Compliance – Who Cares?

Today’s compliance landscape is vastly different than what we’ve seen in the past. With revocations of Guidance Documents, increases in enforcement action terminations, decreases in new enforcement actions, rollbacks in regulation, and the flurry of Executive Orders related to compliance coming out of the Oval Office, the view of compliance has been “trimmed”. It certainly is an interesting time to be in the Compliance Business.

With all of the political noise out there it can become difficult to know what to do. You may be getting some tough questions or push back from business line leaders and perhaps even your Executive Management or Board as it relates to compliance or requests for additional resources and training.

Although Executive Orders have been and will likely continue to be issued, until they are ratified into law, or existing regulations are amended, they are simply written directives instructing government personnel on how to implement existing laws and prioritize enforcement. Executive Orders do not change existing Regulations. What’s more, an Executive Order can be repealed by any new administration. This means that a change in administration could result in the repeal of Executive Orders, and the focus on what is a priority and what is not prioritized may change in two years.

In other words, the Regulation hasn’t changed, just the enforcement priorities and current interpretation.

So how do you address the perception that compliance is not relevant? The first thing is to communicate to all Staff/Management/Board that compliance rules and current regulations have not gone away. There may be less focus on some but the alphabet Regs, Flood, Fair Lending/CRA… are still a “thing”.

This can be a tough sell when we see the FDIC/OCC/FRB/CFPB scaling back on the frequency of their examinations. Although I believe their approach, which is based on an Institution’s overall CMS performance and risk profile, makes sense and is a logical approach to an exam, this may also add to the perception that you can take your foot off the gas and coast a bit.

That is an option, but one that does not come without its share of increased risk. Rules and regulations still need to be followed, and a sound, well organized Compliance Management System or Program is the key to insuring this is being done in your Institution. This time of review and challenge from Washington on consumer regulations does have its benefits. For the first time since the early 2000’s we do not have a plethora of new rules and regulations introduced that create new, complex disclosures and additional processes to be added to our workflow. In other words, this period of time is allowing us to stop and take a breath – not to coast along but to dig deep into your products, processes, procedures and check under the hood to see if anything needs tuned up.

That said, your second step is to review your products, processes, and procedures. Where do you start? As with anything, it must be based on your Institution’s individual risk and the potential of consumer harm. Does your Institution originate consumer mortgages or HELOCs? Are these products fixed rate or adjustable rate? Does your core system align accurately with your account agreements/notes? Changes in risk also come from new products, advertisements, error and fraud claims, new offices, new locations, vendor relationships and systems.

Even if your Institution has not added new products or locations and your risk seems the same, unexpected changes have a habit of popping up. All these things must be assessed and the risk weighed continually as changes can and usually do occur all the time.

It is the responsibility of each Institution to ensure that, changes or not, current regulations are followed and consumers, your customers/members, are not being charged more or less than your agreements/notes state. It is still an Institutions responsibility to ensure lending and account opening decisions are made without bias or prejudice on social, ethnic or political affiliations.

This is not accomplished by hoping your policies and procedures are followed; it’s accomplished by keeping up with your CMS. Review your monitoring schedule, your policies and procedures, your complaint logs. Review your originations and denials not only for compliance and fair lending considerations but also monitor volume increases or decreases. Changes in volume could trigger new reporting or new regulatory requirements under other regulations such as HMDA Reporting or Large/Small Servicer requirements.

Remember the old battle cry from a prior occupant of the Oval Office – “Trust but Verify”.

Need help reviewing your CMS or completing your monitoring schedule – give us a call. TCA is A Better Way to help you stay on the course and ensure regulatory compliance.

TCA – A Better Way!