24 THE NAFCU JOURNAL March–April 2022 Union Administration (NCUA), says Park. “While there is a lot of uncertainty about what both agencies might do with respect to overdrafts, both agencies have indicated that this is an area on which they will focus.” Another way to mitigate risk is to look at the level of CFPB complaints and other litigation and to comparatively assess your risk in those areas of higher risk. CFPB complaints have increased year over year for 2021 according to statistics compiled by WebRecon, a litigation research firm, says Park. While the level of Fair Credit Reporting Act and Fair Debt Collection Practices Act litigation has remained somewhat stable when looking at WebRecon’s analysis for 2020 and 2021, Telephone Consumer Protection Act litigation has significantly decreased. Emerging Risks The increased reliance on fintech companies and other third parties to provide technology to enhance services to members also poses a risk that credit unions should take steps to mitigate before entering any agreements, suggests Park. “Just as with any third-party relationship, NCUA requires that credit unions take certain steps to ensure that they understand the risks posed by outsourcing work to third parties,” he says. These steps include things like performing a risk assessment and considering how the proposed third-party relationship might affect the seven areas of risk that NCUA looks at in an exam. For those credit unions who partner with third parties that provide models and algorithms that might be used in decisioning, it is critical to be to explain how those decisions are made. “Understand how the algorithm works and conduct due diligence to be sure the supplier meets all regulatory expectations for credit unions.” While the upfront work is important, he also adds, “The credit union must also monitor the fintech’s ongoing performance and outcomes because the credit union can be held responsible for compliance failures.” Overall, the best defense against growing and emerging risks is to go on the offensive. “Be proactive in reviews of agreements, disclosures, policies and procedures,” reiterates Park. “A credit union’s best defense against claims is proof that the member was informed and that the credit union’s actions aligned with the terms of the governing agreement, any disclosures provided by the credit union and applicable law.” References 1. Steward J. Digital Federal Credit Union settles $1.8M class action suit. American Banker. October 15, 2019. americanbanker.com/ creditunions/news/digital-federal-credit-union-settles-18m-class-action-suit 2. Strozniak P. American Airlines FCU to Pay $1.5 Million to Settle Overdraft Fee Dispute: California woman who filed the class action lawsuit will be paid a $15,000 service award. Credit Union Times. August 11, 2021. cutimes.com/2021/08/11/american-airlines-fcu-to-pay-1-5million-to-settle-overdraft-fee-dispute/ 3. Buckley Firm. Parties File Unopposed Settlement Requiring Credit Union to Pay $16 Million to Resolve Insufficient Funds Fee Lawsuit. October 27, 2020. buckleyfirm.com/blog/2020-10-27/parties-file-unopposed-settlement-requiring-credit-union-pay-16-million-resolveinsufficient-funds-fee-lawsuit 4. Strozniak P. Navy Federal Credit Union Faces Second Class Action Lawsuit Over Fees: Member claims she was unlawfully charged an international transaction fee for buying a product online from an overseas retailer. Credit Union Times. January 13, 2021. cutimes.com/2021/01/13/navy-federal-credit-union-faces-second-class-action-lawsuit-over-fees/ “For those credit unions who partner with third parties that provide models and algorithms that might be used in decisioning, it is critical to be to explain how those decisions are made. Understand how the algorithm works and conduct due diligence to be sure the supplier meets all regulatory expectations for credit unions.”
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