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15% of Credit Unions Have Consumer Compliance Violations. Are You One of Them?

2 min read
Mar 15, 2022

Credit unions are member-owned and would never do anything to deliberately hurt consumers— yet their track record isn’t flawless and the National Credit Union Administration (NCUA) is trying to do something about it.

In 2021, the NCUA found that nearly 15 percent of federal credit unions it examined had violated consumer compliance rules, according to a recent speech by NCUA Chairman Todd Harper. Fair lending exams at 29 credit unions (less than one percent of federal credit unions) uncovered violations impacting 64,000 members and resulting in $185,000 in restitution and remediation.

The agency also observed “compliance management system weaknesses” in the majority of cases.

Now Harper is telling credit unions to step up their consumer compliance game.

“Given the consumer compliance examination program for comparably sized community banks, our program’s scope is insufficient, especially for those credit unions between $1 billion and $10 billion in assets,” said Harper. “We should be doing more, and we can do more.”

Myth: Credit unions don’t need to worry about consumer compliance because they care about consumers

While credit unions don’t set out to harm consumers, the fact is that oversights happen. Credit unions have been sued for deceptive acts and practices and other consumer protection violations related to improper debt collection, mortgage loan discrimination against women on maternity leave, violations of the Service members Civil Relief Act (SCRA), and overdrafts, Harper noted.

Overdrafts garnered special attention, with Harper opining that credit union members paid $2.4 billion in overdraft fees in 2019 and calling overdrafts harmful practices that can lead to consumers being excluded from the financial system. “The logic that credit unions do not discriminate because they are owned by their members is a dangerous myth and one that should end,” said Harper.

The most common credit union consumer compliance violations related to:

  • Credit reporting
  • Truth In Lending
  • Electronic fund transfers (EFTs)
  • Equal credit opportunity rules

Credit unions: Expect more fair lending exams and reviews

NCUA attention to consumer compliance, fair lending, and overdrafts should come as no surprise to credit unions. The NCUA already highlighted these as top concerns in its 2022 Supervisory Priorities.

“This year, during every federal credit union examination, examiners will review compliance with COVID-19 consumer-assistance programs, fair lending rules, servicemember protections, and fair credit reporting laws, among others. We will also conduct more fair lending exams and reviews,” Harper reiterated in his speech.

The NCUA will also be collecting information about overdraft policies, procedures and audits.

Related: What Breed of Risk Manager Are You?

Is your CMS up to the task?

The fact the fact that NCUA Chairman Harper is re-emphasizing these priorities is a strong reminder that credit unions need to be prepared with strong compliance management systems that demonstrate a credit union’s compliance.

A CMS addresses how a credit union:

  • Learns about consumer compliance responsibilities
  • Ensures that they are understood by employees
  • Incorporates them into policies and processes
  • Monitors to see that policies and processes are followed
  • Takes corrective action as needed

The trust and respect that you have built within your community and among your members took a long time to build, but it can be quickly lost if your credit union isn’t consistently working to ensure compliance with consumer protection laws. Make sure you have the people and processes in place to ensure you can continue serving your community!

What is a Fair Lending Compliance Management System (CMS)?



Learn more about Lending Compliance Management.

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