CFPB’s Future May be Cloudy, but the Outlook is Bright for Credit Unions

By: Beth Planakis, Director of Marketing, Velocity Solutions.

It’s hard to believe it’s been seven years since the formation of the CFPB, but it’s easy to remember what fueled its creation – a financial crisis that Americans hadn’t seen since the Great Depression. And what was one of the most flammable fuels in the fire? Mortgages. Specifically, mortgages that consumers couldn’t afford, couldn’t understand, and for which, in years prior, would never have qualified.

So, as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB was formed to protect consumers from unfair, deceptive or abusive practices in their dealings with financial services and products. Fortunately, the subprime mortgage crisis has since been reigned in, but the bureau has long monitored other types of predatory lending – namely, high-cost payday loans.

While Richard Cordray was Director of the CFPB his expectations were very clear that banks and credit unions could and should be low-cost providers of small-dollar loans, and that payday loans should be more closely regulated. So he proposed a payday lending rule and made significant progress with his agenda. On October 3, 2017, the CFPB cracked down on this “predatory practice” and issued its final payday lending rule, restricting lenders’ ability to profit from high-interest, short-term loans. The tough new restrictions were predicted to essentially decimate the storefront payday lending industry, potentially resulting in up to an 80%* plunge in payday loan volume. The $37,000 annual profit generated by the average storefront lender was estimated to become a $28,000 loss*. That’s a bleak outlook for payday lenders.

Flash forward to today. We’re now living in a post-Cordray world, with front-row seats to a helter-skelter leadership scuffle in the CFPB. Mick Mulvaney, the newly appointed Director of the CFPB, has vehemently voiced his opposition to the payday lending rule. However, it appears that the rule will not be rescinded by the CFPB itself, and it is debatable whether Congress will use its authority under the Congressional Review Act to overturn the rule.

So, what does this mean for credit unions? How can they better serve their members despite the uncertainty?

Proponents of the CFPB say it’s a watchdog agency working for American consumers, and that the payday rule will protect consumers from lenders behaving badly. Opponents believe the CFPB has too much power and that the rule is limiting consumers’ access to liquidity, and even their right to choose how to obtain that liquidity.

But whatever the outcome of the payday lending rule, credit unions have an enormous opportunity to better serve their members with small-dollar loans that are responsible, affordable and compliant.

If the rule takes effect as scheduled in 2019, consumers will be desperate for sources to obtain emergency cash with the storefront payday lenders closing shop. If the rule is overturned, it’s still just as critical to offer your members smarter, more affordable loan options, and to help educate consumers that these superior options exist. Now is the time for credit unions to step in and provide low-risk and affordable small-dollar loans for their members in need of emergency cash.

Here are the top 5 reasons this is a grand slam for credit unions, regardless of the future of the CFPB’s payday lending rule:

  1. Provide a new valuable service to your members, increasing loyalty, retention and lifetime value.
  2. Generate a new source of revenue from members paying high fees elsewhere.
  3. Protect your members from predatory lenders.
  4. Acquire new members by promoting an affordable and convenient small-dollar loan option.
  5. Work more efficiently and effectively. By joining with a partner company that offers a comprehensive, automated solution, your credit union will benefit:
    • No additional loan officers or other additional staff needed
    • Underwriting technology that is automated and proven
    • Assistance with compliance best practices
    • Data-driven marketing to educate consumers about the availability of lower-cost loans

Seize the opportunity now, and make it a resolution to implement a small-dollar, short-term loan solution in early 2018!

Velocity SolutionsVelocity Solutions is the NAFCU Services Preferred Partner for Account Holder Premium Card Rewards Program and Overdraft Management Solutions. More information and educational resources are available at

*New York Times, Payday Lending Faces Tough New Restrictions by Consumer Agency, October 5, 2017.

3 Questions for Your Mobile Banking Partner (Part 2)

By: Will Furrer, Senior Vice President – Product Group, Q2  

We pick up this blog series, addressing the last two questions your credit union should be asking a digital strategy company when developing a mobile banking plan.

Check out Part 1 of the blog series here to learn about the importance of providing a consistent experience on mobile.

Question 2: How does security work for the mobile channel?

