Looking Ahead with NCUA 2023 Supervisory Priorities

January 30, 2023

By Erin O'Hern, VP Strategic Initiatives 

As is customary, the National Credit Union Administration (NCUA) released its supervisory priorities for the year in January. Six primary areas of examiner focus were included in the list:

• Interest rate risk
• Liquidity risk
• Credit risk
• Fraud prevention and detection
• Cybersecurity
• Consumer financial protection

Although all six areas are critical to a credit union’s safety and soundness, especially during this unusual rate environment and increased cyber and fraud attacks, don’t overlook the last item on NCUA’s list. Consumer financial protection is one area no credit union compliance strategy can afford to neglect. While consumer protection regulations will be a priority during the exam, they also represent the areas of high risk for consumer complaints and lawsuits.

A few elements jumped out to our team within the consumer protection section as we reviewed the NCUA’s Letter to Credit Unions: overdraft fees, inclusive compliance practices, and member complaints.  

Overdraft fees are not only on NCUA’s list but a clear priority for the CFPB as well. Fees in general have been in the spotlight for both regulators and elected officials. Overdraft fees — especially the settlement process and how they are advertised and explained to members — will once again be important.

Recommended Action Steps:

• Regularly review the credit union’s overall fee schedule.
• Conduct a quality control review of the credit union’s overdraft procedures. Ensure the settlement process matches both the language of the overdraft agreement and any educational information members receive.

In addition to overdraft fees, the importance of financial inclusion and increased support for those efforts is clear. NCUA will continue the Small Credit Union and Minority Depository Institutions support program, to help preserve these credit unions and the services they offer to underserved communities. There also continues to be a direct tie between consumer compliance regulations and financial inclusion efforts. Fair lending practices are highlighted in the supervisory priorities, including the review of residential real estate appraisals for any bias. Ensuring a diversity and inclusion lens is used to evaluate the credit unions products and practices will be beneficial, especially within your compliance program. 

Recommended Action Steps:

• Document known (or found) discrepancies in lending to provide context for any decisions or action that don’t adhere to policies and procedures.
• Ensure quality and due diligence of any partners in the lending process.
• Update policies and procedures to review any operational, underwriting or servicing processes that may have stuck around post-pandemic.
• Research workflow automation solutions to keep policy reviews on track and on record.

Finally, the letter also explained that examiners will be looking for trends in violations identified through member complaints. This underscores the importance of credit unions doing the same within their individual cooperatives. Monitoring, documenting and taking action to address patterns within member complaints should be a priority for all governance, risk and compliance (GRC) teams.

Recommended Action Steps:

• Ensure member complaints are aggregated and analyzed to identify patterns.
• Develop and document a plan for addressing the root cause of common complaints.
• Consider adding a reporting tool to make analysis easier in the future.

The NCUA’s first Letter to Credit Unions of 2023 had important highlights in a lot of different areas. While consumer compliance may not get the most attention on the list of supervisory priorities, it is important for credit unions to pay close attention to it.

To learn more, check out NCUA’s webinar on January 31 at 2 pm Eastern.