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Compliance hot topics. What The Board Needs to Know. In the last few Years Compliance has felt like this. Still a lot to do. Implemented During 2010. New RESPA Disclosures New Credit Card Disclosures, Processing Rules and Fee Restrictions Shorter Allowable Hold Periods on Deposits

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Compliance hot topics

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Compliance hot topics

Compliance hot topics

What The Board Needs to Know

In the last few years compliance has felt like this

In the last few Years Compliance has felt like this

Still a lot to do

Still a lot to do

Implemented during 2010

Implemented During 2010

  • New RESPA Disclosures

  • New Credit Card Disclosures, Processing Rules and Fee Restrictions

  • Shorter Allowable Hold Periods on Deposits

  • New Overdraft Opt-in, Disclosures and Restrictions

  • Overhaul of Open-end Credit RegZ Disclosures

  • New Uniform Privacy Disclosures

Implemented during 2011

Implemented During 2011

  • New Risk-Based Pricing Notices

  • New Closed-End Mortgage Reg Z Disclosures

  • New Mortgage Loan Officer Compensation Rules

  • SAFE Act Registration

  • Financial Literacy Requirements (Federal Credit Unions)

Coming up soon

Coming up soon

  • Changes to Online Banking Authentication Systems

  • Consumer Financial Protection Bureau

Board responsibility for compliance

Board responsibility for compliance

Board responsibilities

Board Responsibilities

  • Ensure Board Support

  • Appoint a Compliance Officer (and staff if necessary)

  • Provide Appropriate Resources

  • Approve Policy and Programs

  • Review Status Reports

  • Support Risk Based Compliance Management

Key current issues

Key Current Issues

  • CARD Act

  • Overdraft Protection Opt-in

  • Reg Z Open-End Disclosures

  • Mortgage Disclosures

  • Loan Officer Compensation

  • SAFE Act Registration

  • Financial Literacy Training

  • Vendor Due Diligence

  • Flood Insurance

  • Bank Secrecy Act

  • Online Banking Authentication Systems

  • Consumer Financial Protection Bureau

Card act


Rule of Thumb: Anytime a regulation makes it into mainstream news media, it’s a big deal.

Card act1


  • Prohibitions on raising interest rates on existing balances (except for variable rate cards and some penalty rates)

  • Elimination of a floor on variable rate cards

  • New periodic statement disclosures

  • Payment due dates on the same day every month

  • Opt-in for over-the-limit fees

  • New rules for card issuance to members under 21

  • Card agreements posted on the credit union’s website

  • Six month rate increase reviews

  • Fee restrictions

Overdraft opt in

Overdraft Opt-In

Fee Income: An endangered species

Overdraft opt in1

Overdraft Opt-in

  • Applies to one-time debit card and ATM transactions only

  • Member must opt-in for service

  • Regulatory mandated disclosure

  • Credit Union confirmation required

  • No discrimination against members who do not opt-in

Reg z open end loan disclosures

Reg Z Open-end Loan Disclosures

A major overhaul . . . .

Reg z open end loan disclosures1

Reg Z Open-end Loan Disclosures

  • New disclosures for applications and solicitations (applies to credit cards only)

  • New account opening disclosures

  • New periodic statement disclosures

  • New change-in-terms notifications

  • New underwriting and procedural changes for credit unions that offer Multi-feature Open-ended Lending (MFOEL)

Mortgage disclosures

Mortgage disclosures

More important than ever . . . .

Mortgage disclosures1

Mortgage Disclosures

  • RESPA:

    • New standardized Good Faith Estimate

    • Changes to HUD-1 Settlement Statement

    • Comparison of fees disclosed on both documents

    • Limitation on the amount fees can change from application to closing

  • Regulation Z TIL Statement Changes:

    • New payment disclosures

    • Statement that the borrower may not be able to refinance

Loan officer comp ensation

Loan Officer Comp-ensation

The end of yield-spread premiums.

Loan officer compensation

Loan Officer Compensation

  • Applies to compensation related to the origination of mortgage loans.

  • Prohibits any loan originator or mortgage broker compensation based on the terms or conditions of the transaction other than the amount of credit extended.

  • Prohibits payment of compensation by any other party if the consumer is directly compensating the loan originator.

