Compliance Update with Amy K

Key elements of a successful planning process; NCUA announces another distribution to capital shareholders; and CFPB on auto repossessions. 

by Amy Kleinschmit, Chief Compliance Officer

The Importance of Planning
Don’t let planning fall through the cracks! If the credit union has been putting off planning because of the assumption that, “Well, isn’t everyone struggling?” Consider, if your house was burning down, would you just say, “Everyone’s house is burning down?” Or, would you try to put out the fire?

Planning falls within two areas: strategic and operational. Strategic planning focuses on the long-term, extensive allocation of resources to achieve the credit union’s goals and objectives. Operational planning (e.g., business plan) concentrates on shorter-term actions designed to implement the strategies outlined in the strategic plan. The operational plans flow logically from the strategic plan.

As discussed in the National Credit Union Administration (NCUA) Examiner’s Manual, Chapter 7, the following are some key elements of a successful planning process:

• Strong commitment from the board and management;
• Meaningful engagement in the process from key stakeholders;
• Development of measurable goals, including a series of short-term goals;
• Development of strategic objectives;
• Clearly defined responsibility, authority, and accountability;
• Efficient and effective operational processes;
• Necessary managerial, financial, technological, and organizational resources to achieve goals and objectives;
• Policies, internal controls, staffing, training, and management information systems to support each area of operation and overall objectives;
• Communication of goals, objectives, and detailed business plans throughout all levels of the organization; and
• Periodic reassessment of the progress and effectiveness of the strategic plan.

 
The credit union’s board of directors establishes the strategic plan to document management’s in assuring that the credit union prospers in the next two to three years. This plan needs to encompass all areas of operations. An integral part of the strategic plan should include strategic goals addressing the credit union’s information systems and technology.

Management should establish a business plan for the next one to two years that implements and is consistent with the strategies outlined in the strategic planning process.

The NCUA examiner’s manual explains that the business plan should incorporate the following five steps: An assessment of the environment in which the credit union will operate over the medium term; a clear, written statement of key objectives; consistency with federal and state laws and NCUA regulations; communication of the plan’s objectives to management and staff to assure adherence to both the business plan and strategic goals; and finally, implementation of the plan.

Credit unions can learn about strategic planning through a four-part webinar series that NCUA created. This series provides an overview of the strategic planning process and best practices for developing a successful strategic plan. The video also provides a sample strategy for successfully completing and implementing goals identified in the strategic planning process. Find this webinar series here.

Other tools available to credit unions include the Customer Performance Reports, which are provided bi-annually to Dakota credit unions as a benefit of membership. The reports highlight and measure many areas of performance, including loans, shares, fee and other income, capital analysis, and liquidity trends, just to name a few. The analysis helps credit unions assess their performance levels by comparing this year’s results with previous results, by comparing trends in relation to your peer group or other benchmark, and by graphical information that provide additional insight into your credit union.

InforSight has summaries, FAQs and CU policy pro has a model policy, specifically 1160: Strategic Planning, to assist credit unions in the strategic planning process.

A neutral facilitator can assist the credit union in its planning processing. As discussed in Monday’s Memo article, DakCU has developed relationships with facilitators of strategic planning who can lead your credit union through this process. Contact George McDonald with any questions about your strategic planning resources.
 
NCUA Distribution
The NCUA has announced another distribution will be coming – $359.2 million will be distributed to more than 1,000 membership capital shareholders of the former Members United, Constitution, and U.S. Central corporate credit unions. NCUA will also distribute $209.8 million in dividends to more than 1,100 shareholders of Southwest Corporate.

Information on the Corporate System Resolution Program, including projections for the Corporate Asset Management Estates Recoveries and Claims and the process for determining when distributions are made to member capital account holders, can be found on the NCUA’s website.
 
CFPB – Auto Repossessions
The Consumer Financial Protection Bureau (CFPB) recently issued Compliance Bulletin 2022-04: Mitigating Harm from Repossession of Automobiles.

The CFPB Bulletin discusses repossession of vehicles and the potential for UDAAP violations. To prevent unfair, deceptive, or abusive acts or practices, which are discussed in more detail in the Bulletin, the CFPB suggests the following steps be taken:

• Review policies and procedures, including call scripts, to ensure that they provide employees with accurate information about steps consumers can take to prevent repossession.
• Review policies and procedures regarding cancellation of repossession orders to ensure that there is an appropriate process for cancelling repossessions if consumers take steps that should result in cancellation.
• Ensure prompt communications between the servicer and repossession service provider when the servicer cancels a repossession. For example, servicers may call repossession service providers to confirm cancelation or use mobile phone applications that push cancellation updates to repossession service providers’ phones.
• Monitor repossession service providers for compliance with repossession cancellations.
• Incorporate monitoring of wrongful repossession in regular monitoring and audits of communications with consumers.
• Ensure that the entity has a corrective action program to address any violations identified and to reimburse consumers for the direct and indirect costs incurred as a result of unlawful repossessions when appropriate.
• Review payment allocation policies and procedures to validate that they are consistent with the payment allocation order disclosed in contracts and other consumer facing disclosures, such as websites.
• Monitor for illegal fees charged after repossession.
• Review consumer contracts to validate that any fees charged to consumers are authorized under the terms of applicable contracts.
• Review consumer complaints regarding repossession and ensure there is an appropriate channel for receiving, investigating, and properly resolving consumer complaints relating to wrongful repossession and illegal fees after repossession.
• Perform regular reviews of service providers, including repossession vendors, as to their pertinent practices.
• Monitor any force-placed insurance (FPI) program to ensure that consumers are not charged for unnecessary FPI. This may include review of FPI cancellation rates.

 
As always, DakCU members may contact Amy Kleinschmit with any compliance related questions.
 

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