In a risk alert issued Tuesday, CUNA Mutual Group told credit unions that, due to new leadership at the CFPB under the Biden Administration, the priorities and strategies employed by the agency regarding consumer financial protection are likely to change, with “a more aggressive posture,” particularly as it relates to issues resulting from the pandemic.
As loss mitigation and forbearance policies expire, credit unions must deal with troubled assets while operating in a changed business environment, according to the risk alert. Given that the economy was largely stabilized through regulatory deference, stimulus programs and proactive relief against collections, credit unions will be faced with the process of managing the financial and legal fallout from the pandemic and must continue to work through the debt cycle.
Litigation related to lender liability has increased throughout the financial services sector, and credit unions could be at risk of a class-action lawsuit over a systemic flaw, or even an individual employee’s negligence, the alert stated. Specific areas of concern include non-compliant forms, employees not following lending and collections policies, and collections practices, either in-house or through third-party collectors.
The alert also stated that many expect the new administration to focus more on consumer protection in regulation and enforcement actions across the business landscape, which may extend to cybersecurity and data protection practices.
The alert recommends that credit unions:
- work with legal counsel to review written lending policies and forms to ensure that they comply with both state and federal regulations;
- train staff on procedures and audit loan files carefully;
- review lender liability coverage; and
- ensure policies, procedures and guidelines are continuously updated and remain consistent.
“Entities subject to the CFPB’s supervisory and enforcement authority should take time to understand where there may be risk and promptly address it moving forward,” the alert stated.
CUNA Mutual Group’s risk alerts may be accessed on their Protection Resource Center. Log-in is required.