How a Credit Union Adapts to Change at CFPB | Credit Union Journal


To help overcome the uncertainties surrounding unfair, deceptive, or abusive acts or practices, Alliant Credit Union in Chicago looks to the past for answers.

the $ 14.7 billion in assets credit union operates the Consumer Financial Protection Bureau’s Consent Prescription Library to better understand what actions are considered to be in violation of UDAAP guidelines. As the leadership of the CFPB has changed, its stance on what constitutes a policy violation has changed. Thus, the credit union determined that it is better to watch the agency’s actions rather than its words.

“Because the CFPB chose to regulate by enforcement with the UDAAP, at Alliant we have gone back and cataloged every consent order since the first one I worked on, reviewed them for any sort of appeal. UDAAP and then classified it as a risk statement to use for the future, ”said Todd Anderson, director of compliance at Alliant.

Anderson clarified that after reviewing and cataloging consent orders in a constantly updated Excel spreadsheet, the “lessons learned” are then fed into Alliant’s governance, risk and compliance system to ensure its ensure that it complies with CFPB standards.

“First and foremost, you need to define what your UDAAP program is in your institution and describe the specific elements you are seeking to include… but it is equally important to integrate UDAAP thinking into your compliance program to ensure that all new services are properly framed from the start, ”said Anderson.

Enforcement of the UDAAP by the regulator can prove to be a costly burden on credit unions of all sizes. While large institutions have more resources to devote to the UDAAP guidelines, smaller organizations must follow the same framework using a fraction of the resources.

Last month, the National Association of Federally-Assured Credit Unions sent a letter to the Senate Banking Committee ahead of its biannual CFPB review to highlight the challenges small institutions face. In the letter, NAFCU underscored the burden placed on credit unions to comply with UDAAP and called for more clarity.

“Credit unions devote a lot of resources to compliance staff and complaint systems to monitor issues and make sure they are following all consumer protection laws at a ‘t’… but the bureau should clarify from proactively their authority and their UDAAP expectations instead of waiting to catch someone’s bad behavior through coercive action, and only then clarify the acts and practices that they consider unfair, deceptive or abusive ” said Ann Kossachev, vice president of regulatory affairs at NAFCU.

Kossachev pointed out that credit unions seeking to explore new offers for their members could unknowingly violate UDAAP guidelines.

“I don’t think a financial institution is intentionally or deliberately trying to violate consumer protection laws and actively harm consumers… but unclear rules of the road can actually make violations more likely,” said Kossachev.

When initiating an investigation into an institution, the CFPB’s Director of Enforcement or a deputy will review consumer complaints, supervisory reviews, and referrals from other agencies to determine if a response is warranted. For credit unions with $ 10 billion in assets or less, the National Credit Union Administration will step in to oversee enforcement instead.

Before a formal lawsuit is brought against the offending institution, the CFPB’s Notice and Response and Advice process provides the credit union with an opportunity to present a rebuttal. However, the decision to use the NORA process is left to the discretion of the agency and is not always a guarantee.

In January 2020, Kathy Kraninger, then director of the CFPB, describe the “abusive” component of the agency’s UDAAP measures and defined what actions are considered a violation.

Later, Acting Director Dave Uejio (who held the post prior to Director Rohit Chopra’s appointment) said Kraninger’s initial position did not adequately meet the standards imposed by Congress and retracted the agency’s statement.

To give examples of practices that go against CFPB restrictions, the agency publish documents related to enforcement cases that are currently under arbitration or that have been settled for the institutions to see.

As additional resources for the institutions it supervises, the CFPB occasionally issues political guidance through bulletins, joint agency notes and other notices. For those with unresolved questions, the agency has a designated helpline to respond to specific requests.

Despite steps taken by the CFPB to educate the public on practices that would seek to harm the consumers it is charged with protecting, credit unions like Alliant continue to push for clarity in the UDAAP to avoid traps.

“Institutions shouldn’t have to go through hundreds of documents to sum up the simple principles of what CFPB is looking for… that, to me, is something that should be available,” Anderson said.


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