Mobile security is a becoming more and more critical every day.  Due in large part to the fact that today’s mobile devices are essentially hand-held computers. As such, the risk of device compromise is something every member, and you as a credit union, should be keenly sensitive too.

Because of this, the security of your mobile banking solution can’t simply be the ‘latest and greatest’ protection available; it must be ahead of the times – using advanced techniques only behavioral modeling and machine learning can support.

Interconnectivity & Behavioral

Mobile banking is not the only type of digital banking your members will do, therefore, it is critical that your mobile security be part of a holistic view of each member’s behavior within your entire digital banking ecosystem.

A comprehensive picture of members’ behaviors across all your virtual channels, which answers questions such as: What operating system are they using for their banking? What time of day do they usually do their banking? What do their typical movements through the application look like?

The power of interconnected solutions – or better yet – of a single platform solution, are very much aligned with credit unions seeking to be the most trusted, secure brand their members engage with. 

Click for Q2 Case Study — Efficiency

Question 3: Does your mobile banking application provide support for commercial banking members?

As the majority of forward leaning credit unions seek to meet their members where they are, the need for small business features and functions available via the mobile channel is becoming increasingly important. Small businesses—a.k.a. SoHos— are making their way into the households of millions of Americans every year, who prefer to bank with a credit union due to the service, support, rates, and connection to the community where they live and work. However, neglecting their mobile business banking needs will in fact put the business of these profitable households in jeopardy over the coming years.

Feature / Function

Small and medium businesses (SMBs) require access to ACH for payments and payroll. Sometimes it’s only a few people, but more and more frequently SMB owners are using their personal accounts; meaning they are moving larger and larger amounts of money to more and more employees or contractors.

The great news is: your credit union can work with the SMB’s relationships to provide accounts for these potential members. It’s a win/win.  A win for the owner of the SMB—who is now able to manage their payroll via their mobile device, as well as approve wires and draft payments, which is what they expect from a progressive credit union like yours. And a win for your credit union in the form of new members.


Above all else, offering a business banking solution via mobile devices will provide your members the same freedom they have come to appreciate with your retail banking products—expanded to where they make their living, not just where they check their balances. Mobile commercial banking access is a clear separator for innovative credit unions, one that will benefit you and your members.


Q2 is the NAFCU Preferred Partner for Single Platform Virtual Banking Solutions—Including Online and Mobile—for Community and Regional Financial Institutions. Learn more about Q2 by visiting

Card Data Breach Loss Prevention Checklist

By Ann Davidson, VP of Risk Consulting at Allied Solutions

Many of the large-scale card data breaches in 2015 involved the compromise of magnetic stripe data on both credit and debit cards. The data compromised in most of these card breaches involved either track 1 or track 2 magnetic stripe fraud (POS 90), as determined by the merchant during the transaction authorization. Because the track information can be duplicated, there will likely be a high risk for future fraud exposure if you opt not to block and reissue these cards.

For an in-depth look into payment card fraud risks that many credit unions are being hit hard with right now, watch Allied’s webinar “Card Fraud on the Rise: How Financial Institutions Can Help Prevent It.”

Card Data Breach Loss Prevention Checklist:

  • Evaluate the compromised card number to help determine if the risk is high
    • A high risk involves the full unaltered magnetic stripe data from track 1 and/or track 2 – track 1 carries the cardholder name; track 2 does not
  • Confirm you’re utilizing “name matching” if track 1 data was part of the breach
  • Review card associations’ alerts and act immediately on at risk card data outlined in alert
  • Analyze at risk open card accounts to determine which cards are/are not still active
  • Review other card accounts to find out which cards are non-active and have already been closed due to fraud
  • Identify the fraud pattern to uncover the common point of compromise (CPP)
    • This is where the breach took place, not where the fraud occurred
    • Once discovered, report the CPP immediately
  • Block and reissue impacted, open card numbers when magnetic stripe has been compromised
  • Accelerate the reissuance of active cards prior to their expiration date
  • Consider reissuing the card 30 to 180 days before the date of expiration
  • Ask the card association(s) to take recovery action related to any expenses
  • Report the fraud to the Visa Fraud Reporting System and/or MasterCard’s Safe System, as this is a requirement under the card association(s) rules

Watch Allied’s webinar “Card Fraud on the Rise: How Financial Institutions Can Help Prevent It” to learn more about payment card fraud risks.

