Time for Your Credit Union’s Legal Spring Cleaning

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By Samantha J. Forsyth

3 minutes

Here are six key areas to review.

Sponsored by Kaufman & Canoles

The vernal equinox has occurred, and it is the perfect time for credit union executives to take a fresh and somewhat detailed look at their operations and procedures. As you all know, in legal matters, an ounce of prevention can potentially save tens of thousands of dollars (and a lot of stress)! Here are some key areas for your credit union to review:

1. Policies

The National Credit Union Association has specific policies that each credit union is required to have in place (e.g., investment, records preservation program and record retention, and information security). However, there also are policies which, although not mandatory, are very much best practice in most cases (e.g., foreclosure and repossession, conflict of interest, and disaster recovery and business resumption contingency). Our firm routinely assists our clients with a comprehensive list of these policies and guidelines for when they should be reviewed and updated in accordance with NCUA standards and expectations.

2. Latest Developments in Regulations

While some regulations seem eternal, every credit union must stay ahead of the curve when it comes to regulatory compliance. In addition to new initiatives on a regular basis from the Consumer Financial Protection Bureau, we are seeing the need for compliance reviews of transition plans related to the discontinuance of the London Inter-Bank Offered Rate. Full compliance with applicable sanctions against Russia in the wake of Russia’s invasion of Ukraine is another area that seems to change daily. From cannabis rules to forming partnerships with cryptocurrency providers, keep aware of “the next new thing.”

3. Employment Matters

A lot has changed in the employment world over the last two years. The pandemic has affected your credit union’s workplace culture and employment needs. Be open to listening for and implementing changes that allow your credit union to be a place people enjoy working—while remaining one that effectively trains its employees to best serve its members. Consider whether there is room for incorporating new technologies, or even a hybrid work model, to enhance employee performance and satisfaction.

4. Vendor Contracts

It is important to take the time to reevaluate both existing and potential relationships with third-party vendors. Whether it is to renegotiate existing terms or open a line of discussion with a new provider, it is paramount that your credit union ensures that it is being served well—and in accordance with your existing contractual agreements! Do not be afraid to ask questions or discuss more favorable terms for the credit union’s benefit or to walk away from vendors that do not adequately meet your credit union’s needs. And over the years we have seen a number of problems from the automatic non-cancellation/renewal of agreements that may not be serving the credit union’s best interests.

5. Member Agreement

While this document is not something that many credit unions reflect upon often, it is a crucial piece of your credit union’s operation—the very foundation of its relationship with its members. Be sure to review and revise it to reflect any new policies, regulations or procedures. Do you have an arbitration requirement? Do you want one? Are you compliant with all disclosure requirements? And a perfect agreement is not enough: Your staff and internal processes must know and operate in accordance with its terms.

6. Insurance

Insurance is always an unwelcome expense—until you need it. Sit down with your insurance advisors (and your lawyers) to make sure your coverage is adequate in amount and sufficiently broad in scope. Policies that exclude “alleged violations of law” from coverage are of little use in defending a lawsuit! And given the particular tensions of the moment, cybersecurity coverage, including recovery costs and breach notification coverage, should be at least adequate.

Samantha J. Forsyth is an associate in the Richmond office of Kaufman & Canoles, where her practice focuses on providing guidance on regulatory compliance and contract reviews with vendors for state and federal credit unions. She also assists local businesses with transactional matters and commercial and residential real estate transactions. Samantha’s private client services practice includes drafting estate planning documents and estate administration.

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