June 25, 2025 • 20 mins
As the regulatory environment continues to shift and technology reshapes the compliance landscape, today’s lending leaders are under increasing pressure to stay agile and forward-thinking.
In this episode, recorded live at CBA Live 2025 in Orlando, host Lynn Sautter Beal sits down with Aaron Rykowski, Chief Compliance Officer at WesBanco, and Mikey Reynolds, Director of Compliance at Zions Bank Corporation. Both serve on the CBA’s CFPB Committee and share how their institutions are responding to growing uncertainty—from changes in CFPB leadership and examiner shortages to the fast-moving rise of AI in compliance.
Join us as we discuss:
In this episode, recorded live at CBA Live 2025 in Orlando, host Lynn Sautter Beal sits down with Aaron Rykowski, Chief Compliance Officer at WesBanco, and Mikey Reynolds, Director of Compliance at Zions Bank Corporation. Both serve on the CBA’s CFPB Committee and share how their institutions are responding to growing uncertainty—from changes in CFPB leadership and examiner shortages to the fast-moving rise of AI in compliance.
Join us as we discuss:
- How shifts at the CFPB are shaping compliance strategies
- The challenges of operating with fewer examiners and less regulatory clarity
Where AI and emerging tech fit into modern compliance programs - What lenders need to know about the final 1071 and 1033 rules
- Why collaboration and proactive engagement are essential in today’s environment
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Hi, Welcome to Leaders and Lending. This is Lynd Souderbil.
We're joining you today from CBA live in Orlando, and
I have Aaron Rakowski and Mike Reynolds here joining us
on the panel. So Aaron, Mike, would you take a
minute to introduce yourselves and tell our listeners what you do?
Speaker 4 (00:22):
Sure?
Speaker 2 (00:23):
Hi, I'm Eron Kkowsky. I'm the Chief Compliance Officer for
West Banco, headquart in Wheeling, West Virginia. We're about a
twenty eight billion asset bank at the current time, with
offices in nine different states, and I'm responsible for all
of our regulatory compliance programs.
Speaker 3 (00:39):
You, Mike you Reynolds, I'm Director of Compliance for Science
Bank Corporation. We're based in Salt Lake City, Utah, and
we're almost about one hundred billion in assets.
Speaker 4 (00:47):
And Aaron and I realized leading up to this that
we live probably a couple hours apart in Ohio and
have met each other for the first time in Orlando, Florida,
which is always fine. And both of you are on
this CFPB committee for Sumer Bankers Association.
Speaker 1 (01:02):
So can you kind provide our listeners with kind.
Speaker 4 (01:05):
Of an overview and of how CBA and then its
members engaged with the CFPV.
Speaker 2 (01:09):
Well, this was a lot clearer answer a couple of
months ago. Right now the jury's out. We really don't
know how we're engaging with the CFPV at present, you know,
given some of the some of the goings on in Washington.
But you know, ways that we have in the past
is by having dialogue between the membership of CBA and
the CFPB, you know, interacting with that agency. And it's
(01:32):
really unique that we have a committee that is dedicated
to relationships between the banking industry and a particular regulator.
And I think that's what makes this committee unique. You
know this, the regulator has direct supervision authority over banks
with ten billion assets and larger and has it's a
unique structure. So having a committee that is able to
(01:53):
take the concerns of the association's memberships and have that
dialogue at times directly with the agency, see to provide thoughts, feedbacks, concerns,
you know, where we think that you know, some of
their their rulemaking or some of their their activities can
help benefit consumers and benefit our customers, and you know,
the membership and communities at largely, I think that that's
(02:14):
one of the ways we really try to engage, and
you know, we'd also get feedback from our membership to
provide input to the Consumer Bankers Association that they use
when they draft comment letters or when they have discussions
directly with the regulators as well. So in normal circumstances,
that's really how we have historically engaged. Right now, Jerry's.
Speaker 3 (02:37):
Out, I would say for us, I mean there's still
that ongoing or up until maybe two months ago, you know,
the touch points that we would have with the CPP.
