In the rapidly evolving landscape of financial services, credit unions are increasingly digitizing the borrower journey.
According to ViClarity, this transformation involves integrating new personnel, processes, and technologies, each introducing unique risks. A key risk is the failure to comply with fair lending regulations, which could result in regulatory fines, reputational damage, and potential loss of business.
One major issue is the risk of ‘Disappearing Data Fields’. Credit unions upgrading to new loan origination systems (LOS) or loan management systems (LMS) must ensure these systems align with their data collection processes. Simplified data entry interfaces might overlook essential data fields, such as those required by address confidentiality programs in some states, potentially leading to compliance violations.
Another significant challenge is ‘Insufficient Customization’. Technology solutions in lending must be customizable to accommodate the diverse loan programs that different credit unions offer. For instance, credit unions with assets over $10bn face different disclosure requirements and regulatory obligations than smaller entities. A one-size-fits-all approach in lendtech can complicate compliance and add unnecessary steps in the lending process.
‘Delayed Implementation’ of new technologies can also impede a credit union’s operational efficiency. It is crucial for credit unions to understand the support and potential obstacles associated with new tech deployments early in the implementation phase. Inquiring about the tech provider’s policies on compensating for delays that disrupt business or compliance is also advisable.
The issue of ‘Insecure or Vulnerable Data’ is increasingly pertinent with frequent data breaches. Lending teams must ensure they adhere to stringent vendor due diligence processes and stay in sync with the compliance team to keep abreast of new data security regulations. Understanding the fintech provider’s breach notification policy and liability terms is critical, as the responsibility for compliance issues ultimately falls on the credit union, even if they originate from a provider.
Lastly, ‘Inadequate Training’ can lead to non-compliance. Credit unions must invest in ongoing training programs for their compliance and lending teams to prevent errors and adapt to evolving consumer protection laws.
As digital transformations continue to reshape the lending landscape, balancing technological advancements with strict compliance is essential. While these innovations offer significant improvements in efficiency and customer experience, the stakes for maintaining regulatory compliance have never been higher.
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