Reprieve from Last Year’s Wave
of Regulatory Change?
The Regulato Ry develo PMents taBle suggests that January and early February 2010 were relatively light in terms of presenting new rules to the industry. however, consistent with last year, the developments are substantive and focused on providing heightened consumer protections in lending transactions and greater credit availability. unfortunately, the early year activity is not indicative of a regulatory hiatus. to remind us of
this we need to look at the environment from only three perspectives:
Recent Final Rules require significant
resources to implement
There were more than eight key final rules1 with
2010 effective dates, including Phase 2 of the Credit
Card Accountability Responsibility and Disclosure
Act of 2009 (Credit CARD Act). The Credit CARD
Act rules were issued in January 2010 with an almost
immediate effective date of February 2010. The resource
demand is exacerbated by the fact that the Credit CARD
Act rules concurrently repealed new provisions finalized
in 2009 that the industry had already begun to prepare
for implementation. In addition, implementation for the
risk-based pricing requirements of the Fair and Accurate
Credit Transactions Act (FACTA) finalized in December
2009 is extensive and its effective date is close behind on
January 1, 2011.
Outstanding proposals also carry
comprehensive requirements and
include rules such as the following:
■ The far reaching Regulation Z changes to improve
consumer disclosures for mortgage and home
equity loan facilities.
■ The incentive compensation guidance which includes
principals that not only apply to safety and soundness
risks, but are applicable when considering compliance
risk such as fair lending, and unfair and deceptive
practices.
Other indicators of an escalating
environment of regulatory focus,
for example:
■ A significant decline in the consumer compliance
rating trend evidencing internal strains at institu-
tions as well as the intensity of examinations. As
of September 30, 2009, 6. 9 percent of banks were
rated three or worse for consumer compliance,
up significantly from the 3. 9 percent evidenced a
year earlier. 2 The rating trend is largely driven by
substantive weaknesses in compliance risk controls.
