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3 Revelations from 2012 ABA Regulatory Compliance Conference

Lending Compliance

3 Revelations from 2012 ABA Regulatory Compliance Conference

Posted by Andy Barksdale on Jun 18, 2012 10:05:00 AM
Andy Barksdale
The ABA’s 26th annual Regulatory Compliance Conference brought together almost 1,500 regulators, compliance focused bankers and product partners from throughout the country.  While the Central Florida thunderstorms boomed outside, inside there was a powerful whirlwind of industry observations, guidance and reunions.  Below are three quick observations from the conference that used the "Survive the Regulatory Storm" as the conference's headline.

2012 ABA Regulatory Compliance Conference resized 600

  • A Deep Respect for Today's Compliance Officer – The amount and pace of change taking place inside the compliance officer’s domain is summed up by one simple word:  deluge.  Our team maintains a deep respect for the role compliance officers play inside financial institutions as they look to manage the flood.  In community banks, where there tends to be fewer resources, the compliance officers role can be overwhelming at times.  As discussed throughout the conference, risk assessments are a critical part of any compliance management system.  Simply stated, risk assessments can help combat the state of overwhelm and allow you to allocate precious resources (time and money).  
  • Culture is Key – Recognizing the the volume of regulatory law, the various interpretations and proposed changes, the old cliché about the “tone from the top” was omnipresent in every breakout session.  Compliance culture underpins the decisions made each and every day and guides all employees as they make decisions and choices.   Recognizing the deluge, it was made abundantly clear that having Senior Management understand, support AND participate in the compliance function is more important than ever. 
  • Two Hot Topics – Fair Lending and UDAAP (Unfair, Deceptive or Abusive Acts and Practices) took up a great deal of mindshare at the conference. 
    • Regarding UDAAP:  Not surprisingly, the most common discussion was around the definition of an “Abusive Practice.”  Conference attendees are seeking clarity.  Dodd-Frank establishes that an abusive act or practice is one that materially interferes with the ability of a consumer to understand a term or condition or takes advantage of one or more of the following:  a lack of consumer understanding; the inability to of the consumer to protect their interests in selecting a product or service; reasonable reliance by the  consumer that the bank will act in their best interests?  Critics are questioning the clarity of advertisements, disclosure of loan terms and conditions, and the complexity of the products/services.  Therefore, three common sense questions have been suggested:
      • Are the customer agreements (including pricing) in plain language?
      • Are the disclosures simple to understand? 
      • Do terms or costs frequently change?
    • Regarding Fair Lending:  During the breakout sessions, it was confirmed that fair lending remains a top priority by the CFPB and the prudential regulators.  Participants were reminded that the rule making authority of the CFPB impacts all lenders (not just the $10b+ financial institutions).  The DOJ confirmed that “statistical analysis is not the only thing they review, but it is the most important thing.”  Therefore, fair lending risk reviews are not complete without the comparative analysis.
The bottom-line:  As regulatory pressures rise, the Compliance Officer’s role is critical to the success of the bank.  This is especially true in a community bank where fewer resources will be stretched and tested in the coming year.  The ABA's conference confirmed that managing time and resources has never been so important. 

Finding a trusted and experienced resource, like TRUPOINT Partners, can help financial instittuions efficiently manage both time and money.  A free 15 minute fair lending risk review is a great way to learn how. 

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Topics: Lending Compliance, Lending Compliance Blog

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