Allied Solutions is the NAFCU Services Preferred Partner for Insurance- Bond, Creditor Placed (CPI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown Protection (MBP). More educational resources and partner contact information are available at


Ins and Outs of Fiduciary Outsourcing for Credit Unions

By: Richard W. Rausser, Senior Vice President of Client Services, Pentegra Retirement Services

With retirement plans seemingly becoming ever more complicated, outsourcing of fiduciary investment responsibilities has steadily become more commonplace. This is especially true in the case of the C-Suite at credit unions, which can find outsourcing very appealing.

Not only is the passing along of fiduciary responsibilities one less burden for credit union managers, allowing them to focus on day-to-day business and obviating the need for them to become qualified plan experts, but the practice can also serve to insulate them and their credit union from a number of risks.

Benefits of Outsourcing

Outsourcing to a sanctioned third-party fiduciary guarantees that a given plan’s documentation is up to date, complies with all laws and regulations, and delivers appropriate disclosures to plan participants and sponsors.

If a plan is large enough (meaning it has roughly 100 to 120 participants) it requires an independent auditor – the selection of which again can be provided by the external fiduciary, saving the credit union time and money. (It should be noted that investment fiduciary outsourcing can be appropriate for defined benefit and defined contribution plans of all sizes.)

In addition, the day-to-day management of a plan involves, among other things, making sure the plan is running as it should be; nuts and bolts record-keeping; and administrative decisions about such issues as a plan participant’s request for a loan or a hardship distribution.

Customizing Responsibilities

Arranging the responsibilities of a third-party fiduciary should be fairly easy to customize; one can outsource all of the above or cherry-pick whichever duties one wishes on an ala carte basis.

A credit union needs to provide a reputable third-party fiduciary with the following:

  • Data on the plan participants;
  • The money involved with the plan; and
  • A commitment to regularly review the plan’s performance (usually once a year).

In that way, any questions or concerns can be addressed efficiently. (Of course, any issues that rise before the review date can also be discussed at any time.)

Fiduciary Responsibility

If there are record-keeping errors made by the outside fiduciary, it is that fiduciary’s responsibility to make amends, including making up any monetary shortfall. In the unlikely case of a participant-filed lawsuit, the outside fiduciary is again front and center, providing the defense in the case and making good on any claims or settlements.

The credit union’s board and senior management are insulated from responsibility; even though the plan ultimately belongs to the credit union, it is the named fiduciary who holds the liability in such instances.

Such an arrangement can also be of value in the case of multiple employer plans (MEPs), an employee benefit plan that can be maintained as a single plan in which two or more unrelated employers participate. As each credit union has its own separate boards of directors, the advantages of having an independent fiduciary to manage and administrate the plan are readily apparent.

Credit Union Responsibilities

All of that said, there will remain some fiduciary responsibilities and liabilities for the fiduciary responsible for selecting and contracting with the outsourced fiduciary. Breach of contract is the most obvious of these, but there is also the matter of monitoring/reviewing with the outside fiduciary that I mentioned previously.

In addition – and this should go without saying – it is incumbent upon the relevant credit union executive to read all communiques from the third-party fiduciary, and to ask and follow through on any questions or concerns.

None of these duties should be particularly onerous, especially if you have chosen a reputable external fiduciary. When considering such a company – as you should with all outside vendors – “test drive the car”: Find out all you can about several different ones, ask lots of questions, and make as informed a final decision as possible.

Learn more from Rich by watching the recorded webinar: “Innovative Retirement Plan Design for Maximum Results.”

About Rich Rausser:
Richard W. Rausser has over 25 years of experience in the retirement benefits field. He is Senior Vice President of Client Services at Pentegra Retirement Services, a leading provider of retirement planning services to financial institutions and organizations nationwide, founded by the Federal Home Loan Bank System in 1943. Rich oversees Pentegra’s consulting, marketing and communications and actuarial service groups at Pentegra. He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA).

Pentegra_Logo_FinalPentegra is the NAFCU Preferred Partner for Qualified Retirement Plans for Credit Union Employees