  • Prohibits loan originators from steering applicants to loan products based on the fact that the loan officer will receive greater compensation for the loan.

Safe act registration

SAFE Act Registration

You can’t make mortgage loans without it . . .

Safe act registration1

SAFE Act Registration

  • All Mortgage Loan Originators (MLOs) should have been registered by July 29, 2011.

  • After the registration deadline MLOs cannot originate mortgage loans without their identification number.

  • The Board must approve a written SAFE Act Policy.

  • All newly hired MLOs must be registered before acting as an MLO.

Financial literacy training

Financial Literacy Training

Requirement for Federal Credit Unions Only.

Financial literacy training1

Financial Literacy Training

  • Directors must have the following financial skills:

    • Working familiarity with basic finance and accounting practices

    • Ability to read and understand the credit union’s balance sheet and income statement

    • Ability to ask substantive questions of management and auditors

  • Level of financial knowledge should be consistent with the size and complexity of the credit union.

  • Directors appointed prior to January 27, 2011 should have acquired necessary skills by July 27, 2011.

  • Directors appointed after January 27, 2011 will need to acquire necessary skills within six months of their appointment.

Vendor due diligence

Vendor due diligence

Do you really know your vendors?

Vendor due diligence1

Vendor Due Diligence

  • Third party arrangements should be evaluated for possible risks and managed in a manner commensurate with the credit union’s size, complexity and risk profile.

  • Credit Union management should complete the following tasks:

    • Risk Assessment and Planning

    • Due Diligence

    • Risk Measurement, Monitoring and Controls

  • A plan should be in place to evaluate all new vendors, monitor existing relationships and manage risk.

Flood insurance

Flood Insurance

You never think about it until it’s too late.

Flood insurance1

Flood Insurance

  • Large fines are possible

  • Credit Unions must do the following:

    • Determine the flood zone of all real property securing a loan each time the credit union makes, increases, extends or renews a loan

    • Notify property owners in flood zones of insurance requirements within a reasonable time (10 days) prior to consummation

    • Ensure adequate flood insurance is in place prior to consummation

    • Track insurance coverage through the life of the loan

    • Force place insurance when necessary

Bank secrecy act

Bank Secrecy Act

An oldie, but a goodie . . . .

Bsa program requirements

BSA Program Requirements

  • Independent testing of BSA compliance.

  • A specifically designated person or persons responsible for managing BSA compliance (BSA compliance officer).

  • Training for appropriate personnel.

  • A system of internal controls to ensure ongoing compliance.

Bsa board responsibilities

BSA Board Responsibilities

  • Approve the BSA Program annually

  • Appoint a BSA Officer

  • Review the BSA Risk Assessment as applicable

  • Review periodic BSA program updates

  • Ensure BSA officer has adequate staffing and resources

  • Review reports of filed Suspicious Activity Reports

  • Champion policy and procedure

Online banking authenti cation

Online Banking Authenti-cation

Changing requirements for a changing world.

Updated online banking authentication systems

Updated Online Banking Authentication Systems

  • Changes should be completed by January 1, 2012.

  • Required by the supplement to the FFIEC’s “Authentication in an Internet Banking Environment.”

  • Examiner expectations include:

    • Risk Assessments (updated at least every 12 months or as membership, products, services, or on-line threats change)

    • Increased authentication for higher risk transactions (member initiated ACH withdrawals, business accounts)

    • Implementation of layered security for online banking

    • Re-evaluation of authentication techniques (username/password/cookie and simple challenge questions will no longer be considered adequate)

    • Member Awareness and Education Program

  • Assistance and cooperation from your online banking provider is critical. Status updates should be provided to the board.

Compliance hot topics


Still a lot of unknowns . . .

Consumer financial protection bureau

Consumer Financial Protection Bureau

  • Direct examination authority only for financial institutions with $10 billion or more in assets.

  • The Bureau has rulemaking authority for many consumer protection regulations.

  • The Bureau can go on joint examinations with the NCUA if there is practice the NCUA is concerned about.

  • Even beneficial changes mean more work for credit unions:

    • New forms

    • New procedures

    • New training

Thank you

Heather Line

Compliance Specialist

Utah Credit Union Association


Thank You

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