Memorial Day is just a few weeks away, which means that summer is almost here. For many credit union professionals, this means summer vacations, time spent with family, or well-earned time off. With the year reaching the halfway mark, your credit union has surely accomplished many of its new year’s goals by now. And a break is good for a healthy work-life balance. Rest is fine; just make sure you don’t take a credit union compliance nap. Those can be costly!
Credit Union Compliance Naps Cause Financial Nightmares
Everyone’s jaw dropped when they learned of one of the top credit union’s whopping $28.3 million fine assessed by the CFPB for failed compliance issues. Of the fine, $23 million was to be paid to members in redress, while $5.5 million was a flat civil penalty. The fined credit union cited poor internal controls, specifically inadequate employee training as it relates to debt collection, but hindsight does not negate the fine.
And don’t forget about the debacle involving Patriot Act Violations in 2014 that cost another credit union $300,000. Compliance failure stemmed from failure to file FinCEN 314(a) reports issued weekly from a secure website. The fine caught everyone’s attention and sparked a bit of panic.
The Reason Credit Union Compliance Issues Occur
The truth of the matter is the industry is over-regulated. Since the Dodd-Frank Act (along with its last minute Durbin Amendment addition) became effective in 2010, credit unions were forced to spend a large portion of their budget on compliance. A study by the Filene Institute from 2007-2012 found credit unions increased full-time compliance employees by 70%. That equates to 4 times more than any other employee position. The CFPB continues to saddle credit unions with more regulatory constraints. They effectively put a chokehold on the industry. The good news?
Most credit unions are carrying the burden in full stride. The industry has adapted and there is promise of regulation changes to rule in the favor of credit unions. Such as a recent FOM rule change, which made expansion possible. Commitment to members and excellence are the heartbeat of the issue. This is why it is important to make sure you don’t take a compliance nap as winter slumber fades.
We assure you examiners are not sleeping. It is their job to make sure regulations are enforced. Take the examples of these two credit unions to heart. It makes no difference to examiners if your institution is large or small. Any examiner can walk into any credit union and assess a fine if mistakes or discrepancies are found.