Here in Iowa we had quite a drought last summer. I watered my garden seemingly every day, but the dry weather just soaked it up. This year I haven’t had to water at all, because it is has rained almost daily. That’s kind of how the regulatory environment is as well. ”When it rains it pours,” they say. For years, as the economy ticked along and we all felt invincible, the regulations received minor updates and tweaks, here and there. But, then the bottom dropped out. During the good times, lenders did stated income and asset loans. But the downturn in the economy put an end to that. Instead of making some minor corrections to right the ship, a plethora of new requirements were implemented, largely directed by Dodd-Frank. Stated income and assets loans were replaced, not with credit union’s typical sound underwriting, but, with specific criteria outlined in the new Ability to Repay rule. Fortunately, credit unions were not major contributors to the downturn in the economy and their original underwriting standards are similar to the new requirements. Still, there are several new rules which credit unions must comply with by January of 2014. And, oh yeah, don’t forget about health care reform.
With all of these new rules, it is easy to get overwhelmed. I receive calls and emails on a daily basis, from credit unions which are trying to understand the new rules, and determine how they may implement policies and procedures to maintain compliance. At PolicyWorks we are working to provide our credit unions with helpful resources to aid them in this process. The CFPB has also issued some resources which it hopes will aid financial institutions in complying with the requirements. One of the most helpful resources is one which the CFPB has created for its own staff, but shares with the public. And that is its Exam Procedures. That’s right… they expect credit unions to maintain written procedures, but, they hold themselves to the same standard. This can be a terrific resource for credit unions. It’s like getting a copy of the test before you take it. Only it’s not multiple choice (multiple guess?) its more of an essay question.
The first set of updated exam procedures addresses Truth in Lending and the Equal Credit Opportunity Act. The CFPB’s release can be accessed here. I would highly recommend that credit unions review the updated documents and ensure that they continue to meet the expectations of the CFPB. While they may not be the actual examining agency for most credit unions, they are the ones writing the rules that we all must comply with. At PolicyWorks, we will continue to provide credit unions with the road maps to reach the compliance destination. But, the CFPB has provided their expectations of what that destination looks like. They have given us the test ahead of time. And PolicyWorks is here to provide your credit union with answers, and to help you study. We are that nerd in your class that tutors the other kids. Only we are more fun.
If we can provide you with any assistance feel free to contact us. Tutoring lessons are available at email@example.com.