The effects of the COVID-19 pandemic have not only changed daily life but also many industry futures. As credit unions take stock in the amazing transformations that took place in 2020, many regulatory bodies are taking a hard look at their best practices through the lens of a global crisis.
Let’s discuss how credit unions can prepare for regulatory changes.
Preparing for Regulatory Changes
Recently, Credit Union Business News featured an article by Joel Schwartz, Founder & Co-Chief Executive Officer of DoubleCheck Solutions. This article highlights the ways credit unions will be facing regulatory changes as the world moves out of the pandemic.
Many expect consumer protection and financial transparency regulations to take center stage.
Consumer Protection & Empowerment
The Consumer Financial Protection Bureau is waiting on a Congressional vote to institute Rohit Chopra as Director, and if that happens, consumer protection and empowerment regulations are likely to be more heavily enforced. But what does that mean?
It means more guidelines will be put forth to promote more financial transparency for consumers, thus empowering them to make better-informed decisions regarding their banking and other financial activities.
This enforcement comes on the heels of heavy amounts of class-action lawsuits being filed against credit unions. Many of these lawsuits stem from “deceptive practices in assessing non-sufficient fund (NSF) fees.”
Minimizing Operations Impact
This push for financial transparency is spearheaded by a goal of providing straightforward financial services without drastically impacting credit union operations.
This push will most heavily impact language and operations surrounding things like overdraft programs, to cut out excessive fees and vague language. This change, however, could easily wipe out a credit union’s main source of non-interest income: NSF fees.
These changes would affect your core system and its operations related to checking account structure. Alerts, notifications, and fee assignments would all have to be modified to reflect more transparent and specific situations and guidelines.
Your credit union would also have to put time and labor hours into alerting your customer base about these changes – what they are, who and what they apply to, and when they take effect.
This also means employees will spend more time auditing and ensuring compliance with the new, stricter regulations.
This would also have a financial impact. Members will love paying fewer overdraft fees, but bounce fees and late payments could be steeper, which negatively affects your credit union’s bottom line.
The Good News
Credit unions can get ahead of the curve by implementing better technology that can handle these regulatory changes now. Partner with a fintech or software provider that can customize your operations surrounding NSF fees before the government starts mandating it. This will help you work out operations kinks and train your staff on the new system before you are expected to have these protocols in place. It also gives your credit union reputation a boost, positioning it as member-centric and forward-focused.
Be sure to look for a fintech or software provider that already has a solid foundation in the banking industry. Or partner with a company that has solutions tailored to credit unions specifically, like IMS.
Get Your Revamped CU Solutions from IMS
IMS can help with the tech upgrades that will make your next regulation-based transitions easier on your credit union team and your members.