Credit Card Compliance Burden Continues
posted by Corey Skadburg, Senior Credit and Risk Manager on Friday, May 22, 2015
- card act
The Credit CARD Act of 2009 presented a seachange for many financial institutions. Already a complex product to manage, credit cards ultimately became a business line some credit unions and community banks had to rethink. Could they continue to offer the product given the added pressure of regulatory compliance?
Although the CARD Act has been in place for more than six years, the burden of compliance continues – particulary for financial institutions without the kind of resources it takes to run a profitable portfolio today. Because there are CARD Act limits on how often issuers can change fees and interest rates, portfolio management requires diligent planning, sophisticated data and behivor analysis and a stepped-up pricing strategy.
To complicate matters, the Consumer Financial Protection Bureau (CFPB) has advised that every financial institution is expected to have an effective compliance management system (CMS) in place. Effective CMS systems will have Board of Directors and Management oversight, a formal written compliance program with policies and procedures, training, a consumer complaint management program and have independent compliance audits performed regularly. Integrating the unique complexities of CARD Act into your existing CMS is a must.
In my experience, community financial institutions typically come to the same conclusion when contempating whether to offer a credit card. Even in this intense climate of regulation, competition and disrpution, most still understand the consumer value of a great credit card product. With good collaboration between internal teams and external guidance, credit card programs can achieve compliance, generate revenue and inspire long-term loyalty from influencial consumers.