I'm kind of focusing on what Aaron said to coming
together in our committee to then you know, discuss kind
of current trends, things that are going on with exams,
you know, or hotspots up until about two months ago.
But still you know, trying to abide by the law
for what it is right now.
Speaker 4 (02:58):
Sure, and I think you know, we a lot of
us have talked about that recently, just the uncertainty and
it's much more straightforward and easy to build a compliance
organization and a period of clear roles and clear oversight.
But you know, given the changes in the administration, uh,
this is probably it's a hard one to forecast. But
(03:19):
you know, if you had to say what you know,
what do you think is going to happen, And with
CFPB regulations in the year ahead, how do you think
that those may change and ways that impact the CBA members.
Speaker 2 (03:32):
I think a lot of that depends on the time
frame and confirmation of a new director. So you know,
obviously there's an arum director and now there's been a
couple of them since the new administration has taken office.
But you're really understanding the thought process and priorities of
the administration and the new director and what that's going
(03:54):
to look like. So right now it's hard to forecast.
I know the current nominee for the director has experience
on the FDIC board, so he knows what it's like
to be a bank regulator, to be part of an agency,
to lead an agency, to manage through that. So what
(04:15):
we're hoping for as members is we kind of get
back into common sense regulation. You know, enforcement. I believe
in enforcement, I believe in supervision. But enforce the regulations
as they are as they're written, examine based on the
exam manuals as they are and as they're written, and
have that transparent dialogue with your banks when you're in there.
You know, part of my background, I'm an next examiner.
(04:36):
I was an FDIC examiner years ago, and that was
always the mentality that I took. You know, here's the
exam manual, here's the rule. How are you complying with this?
So when we're talking about supervision regulation, you know, I
would look for and expect the agency to adhere to
the rules as they're written and follow their exam manuels.
(04:57):
At least that would be the whole Yeah.
Speaker 3 (04:58):
That's squat point. I mean, we still have to apply
with rules that are codified you know currently, and all
of these pending rules that are still under the Congressional
Review Act, you know, and we have some time still
to go for some of those. I mean, it's still
status quo for us. It's nothing normal. And I would
say even since twenty twenty when COVID hit and we
had a bunch of regulatory reform because of consumer harm
and whatnot, you know, I mean, it's just, you know,
(05:20):
business is usual for us right now.
Speaker 4 (05:21):
So sure, sure, yeah, And we you know, we work
within a number of banks and credit unions on our platform,
some banking as a service providers, some traditional banks that
originate and retain as well as credit unions. And so
while we're not directly regulated by the prudential regulators, you know,
we do get state examines examinations, and we support a
(05:42):
variety of examinations, and we you know, had a partnership
with the CFPP for a period of time. And I
think that's the one thing I was talking to some
other folks earlier, that the banks don't want to do
consumer harm, right, like you can't harm your customer, you
still need will do those things even in the absence
of CFPV may be coming in. So, you know, if
(06:03):
the CFPP, if some of the trends towards defunding and
decreasing the size of the CFPB and even some of
the other regulatory agencies continue or accelerate, even anything that
you can see on like broader implications for what that
means for the banking industry as a whole.
Speaker 2 (06:19):
Well, if they see kind of a shrinking of the
exam workforce, I think that that'll depending on how they
go about that. I think you could see a lot
of broad implications. They're both for consumers and consumer protection regulation,
but also safety and soundness of risk management examinations. You know,
the way Typically these things happen is they look at
seasoned examiners at the top of the pay scale and
(06:41):
offer them, you know, early retirement options, or you look
at people that are coming up through the ranks and
maybe going through various schools and training and onboarding that
have not earned their commission yet to write exams, and
they maybe let go. They may be probationary employees or
ones that have not fully gone through the education and
onboarding process, so the exams have to happen, right, you know.
