Credit Unions

Moderated by Scott Simpson, president of the Utah Credit Union Association

July 9, 2013

ADAMSON: Well, they’ve added a whole bunch more employees that they’ve had to keep busy.

BARBER: One of the things I’ve noticed more in the last three or four exams is, “You will do this because someone else had a problem, somebody else goofed up; therefore, you will now do something totally different that won’t have an affect on what you’ve been doing.”

LUND: The knee-jerk reaction.

MOODY: The regulators are going to be proactive this time. They’re not going to allow anything to happen.

PAYNE: They’re regulating to the last crisis, like they always do. As if we weren’t smart enough to see it ourselves and say, “That was really dumb. I want to be around in five years. I’m not going to do that.” Then the regulator shows up and says, “Hey, that was really dumb. You’re not going to do that.”

“We know. We’re already not doing it.”

“Right. Now write us a policy that explains why you’re not doing it, how you’re not doing it, that you’re measuring that you’re not doing it, that you’re reporting that you’re measuring.”

How does all this affect consumers?

NIELSEN: Consumers are hurt dramatically by the increase in costs caused by regulation and regulators regulating to the last disaster. They’re always trying to fix the last thing that happened as opposed to looking forward and seeing what really is going to help us to survive.

PAYNE: Credit unions really do have the consumers’ best interests in mind. We may not do everything perfectly all the time, but at the end of the day, that’s why we come to work, that’s why we do what we do. We’re not working for a stock option or a stock price target. We’re coming to work because we want to help the member.

I can give you a couple of examples of regulations that have taken ways we can help the consumer off the table. Student lending. Because of the paperwork and the regulatory requirements—the pre-disclosure, the follow-up disclosure, the at-signing disclosure and the post-closing disclosure—it nearly rivals a mortgage loan. And this is for any loan that is going to be used for educational purposes. You need $300 to buy books? I just flat out can’t do it. Because the regulation’s changed. Yes, there were some bad actors. But they’ve eliminated consumer choice.

The other example is credit card abuse. There was a Christmas-time promotion we did several years ago. It was very popular because it saved our members money on the interest rate. They got an introductory rate for six months and a low fixed rate until they paid the balance off. Well, because of the way the law’s changed, legally, I could do it, but practically I can’t. It becomes a product that we can no longer offer.

You want to say, “Thank you for regulating a helpful product out of the market. How is the consumer now better off as a result of it?”

MOODY: Compliance costs today are just through the roof. It continues to be more expensive every year. And that is an added expense that has to be offset with revenue being charged or received in another way that certainly could be more productive. So it’s frustrating, it’s difficult.

NORTON: I’m curious on that point. I do quite a bit of regulatory work with my clients. And the large banks have gone out and in some cases hired thousands of people to work in their legal departments and their compliance departments. So how are you—as institutions that can’t go out and hire a thousand new employees—staying ahead of all of the change?

PAYNE: On a shoestring. I’ve got seven employees. In addition to the CEO and marketing and HR, I’m compliance. You just change hats, and you go as fast as you can and keep going. And you’ve got to be good.

GOURDIN: If you’re a smaller institution, you have to develop some strategic partnerships. For instance, we don’t do our own loan docs. We have a partner that provides those, and they assure us that they’re in compliance on all the federal and state laws. So we rely on that. And then, of course, we have a strategic partnership with the Utah Credit Union Association for training and some review processes there.

But you do have to have somebody on staff that is kind of a hands-on person. And with our size, that’s someone who wears several other hats and can’t give it full attention.

VANAUSDEL: We have full-time compliance officers, but they don’t even know if we’re in full compliance because it changes too much. Look at the new CFPB mortgage rules—what is it, 3,506 pages? So we have to rely on other resources. They can’t even interpret it right now. You listen to NAFCU and sit in on some of those discussions when they talk with the CFPB people and it’s, “Well, we don’t know exactly what that means yet.”

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