CrossState Compliance Offers 2023 NCUA Exam Tips for Credit Unions
The NCUA last month released its 2023 supervisory priorities. Many of you may have noticed that the Bank Secrecy Act was absent for the first time in many years. The focus of this year’s priorities appears to be on risk management. Credit unions would do well to get prepared to meet compliance requirements by continually assessing and mitigating risk for a proactive approach to risk management.
NCUA’s 2023 Supervisory Priorities focus on:
Fraud prevention and identification
Data shows fraud is on the rise. The NCUA is taking a proactive approach to combatting fraud. It will be closely reviewing internal controls, including separation of duties, and will use a new questionnaire to identify red flags and potential fraud risks during exams.
Credit unions should prepare by reviewing and assessing their fraud controls for effectiveness and implementing any necessary adjustments. This includes taking a closer look at their effectiveness and determining if any adjustments or new controls need to be implemented.
Information security and cybersecurity at credit unions
The NCUA has introduced new Information Security Examination procedures for 2023. It’s placing a strong emphasis on the ability of credit unions to adapt and effectively combat emerging cyber threats.
One recommended resource for preparation is the use of the Automated Cybersecurity Evaluation Toolbox (ACET). It helps evaluate your cyber maturity so you can assess critical cyber controls and have a common language for discussing cybersecurity with examiners. Ongoing cybersecurity risk management is a must.
Consumer protection
Consumer protection, including overdraft programs, fair lending, the Truth in Lending Act (TILA), and the Fair Credit Reporting Act (FCRA), are a high priority for the NCUA.
Last year the NCUA requested information about overdraft programs. This year they’ll also examine website advertising, balance calculation methods, and settlement processes to ensure that credit unions are assessing the potential risk for consumer harm from unexpected overdraft fees – and taking action to remedy any issues.
The NCUA will closely scrutinize policies and practices related to steering and loan pricing discrimination. Additionally, they will focus on the potential for bias in residential real estate appraisals, examining consistency, fairness, and accuracy during tailored file reviews.
To prepare, credit unions should conduct a thorough analysis of their loan data to identify any disparities that may indicate discrimination or fair lending violations — and then take action to understand why they are happening and correct them. They should also review policies and practices to ensure they are up to date and effective and that staff complies with them.
To prepare, make sure your auto lending policies, procedures, and disclosures are accurate, up-to-date, and working effectively. Third-party vendor management is essential to ensuring any partners are also complying with TILA.
Credit reporting will be an exam priority, especially furnishing, adverse action notices, risk-based pricing, and consumer rights disclosures.
Prepare by reviewing your FCRA policies and procedures. Pay special attention to high-risk areas. If you find control weaknesses or discover employees aren’t following policies and procedures, take steps to remediate those issues.
Credit unions can ensure their members are part of a safe, sound credit union with strong consumer protections by getting and remaining compliant for NCUA exams through sound risk management.