November 12, 2019

NAFCU to CFPB: CUs will benefit from modernized supervisory processes

cfpbProviding feedback to the CFPB on its proposed use of "tech sprints" in order to encourage innovation and address regulatory compliance challenges, NAFCU's Andrew Morris said "all credit unions stand to benefit from regulatory efforts to modernize and streamline supervisory processes."

Morris, NAFCU's senior counsel for research and policy, noted not all credit unions fall under the bureau's supervisory jurisdiction, but for those that do, "reducing the length of exams and minimizing manual review processes could alleviate operational disruption."

Through the use of tech sprints, Morris offered a few areas where technology could be leveraged to reduce supervisory burdens:

  • Compliance checks: Morris recommended consideration of machine automated compliance checks as a way to reduce exam length and documentation requirements. Morris noted that "greater automation could also improve the objectivity of exam results."
  • Risk management decisions: Morris said the bureau could "facilitate industry adoption of automated compliance systems by validating the use of [artificial intelligence (AI)] to inform risk management decisions." He also suggested that tech sprints could help the bureau better understand the potential role of AI in credit underwriting, Know Your Customer procedures, and Bank Secrecy Act/anti-money laundering compliance.

Morris also said the bureau should ensure tech sprint work groups are inclusive of credit unions and their vendors, taking into account size and resource differences, and also work with the NCUA "to promote broader understanding of potential supervisory optimizations."

While the tech sprints proposal aims to find technological solutions to address compliance burdens, Morris asked the bureau to also reconsider requirements of certain rules and regulations.

"For example, reconsideration of the permanent transactional and institutional coverage thresholds for the Home Mortgage Disclosure Act (HMDA) would achieve more tangible relief than minor refinement of the HMDA submission platform," Morris argued. "Likewise, reducing the amount of discretionary HMDA data points would also provide relief for credit unions that still rely on manual processes for reporting some of these elements."

Read Morris' full letter on the CFPB's tech sprint proposal.