WASHINGTON (9/25/13)--With Halloween approaching next month, there will soon be many scary things in the air, but Credit Union National Association General Counsel Eric Richard told the CUNA's 2013 Attorney's Conference Tuesday to forget witches--"the three things credit unions are most scared about are compliance, litigation and enforcement."
Overall, Richard said, regulatory complexity continues to increase, creating more and more emerging issues for credit unions. "CUNA will continue our efforts, working with credit unions and leagues, to ensure that these developments do not have unintended consequences for the credit union system or impose unnecessary regulatory burdens on your clients," he said.
"The good news is that, for credit unions, the worst of [the Consumer Financial Protection Bureau's mortgage rule writing]--and the uncertainty this creates--seems to be behind us," Richard said. The bad news, he said, is that credit unions now have to figure out how to live in the new world with new ability-to-repay, mortgage escrow, high-cost mortgage lending, home ownership counseling, mortgage servicing rules, mortgage loan originator compensation, and appraisal rules, and others, forever.
"This compliance obligation is no easy task for even the most sophisticated of America's financial institutions. It can be a killer for community-based institutions like credit unions," he said.
He urged the assembled crowd to help spread this message: "compliance is unavoidable, and the time for compliance is now. If credit unions are not ready in January, they face many litigation and enforcement risks that may harm the institutions and the way they serve their members."
The bottom line is that, for most credit unions, compliance is the most important legal task they face this year, Richard said.
Ongoing litigation is also creating uncertainty about other rules. Proposed amendments have come out over and over again in 2013, and sometimes final rules that have already been implemented "face a collateral attack in court," Richard said. One such rule is the Federal Reserve's interchange regulation, which is currently being discussed as part of a legal challenge from merchants.
The Fed is appealing the merchant challenge, and CUNA is doing everything it can to ensure the D.C. Circuit Court of Appeals is aware of credit union concerns as the case moves forward, Richard emphasized.
And then, there is enforcement: A potentially very significant development in regulatory enforcement came from the CFPB this year when it brought a case using the "abusive" prong of unfair, deceptive or abusive acts or practices (UDAAP) enforcement authority. The challenge credit unions face is that UDAAP is not clear, Richard said. UDAAP itself is vague, and the CFPB has not provided guidance. "Lots of uncertainty remains over UDAAP authority, and this is an area to watch over the coming years," he said.