The NAFCU Journal July - August 2017 - 52

COMPLIANCE CENTRAL

Examination Updates
to the CCRS
By Stephanie Lyon

T

he Consumer Compliance Rating
System (CCRS) is a supervisory
framework that has been around
since 1980. Recently, and for the
first time since it was established, the
Federal Financial Institutions Examination Council (FFIEC) updated its CCRS
guidance to reflect regulatory, examination, supervisory, technological and
market changes. The changes reflect the
continuing shift from transaction-focused
examination to a risk-focused, principals-based examination. Credit unions
supervised and examined by either the
Consumer Financial Protection Bureau
(CFPB) or the National Credit Union
Administration (NCUA) may want to
ensure that compliance and audit teams
are made aware of the changes to the
CCRS so affected internal processes can
be modified, proper attention is given to
a credit union's compliance management
system and the credit union can be prepared for upcoming examinations.
The CCRS was established by the FFIEC
on behalf of its members, which include
the CFPB and NCUA. The purpose of
the CCRS is to ensure consistency in
how financial institutions are examined
for compliance with the ultimate goal
of avoiding consumer harm. Previously, the CCRS framework focused
on transaction testing for regulatory
compliance, but it has now moved to be
better aligned with the current riskbased, tailored examination processes of
FFIEC members. The four core principles of the CCRS framework are that it
is risk-based, transparent and actionable, and incents compliance. Below is a
description of each core principle:
52

1. Risk-based. The CCRS is risk-based,
meaning it recognizes an institution's
size, complexity and risk profile when
evaluating its performance.
2. Transparent. The CCRS is transparent and provides clear distinctions
between rating categories to support
consistent application by regulators
across supervised financial institutions.
The rating should reflect the scope of
the review that formed the basis of the
overall rating.
3. Actionable. The CCRS identifies areas
of strength and directs appropriate
attention to specific areas of weakness,
reflecting the revisions made to the
CCRS based on a risk-based examination model. It conveys the examiner's
assessment of the effectiveness of
a credit union's CMS, including its
ability to prevent consumer harm and
ensure compliance with consumer
protection laws and regulations.
4. Incent Compliance. The framework
is meant to incentivize compliance
through the implementation of an
effective consumer compliance system.
Credit unions are expected to identify
deficiencies and promptly self-correct
any compliance weaknesses.

The CCRS and BureauExamined Credit Unions

Credit unions with an asset size of $10 billion or more are examined by the CFPB
and are also supervised by the NCUA's
Office of National Examinations and
Supervision. The bureau incorporates the
CCRS and uses it to assign a consumer

compliance rating to credit unions. The
rating is based on a numerical scale of 1
through 5 in increasing order of supervisory concern. Ratings of 1 or 2 represent
satisfactory or better performance, and
they are generally given to credit unions
that maintain a strong and satisfactory
compliance management system and take
prompt action to prevent or substantially
limit violations of law and consumer
harm. Ratings of 3, 4 or 5 indicate
performance that is less than satisfactory
and indicate a significantly or critically
deficient compliance management system.
Credit unions examined by the CFPB
may want to review the bureau's updated
examination guidance, which incorporates changes to the CCRS framework.

The CCRS and NCUA-Examined
Credit Unions
Credit unions with less than $10 billion
in assets are supervised and examined
by the NCUA. While the CFPB treats
the CCRS as freestanding, the NCUA
incorporates the CCRS outcome into
the management (M) section of a credit
union's CAMEL rating. The NCUA has
explained in the past that CAMEL components are interrelated and can affect
the evaluation of the other factors. It's
important that NCUA-examined credit
unions use the updated CCRS to inform
compliance audits and ensure readiness
for examinations under the new framework, as the updated M section can
impact an overall CAMEL rating.

In 2002, the NCUA issued supervisory
guidance pertaining to the CCRS factors
and their interplay with a risk-focused
examination. The guidance essentially
THE NAFCU JOURNAL  JULY-AUGUST 2017



Table of Contents for the Digital Edition of The NAFCU Journal July - August 2017

Our First 50 Years
Events Calendar
From the Chair
Inside NAFCU
The Digital Download
How Secure Is Your Credit Union?
The Bank Secrecy Act
2017 Annual NAFCU Award Winners
2016 NAFCU Annual Report
Getting to Know …
Management Insight
Compliance Central
Inside NAFCU Services
From the President’s Desk
The NAFCU Journal July - August 2017 - Cover1
The NAFCU Journal July - August 2017 - Cover2
The NAFCU Journal July - August 2017 - 1
The NAFCU Journal July - August 2017 - Our First 50 Years
The NAFCU Journal July - August 2017 - Events Calendar
The NAFCU Journal July - August 2017 - From the Chair
The NAFCU Journal July - August 2017 - 5
The NAFCU Journal July - August 2017 - Inside NAFCU
The NAFCU Journal July - August 2017 - 7
The NAFCU Journal July - August 2017 - 8
The NAFCU Journal July - August 2017 - 9
The NAFCU Journal July - August 2017 - 10
The NAFCU Journal July - August 2017 - 11
The NAFCU Journal July - August 2017 - 12
The NAFCU Journal July - August 2017 - 13
The NAFCU Journal July - August 2017 - The Digital Download
The NAFCU Journal July - August 2017 - 15
The NAFCU Journal July - August 2017 - How Secure Is Your Credit Union?
The NAFCU Journal July - August 2017 - 17
The NAFCU Journal July - August 2017 - 18
The NAFCU Journal July - August 2017 - 19
The NAFCU Journal July - August 2017 - 20
The NAFCU Journal July - August 2017 - 21
The NAFCU Journal July - August 2017 - The Bank Secrecy Act
The NAFCU Journal July - August 2017 - 23
The NAFCU Journal July - August 2017 - 24
The NAFCU Journal July - August 2017 - 25
The NAFCU Journal July - August 2017 - 26
The NAFCU Journal July - August 2017 - 27
The NAFCU Journal July - August 2017 - 28
The NAFCU Journal July - August 2017 - 29
The NAFCU Journal July - August 2017 - 2017 Annual NAFCU Award Winners
The NAFCU Journal July - August 2017 - 31
The NAFCU Journal July - August 2017 - 32
The NAFCU Journal July - August 2017 - 33
The NAFCU Journal July - August 2017 - 34
The NAFCU Journal July - August 2017 - 35
The NAFCU Journal July - August 2017 - 36
The NAFCU Journal July - August 2017 - 2016 NAFCU Annual Report
The NAFCU Journal July - August 2017 - 38
The NAFCU Journal July - August 2017 - 39
The NAFCU Journal July - August 2017 - 40
The NAFCU Journal July - August 2017 - 41
The NAFCU Journal July - August 2017 - 42
The NAFCU Journal July - August 2017 - 43
The NAFCU Journal July - August 2017 - 44
The NAFCU Journal July - August 2017 - 45
The NAFCU Journal July - August 2017 - 46
The NAFCU Journal July - August 2017 - 47
The NAFCU Journal July - August 2017 - Getting to Know …
The NAFCU Journal July - August 2017 - 49
The NAFCU Journal July - August 2017 - Management Insight
The NAFCU Journal July - August 2017 - 51
The NAFCU Journal July - August 2017 - Compliance Central
The NAFCU Journal July - August 2017 - 53
The NAFCU Journal July - August 2017 - Inside NAFCU Services
The NAFCU Journal July - August 2017 - 55
The NAFCU Journal July - August 2017 - From the President’s Desk
The NAFCU Journal July - August 2017 - Cover3
The NAFCU Journal July - August 2017 - Cover4
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