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5 Major Trends Reshaping Today's Lending Compliance Landscape

author Ncontracts
2 min read
Jul 24, 2020

Today's lending landscape is changing rapidly, dramatically and irreversibly. Financial institutions may struggle to evolve and keep pace with those changes. This blog illustrates 5 major trends that are reshaping today's lending compliance landscape!

The New Compliance Landscape

Trend Report: Key Stats on Today's Regulatory Environment

The regulatory environment is changing, and new pressures impact financial institutions nationwide. Let's dive into some key statistics that illustrate some of the biggest trends shaping today's compliance landscape.

1. Redlining Rises to the Top

Redlining is one of the hottest topics for the regulators. In fact, the CFPB listed it as a top priority in their annual Fair Lending report. Redlining settlements have also grabbed headlines this year, and we're expecting more to come.

Redlining is unique in that negative findings can spawn CRA or Fair Lending issues, and vice versa. If you're not yet analyzing your data for Redlining risk, there's no time to waste.

[Free Download: 3 Ways to Mitigate Redlining Risk]

2. Regulatory Scrutiny

The level of regulatory scrutiny has increased dramatically since the financial crisis. For example, the DOJ has received 119 Fair Lending referrals since 2010. To compare, they only received 30 referrals from 2001 to 2008.

In addition, 73 percent of compliance professionals globally believe that the regulatory focus on managing risk will increase over the next 12 months.

The bottom line: You can't afford to let your compliance risk go unchecked.

3. The Cost of Compliance

  • The 6 largest banks collectively spent $70.2B on compliance in 2013, versus $34.7B in 2007.
  • 54% of compliance pros globally expect the total compliance budget to increase over the next 12 months.
  • More than half of financial institutions expect to spend more on senior compliance staff next year.
  • 32% of community bankers list regulatory pressure as the top barrier to growth.
  • In the past 5 years, only 10 new banks have opened, versus 1200 new banks in the 7 years before the crisis.
  • Compliance costs represent 22% of the net income of community banks, or $4.5B.

4. Regulatory Burden

Every year seems to bring new regulations, new focal points, and new pressures. Almost 70 percent of compliance officers globally expect regulators to push more information over the next 12 months.

Last year, the new TRID/RESPA rules shook up the mortgage industry, and the introduction of HMDA Plus data is a major upcoming adjustment. Some financial institutions may struggle with the pace of change.

5. Consumer Behavior 

  • More than 62% of Americans say digital is their primary method of banking.
  • 54% of consumers, and 75% of millennials, report using a mobile banking app.
  • 41% of consumers say constant access to their finances via an app reduces their stress.
  • Consumers that use both digital and physical channels tend to be more loyal.
  • 81% of consumers would not switch banks if their local branch closed.
  • 41% of consumers still purchase more complex products, like mortgages and personal loans, in the branch.

The combination of increasing regulatory scrutiny and changing consumer behaviors create unique challenges - and opportunities.

The best financial institutions are crafting multi-year branch network planning and growth strategies that consider both compliance requirements and consumer behavior.

Ncontracts Viewpoint

The financial landscape is evolving dramatically, pushed by regulatory pressures and changing consumer behavior. In order to stay competitive, financial institutions need to proactively manage their risk, stay on top of compliance updates, and map their growth strategy to the needs of today's consumer.

At Ncontracts, we help more than 500 of the nation's best financial institutions to reduce risk, increase efficiency and increase profitability. We'd love to help you do the same. Learn more today!

Related: How to Build a Strong Fair Lending & Redlining Compliance Management System

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