How to Navigate Compliance in a Time of Uncertainty

by Barbara Boccia:

“If you can keep your head when all about you, are losing theirs and blaming it on you…”
If, a poem by Rudyard Kipling

These are tumultuous times for compliance professionals at financial institutions (FIs). It may be easier said than done to try to “keep your head” and maintain the important controls you have in place to mitigate risk when others around you see an opportunity to run free. With so much movement and chaos happening in the broader environment, it’s best to not get swept up in the euphoria. Now more than ever, it’s critical for Compliance to have a seat at the table and steer the FI with an even keel.

The reality is that while change is occurring, we have no idea what exactly will change. If history is our guide, under the first Trump administration there continued to be regulatory exams, enforcement actions, and remediations. Perhaps a general comparison is that there was less publicity and fanfare than under President Biden, and not as large dollar amounts paid by FIs in Civil Money Penalties. It would be realistic to expect that some of the more expansive interpretations and overreaching under the prior administration would be reined in, especially in reference to activity by the Consumer Financial Protection Bureau (CFPB.)

While we reflect on lessons learned from the past, we cannot forget how the financial crisis of 2008 brought the country, as well as the global economy, to the brink of despair. Many financial institutions completely disappeared, as many Americans lost their homes and their jobs.

Regulations brought to us by the Dodd-Frank Act such as the Ability to Repay (ATR) rule and the “Abusive” standard under UDAAP (Unfair, Deceptive or Abusive Acts or Practices) were put in place to protect consumers and the industry from a future crisis. While these measures were difficult for the banking industry to put in place, we have enjoyed the benefits of economic recovery and guardrails to protect the consumer from unscrupulous actors.

The challenge is that fifteen-plus years ago is a long time, and there may be a lot of people in the workplace that don’t recall any crisis pre-COVID. It’s imperative that Compliance maintain a level head and strong voice within the FI to steer a course through the chaos of uncertainty. Stay attentive to regulatory changes, and expect the unexpected.