When Wolters Kluwer asked bankers recently which regulatory concerns keep them up at night, 46% said "regulatory reform" referring to new rules stemming from the Dodd-Frank Act and the Consumer Financial Protection Bureau.
But more than a third (35%) of respondents in its regulatory and risk management study said they are alarmed about new consumer lending regulations, including the CFPB's new mortgage lending rules and changes to the Truth in Lending and Real Estate Settlement Procedure acts.
"I'm not surprised because everyone is waiting for this we know the Bureau's been working on this for a year and a half now," says Edward Kramer, executive vice president, regulatory affairs at Wolters Kluwer. The CFPB has released some sample forms that show how it's trying to condense large disclosure forms into one that's smaller, easier to read, and more comprehensible for the borrower. "That's a big deal," Kramer says.
Wolters Kluwer, which provides compliance advice and software to banks, surveyed 400 executives at banks and credit unions in January, then again surveyed 430 at the end of April.
The very largest banks were more worried about UDAAP and HMDA reporting amendments. UDAAP is a rule under the Dodd-Frank Act that makes it unlawful for any provider of consumer financial products or services or a service provider to engage in any unfair, deceptive or abusive acts or practice.
"Everybody is waiting to see how 'abusive' is defined," Kramer says. "The smaller banks don't see the new abusive act standard as a major issue, but the larger banks do." The CFPB has jurisdiction mainly over 110 large banks.
Mortgage servicing requirements in the exam guidelines are another big area of concern. "Mortgage servicing hasn't exactly been on the back burner, but since Dodd-Frank and the creation of the Consumer Financial Protection Bureau, we're seeing much more attention being paid to mortgage servicing." Ditto for QM and QRM, proposed rules around qualified mortgages and qualified residential mortgages.
What is the role of technology in adjusting to all these new rules?
"Technology is critical," Kramer says. "When you have an enforcement brought by your regulator of a significant deficiency, the first thing senior management used to say is, where is our chief compliance officer? How did this happen? Now the question is going to be, where is our chief technology officer? Why didn't technology come up with the means to implement these changes in a more effective, efficient, and compliant way? If technology and compliance aren't talking to each other, they need to."
The high sense of alarm bankers expressed in the survey is appropriate, Kramer suggests. "There are more regulations, more and bigger fines, more staff resources required than at any other time in my 40-year career," he says. Small community banks are overwhelmed by the additional staff resources needed. Large banks are adding 20-50 people in their compliance departments, the largest have more.
"What's the bottom line for the bank executive? More anxiety and stress."