Compliance Insight with David Schneier

Crystal Ball: How Will Lending be Regulated a Year from Now?

I was presenting at a credit union conference this week, where the session before mine covered current economic conditions. The timing was perfect in a macabre sort of way, as the 24 hours prior were filled with news about the Merrill Lynch rescue and Lehman Brothers collapse. As part of the Q&A phase, a prediction was made that the subprime debacle would lead to new regulations governing lending. I was surprised that the reaction in the room was mostly that of heads quietly nodding in agreement.

It was with an additional touch of irony that I followed with my presentation, covering what's new in the compliance space and provided some insight on how to manage through it. I covered Red Flags (the newest of the new) and Vendor Management (everything old is new again) and realized somewhere mid-presentation that roughly a year or so from now I'm likely to be discussing meeting the challenges of the new lending compliance requirements.

Obviously I'm biased a bit based on what I do for a living, but I've come to truly believe that what GLBA and NCUA require from its institutions actually makes sense. After spending a considerable portion of my professional life these past few months figuring out the correct approach to Red Flags and spending an almost equal amount of time on how to better manage vendors, I'm certain that the resulting solutions will help anyone who trusts their money with a bank or credit union sleep better at night. And with worsening economic conditions bringing even greater pressures to bear upon all of us, ensuring that all that can be done to safeguard our interests is being done is a good thing.

As for lending rules, I recall years ago, while working on a project in Ireland, my client sponsor explained that their banks limited the amount an individual could borrow to a multiple of three-times their annual salary. I believe that's since changed, but that logic always appealed to my better judgment. When I bought a house in 2002, I was stunned to learn I could've borrowed more than four times my salary. How did that ever make any sense?

Much like the people at the conference earlier this week, nodding their heads in agreement, I'm unusually open to the idea of new regulations. I'm not sure what the regulators are going to come up with, but I have a high degree of confidence that it will help ensure we avoid making these same mistakes again.

About the Author

David Schneier

David Schneier

Director of Professional Services

David Schneier is Director of Professional Services for Icons Inc., an information security consultancy focused on helping financial institutions meet regulatory compliance with respect to GLBA 501(b) and NCUA Part 748 A and B. He has over 20 years' experience in Information Technology, including application development, infrastructure management, software quality assurance and IT audit and compliance.

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