so why should that be a limiting factor? We are doing what we can to lobby through CUNA and the Minnesota Credit Union Network.

Kim Fettkether, VP of strategic development, $3.5 billion Veridian CU, Waterloo, Iowa

In Iowa right now the big issue for credit unions is tax reform. Credit unions have been a target in the state legislature. The Iowa state legislature is controlled by Republicans, and bank lobbyists have used a tax reform bill to, as they say, “end the credit union free ride.” The state senate passed a bill that would raise taxes on credit unions and lower taxes on banks. However, the house is debating a bill that does not have that tax language, and the governor’s version does not have that language, so I am cautiously optimistic. We hope all the grass roots efforts Iowa credit unions have done will pay off. We have engaged targeted sections of our members. We asked them to contact their state representative and/or senator and ask them to promote financial choice. This effort started last summer because we knew it would be a target. When we heard about other credit unions getting hit with ADA lawsuits we audited and updated our website to be as compliant as possible and give our members the best experience possible.

[Note: Since this interview was conducted, Iowa lawmakers agreed to a tax reform bill that kept the credit union tax status intact.]

Ray Crouse, president and CEO, $210 million Parsons FCU, Pasadena, Calif.

We have been impacted by ADA website lawsuits. They are concerning for us as a small credit union, because it took a lot of resources to respond, and we had to make our website less attractive. The incidental powers rule also affects us. Currently, credit unions can only use CUSOs for mortgage or business lending. We would like to expand that to include auto lending.

David Libby, president and CEO, $361 million Town & Country FCU, South Portland, Maine

Compliance is just a necessary part of our operation. We build resources internally to help us deal with it as best as we possibly can. We build effective and efficient resources so compliance is not a drain so we can work on technology and helping our members. Compliance builds trust. It is good offense. We use newer tools and solutions to manage compliance. Compliance is both a cost and a time commitment.

Mike Sugrue, EVP and chief operations officer, $562 million Polish National CU, Chicopee, Mass.

We have so many other worries in front of us, we are not worrying about those issues. Operationally, we are looking for organic growth. There has been so much consolidation in the industry, in 10 years there might be only 2,000 credit unions – and we want to be one of those. We are looking to get to $1 billion in assets just to survive. We are open to mergers with smaller credit unions. In the same year, we added residential mortgages and member business loans, and we started a CUSO to allow us to offer investment products. I am at this conference looking for a way for us to offer insurance products.

Rachel Pross, chief risk officer, $690 million Maps CU, Salem, Ore.

Rules and regulations do not keep me up at night. We can be a little overreactive. We need to address risk, but we get emotionally charged up – even when we hear rumors of regulations. We can become so paranoid and risk averse that we lose our mission and hinder our business possibilities. Credit unions as an industry need a common sense approach to challenges. For example, when ADA website lawsuits started popping up we took a look at our website, but we did not dramatically alter our model out of fear. We partnered with experts who walked us through changes. What we did was not driven by fear of a lawsuit, it was doing the right thing for our disabled members. We asked the important question: Is our reaction going to benefit the membership?

Joe Conners, chief financial officer, $645 million Ardent CU, Philadelphia

What keeps many of us up at night is cybersecurity. A couple weeks ago there were three major data breaches in a single day. And, of course, there was the Equifax breach. It is clear that everyone’s data is out there. We have had situations where members’ phones have been hacked, which is scary for wire authentication. At the Consumer Financial Protection Bureau, it looks as if [CFPB acting Director Mick] Mulvaney has put his own stamp on that. The credit union industry is for the consumer, unlike mega banks that need to supply regular quarterly earnings. Reasonable regulation is needed. I would say 95 percent of us are good people, but we need regulations to protect us from the other 5 percent. But regulators need to remember the cost of compliance for a small credit union is huge.