Regulatory compliance professionals hate ambiguity but work in a world that's full of ambiguity. How often do we hear "Are we in compliance"? How often do we have to respond "It depends", or "Maybe"? Certainty is not a luxury that we either get, nor do we necessarily strive for. If we had hard and fast rules to follow, we couldn't find creative, and legal, ways to comply with regulations. We do need to have some idea of what the rules will be, however.
Congress is making it impossible to even know what the rules might be even 3 months from now. As I last checked, at least three bills had been introduced regarding credit cards. Additionally, there is talk that a federal usury bill may be introduced which would amend TILA's definition of finance charge for purposes of determining whether a loan had an APR over the usury ceiling. I understand the legislative process is such that we may never see any of these bills passed and signed into law. What concerns me most is the three month implementation time contained in some of these bills. The need to make changes should not trump the need to make sure changes can be made in a timely fashion. If heroic measures are needed to ensure compliance, banks and credit unions will just pass on the cost to consumers. That's not reform, that's demagoguery
Monday, February 23, 2009
Thursday, January 22, 2009
Congress Starts the Blizzard
Well, the first in the blizzard of proposed legislation in the regulatory compliance front has been introduced into Congress. HR 627 was introduced into the House, as was its companion in the Senate, s. 235. The bills are known as the Credit Cardholders' Bill of Rights Act of 2009. (CCBRA) I'm not even going to begin to determine how to pronounce CCBRA. It sounds a little like the sound one of my cats makes when bringing up a furball.
This legislation was introduced in the face of the UDAP rules passed by the various regualtors. It limits such things as universal default, defines "prime rate", creates new rules for due dates, amends the rules for certain "subprime" or "harvester" credit cards to 25% of credit limit, and limits issuance of cards to minors. Finally, it sets the effective date for the law at 3 months after the law's enactment, including creation of rules by the various regulators all in that 3 month period. This would supercede the UDAP rules' compliance date of July 1, 2010.
While acknowledging the Congress's right to pass legislation, and even if I agree with the provisions of the legislation, setting 3 months' time period for compliance is just plain irresponsible. The cost and confusion will be passed along to consumers i nthe form of higher rates and higher fees. I applaud Congress's desire to initiate change, but let's do so in a fashion that is attainable and cost effective.
This legislation was introduced in the face of the UDAP rules passed by the various regualtors. It limits such things as universal default, defines "prime rate", creates new rules for due dates, amends the rules for certain "subprime" or "harvester" credit cards to 25% of credit limit, and limits issuance of cards to minors. Finally, it sets the effective date for the law at 3 months after the law's enactment, including creation of rules by the various regulators all in that 3 month period. This would supercede the UDAP rules' compliance date of July 1, 2010.
While acknowledging the Congress's right to pass legislation, and even if I agree with the provisions of the legislation, setting 3 months' time period for compliance is just plain irresponsible. The cost and confusion will be passed along to consumers i nthe form of higher rates and higher fees. I applaud Congress's desire to initiate change, but let's do so in a fashion that is attainable and cost effective.
Monday, January 19, 2009
Regulatory Compliance Comes to the Forefront
The last few weeks, I've spent more time than I'd like to think reading new regulations. I started with an appetizer the new HUD regulations dealing with RESPA. Then I moved on to a second course of Unfair and Deceptive Acts and Practices rules and a main course of final Regulation Z rules on open-end lending dealing with credit card regulations and multi-featured open-end lending. I had a dessert of proposed changes to Reg Z for mortgage disclosures. It was, well, quite a meal.
I worked through these regulations, trying to understand how the rules were meant to work, and how they succeeded in meeting the expressed goals of the particular regulator. In some cases, they did a pretty good job at all these tasks, some not so good. I'll comment on these attempts in a later posting. What came more and more to mind was the new importance and prominence of regulatory compliance in a post banking meltdown world.
Compliance has always been, in my perception, something that's been viewed as a royal pain by most credit union staff. In many cases, it's been seen as obstructing credit unions from carrying out processes or strategies, a joke, an irritant. Times are different now.
One aspect of the banking meltdown most people agree on is that lack of regulation was a cause of of the problems we now face. To reduce the likelihood of a reccurance of the problems in the financial services industry happening again, we all face more regulation. No longer can we view it as a joke or an irritant. Now, we need to be serious about compliance.
I worked through these regulations, trying to understand how the rules were meant to work, and how they succeeded in meeting the expressed goals of the particular regulator. In some cases, they did a pretty good job at all these tasks, some not so good. I'll comment on these attempts in a later posting. What came more and more to mind was the new importance and prominence of regulatory compliance in a post banking meltdown world.
Compliance has always been, in my perception, something that's been viewed as a royal pain by most credit union staff. In many cases, it's been seen as obstructing credit unions from carrying out processes or strategies, a joke, an irritant. Times are different now.
One aspect of the banking meltdown most people agree on is that lack of regulation was a cause of of the problems we now face. To reduce the likelihood of a reccurance of the problems in the financial services industry happening again, we all face more regulation. No longer can we view it as a joke or an irritant. Now, we need to be serious about compliance.
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