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The Key Issues in Credit Union Compliance in the Year Ahead

The Credit Union National Association (CUNA) heads to Washington D.C. from February 27 to March 3, 2022, to debate the key issues affecting credit union and financial-institution compliance at the Governmental Affairs Conference (GAC). And Lumin Digital will be there. With the ongoing shift toward a digital banking environment and the lingering effects of the pandemic to address, the conference will shine a spotlight on credit-union compliance and regulation. Find out how CUNA aims to protect the role credit unions play in serving communities, and what issues we expect to resonate into 2022 and 2023.

Modernizing Governance

Securing the financial future of the nation’s small businesses and entrepreneurs, particularly as we recover from the pandemic, will require modernization of the Federal Credit Union Act. One of the key discussions at GAC will be around lifting arbitrary business lending caps and allowing credit unions to service loans with terms longer than 15 years. Ultimately, the goal is to remove the field of membership restrictions and make access to financial services more equitable.

Opposing New Interchange Rules

In May 2021, the Federal Reserve Board announced plans to amend regulations on debit-card interchange fees and routing. Essentially, the proposed changes will allow merchants to choose from at least two unaffiliated networks when it comes to card-not-present transactions. Although the changes are to be introduced under the guise of stimulating competition, the regulation “does little to aid American consumers,” according to Dan Berger, president of the National Association of Federally-Insured Credit Unions (NAFCU), and will “distort the competitive landscape further by restricting credit union members’ freedom to use the safe, affordable, and innovative payment options they want.”

Moreover, CUNA will argue that proposed changes to electronic payments pose a cybersecurity risk. In 2020, more than 300 million people were affected by data breaches. The conference position is that the current interchange arrangement works, protects end user’s cards and keeps the economy flowing, whereas the proposed changes could make it harder for people to access credit and will increase costs for small businesses.

IRS Reporting Provisions

Congress plans to require credit unions and other financial institutions to report any transaction over $10,000 to the Internal Revenue Service. This proposal poses significant reputational and operational challenges for credit unions, while also increasing data privacy concerns for end-users. Although the NAFCU supports any effort to increase tax compliance, it rejects any proposal to capture nontaxable activity to the detriment of users’ personal privacy.

Securing Data

Credit unions play a crucial role in supporting communities and contributing to members’ financial well-being — even more so during the pandemic. With that goal in mind, GAC will continue to lobby Congress to strengthen data security and privacy through national data security and privacy law. Pointing out that more than 12 billion records have been exposed due to lax security since 2005, GAC will be pushing for Congress to extend data protection to every entity that holds data. Currently, robust laws like the Gramm–Leach–Bliley Act and the Health Insurance Portability and Accountability Act apply only to financial services and health care providers.

Bank Secrecy

Credit unions are required to meet rigorous anti-money-laundering and “know your customer” regulations. However, non-federally insured credit unions are currently exempt. The National Credit Union Administration has already called for greater coordination with the Financial Crimes Enforcement Network in order to “minimize compliance burdens related to Bank Secrecy Act/Anti-money Laundering (BSA/AML) regulations.” Ultimately, it’s a question of resources. Credit unions, with their focus on minimizing cost in order to serve communities (more than 75% are in low- and middle-income areas), can ill afford to allocate more resources and personnel to regulatory compliance.

Records Preservation

A further burden on credit unions is the need to identify, store and preserve vital financial records “in the event that the credit union’s records are destroyed.” CUNA’s senior director of advocacy and counsel, Luke Martone, points out that “many credit unions do not have the physical space to store such records nor the money to pay a storage facility vendor to store these records forever.”

The consistent theme of these regulatory and compliance issues due to be debated at the CUNA Governmental Affairs Conference is the need to find solutions that protect end users, serve the community as a whole, accommodate the unique role credit unions play when it comes to lending (and support the economy as a whole. As part of that momentum, Lumin Digital will continue to drive innovation in digital banking and deliver better engagement, security and speed as part of the user experience. Learn more about our cloud-native platform here.


CUNA CUNA Governmental Affairs Conference 2022