Getting to Know Your Regulator

Michael A. Richardson Sr, Mid-Atlantic Federal Credit Union
January 16, 2007

Over my past 29 years of working at Mid-Atlantic Federal Credit Union (MAFCU), I’ve found it much easier to work with my examiner, rather than working as adversaries.

I’m not sure how it is in other regions of the country, but in Region II, where we are located, I’ve entertained a host of examiners who seem to rotate in and out of their positions every two or three years. One of the best pieces of advice I can give is to become as familiar with the regulations as possible. For me, that path was becoming a NAFCU-certified compliance officer about nine years ago. It was one of the most difficult tasks I have experienced, but also one of the most rewarding. When you know what the regulations say about certain areas of your operation, you immediately make the necessary changes to meet the requirements.

Something that has worked for me is letting the regulator ask the questions first. You, as the responsible person of the lending area, already know what you and your organization are doing to meet the requirements of the law. The examiner is in a fact-finding mode to determine if you are on top of things. How you respond determines how picky the examiner will be with his or her findings. Your responses should always address the answer to the question. Nothing more, nothing less! It always helps if you can go into detail about the procedure or process that you have initiated (or already have in place), and speak to it as if the regulators are already familiar with what you are doing. Talk to them as if they are old friends. Make them feel comfortable and provide the information requested as quickly as possible. If you can show them examples that support your procedures and processes, it’s a sure way to meet their inquiry and they will then move on to the next subject.

When they include in their findings suggestions you don’t agree with, it’s usually followed by the phrase that it is recommended “for the safety and soundness of the organization” Responding effectively to such recommendations is where your knowledge about the regulations will pay off. Usually you can easily produce examples (for example, low delinquency or charge-offs) that show the integrity of the operation in question is intact and that it’s not necessary to implement their recommendation and you will continue to monitor that area.

I also highly recommend establishing a relationship with an attorney who is very familiar with credit union regulations, and if possible, have that person on retainer. You will then have the opportunity to pick up the phone and have the attorney confirm or deny what is required, if there is ever any doubt about what the examiner is telling you to do. If that attorney is truly an expert, he or she will always be able to provide you, chapter and verse, where it’s stated in the regulations that you must be doing something. And, if the examiner is telling you to do something that is not in the regulations, you can then respond by asking the examiner to show you where it is written. Ten times out of ten you’ll get the response, “Well, it is recommended for the safety and soundness of the organization.”

Michael A. Richardson Sr. is vice president/chief lending officer for Mid-Atlantic Federal Credit Union in Maryland. He has 32 years of credit-union experience. Contact him at MichaelR@mafcu.org.