By Ray Birch
ARLINGTON, Va.—The massive $2-trillion CARES Act and its many provisions seeking to prop up the economy and consumers is succeeding in creating jobs for at least one profession: compliance professionals.
Both credit unions and their trade associations are working to sort through all the new rules and sometimes hazy statements coming out of government agencies and regulators.
And all of that additional burden is coming at a time when CU staff are working tirelessly to provide support for members who are out of work, notes NAFCU.
“There are provisions in the legislation that will prove difficult for some credit unions to implement and to comply with,” explained NAFCU Vice President of Regulatory Compliance Brandy Bruyere. “We know credit unions will do what they do best—find ways to serve their members in these difficult times—emergency loans, extending credit lines, and now loan forbearance.”
The biggest new area credit unions are being forced to address is related to new rules around forbearance that allow individuals who lose their jobs to defer payments for up to 180 days. Bruyere acknowledged that requirement of the Act will not only lead to additional tasks for credit union compliance teams, it is also going to create uncertainty around who should be granted forbearance and who should not.
Feeling the ‘Pressure’
“We also have concerns about the provision in there that addresses suspending escrow,” said Bruyere. “We're working with Treasury, trying to make sure credit unions have some options.”
Bruyere said all of the new rules and economic conditions mean “pressure” is now coming at credit unions “from many sides.” It’s made for a challenge for trade associations, too.
“Their resources, including compliance, are stretched thin right now,” said Bruyere. “That’s why we’ve really ramped up our efforts to get information out to credit unions and help them. We are running our compliance blog Monday through Friday, whereas it has typically been updated three times a week. We are simplifying and summarizing key parts of the CARES Act that impact credit unions, and our compliance team is getting requests from members every day. These requests are probably at least 50% higher than in the past.”
SBA-Related Issues
That many requests, agreed Bruyere, is a clear indication of the level of compliance support, and the additional burden being applied, from the CARES Act.
“Credit unions are trying to figure out how they can participate in the (SBA) program (in the CARES Act granting loans to small businesses), and some are trying to get certified as SBA lenders and understanding how that process can be expedited. So we're seeing compliance issues from that angle, as well,” said Bruyere.
The SBA is also overseeing the $349-billion Paycheck Protection Program.
As far as loan payment deferrals, Bruyere said many credit unions were already taking that step even before the CARES Act was passed. But the CARES Act is bringing more members forward requesting deferrals, and Bruyere acknowledged it is a time-consuming and sometimes difficult task to determine who gets the forbearance.
“But Congress has made it easier, saying lenders don’t need a great deal of documentation from the borrowers now to prove hardship,” she said. “All of this is taking staff hours at a time when credit unions are also trying to make sure they're helping members. They’re facing some operational challenges themselves—such as limited branch operations, staff working from home…”
Credit unions, too, cautioned Bruyere, must be careful to not ask for too much information during the pandemic that might lead to a violation of HIPPA rules.
‘Risk-Based Decisions’
Brandy Bruyere
With the CARES Act requiring limited documentation from borrowers to request forbearance, does NAFCU believe some members who continue to be employed will still attempt to have their loan payments deferred
“There is that possibility,” said Bruyere.
As CUToday.info reported, WestStar CU in Las Vegas is already seeing that scenario.
“Credit unions will be making some risk-based decisions on what to do to help members. What do they do about members who are not entitled to protection under the CARES Act?” asked Bruyere. “We're seeing guidance from NCUA and other federal banking regulators.”
As CUToday.info has also reported, financial institution regulators, including NCUA, have issued a joint policy statement to provide regulatory flexibility in working with consumers under the CARES Act, and also for those who don’t qualify for the assistance.
“The agency is not requiring credit unions to be 100% perfect now,” said Bruyere. “We hear NCUA using the word ‘prudent’ a lot now—‘Make sure you're helping your members but that you're also being prudent and being safe and sound’.”
Due Diligence Challenges
Credit unions aren’t alone in trying to make sense of the new compliance demands. A report from the National Law Review suggests organizations whose compliance teams are now working from home can face due diligence challenges by not being in the office and having contact with paper documents.
“In the context of COVID-19, there are significant challenges involved in conducting due diligence: hard-copy documents are inaccessible, in-person meetings have moved online, and on-site visits may be impossible,” the National Law Review stated.