(07:02):
From the credential regulatory side, you know there's rules that
you have to come in every so often to look
at consumer compliance, to look at community reinvestment, to look
at fair lended compunts with fair lending laws. And you know,
a reduced examination workforce is going to leave less resources
to examine banks, but you also lose that relationship that
(07:24):
you've built with your regulators. You know, the end goal
is a safe and sound banking system, a safe and
sound bank, and nobody wants to do harmon consumers. You
have been in banking over twenty years and never once
have I been in a room where somebody said, well,
let's how much in fees can we get on this
or how can we really you know, do something other
than what's in the best interest of our customers. But
(07:47):
you know, you still have you know, the regulatory side,
and people need to come in, and a lack of
experienced examiners that don't have the institutional knowledge, that don't
have that relationship with management, can't have those sometimes hard
conversations how did you think this through? Why are you
doing this this way? It could lead to things that
(08:09):
don't get caught, or it could lead to questions that
don't get asked or issues that don't get resolved. So
you know, when I would look at this, like you know,
anybody would listen to me anyway, But I would say,
you know, just kind of proceed with caution when you
look at right sizing, if that's the right term, an
examination workforce, to make sure you still have the right
people looking at the right things on the right frequency.
Speaker 3 (08:30):
And I would say that even though there's a roll
right now, you know, from that perspective, I mean, we're
still gearing up for potential state regulation then to kind
of come in and swing. We've got you know, the
midterms coming up. I would say in about a year
and a half and so that may be another pendulum
swing that we have to then prepare for, or a
moot house where you know, there's a lot to be
unexpected I think right now.
Speaker 4 (08:51):
So yeah, and I think that the impact of a
patchwork of state regulations that may be very strong would
be very difficult to deal with. You know, even for
a fintech like ours that lends nationally or works with
banks to lend nationally, those state regulations can be very
difficult for us to manage our business and understand volume
and and ensure that we're we're applying them, like the
(09:12):
Colorado UH law, if we had to put that into effects,
you know, and spending time and money and and certainly
a time and money expends on banks for for especially
with uncertainty and less clear I really liked it you said, though, Aaron,
about less experienced examiners and kind of the team where
you know, they really maybe knew the bank partnership and
(09:33):
and had insight there, particularly as it relates to say,
you know, use of AI partnerships with FinTechs UH or
or new technologies.
Speaker 1 (09:43):
You know, what would.
Speaker 4 (09:44):
You you know, one with some of the changes in
the regulatory bodies right now, like what do you think
the risks are there in their ability to oversee those?
And I guess I would say too, like, you know,
how how can the cb I members think about working
with them to maybe help educate them on the new
(10:05):
technologies or partnerships that they have.
Speaker 2 (10:07):
It's a very broad question. So I think here AI
is becoming more prevalent. General of AI is becoming more prevalent,
and I think that banks and through that through just
using it directly, developing it directly, or partnering with FinTechs
offering it directly. You know, they're looking to find ways
to go to market and work with their customers in
(10:28):
the most efficient way possible, and this is kind of
a way to do that. Really, looking at the risks
of AI, it's to me, you know, starting with your
third party management or risk management program and being sure
you understand what the what the service is, what the
AI can do, what the variables are, because again, the
(10:48):
the compliance risk is always there and it's still there,
ends Mikey mentioned earlier, the codified rules and regulations are
still there. We still have an you know, upstarting the
lending space and looking at AI and Algareth algorithms used
in lending for automated decision and approval. You still have
to ensure that those models that you're using, the AI
(11:08):
you're using is operating fairly. You know those rules and
those laws. Equal credit opportunity does not go away. You
know you're still going to be examined for it. You
still have your prudential regulators that can look at fair
housing if you're in the mortgage space and using some
AI to help with your decision making. So you know,
the basic blocking and tackling of your compliance program does
(11:29):
not change regardless of you know, the political environment or
the regulatory environment. And just be honest, because things ebb
and flow. You know, we've seen a lot of ebb
and flow over the last ten years as far as
which administration is currently sitting in the White House or
which administration or which party is currently controlling Congress. You
(11:49):
see swings back and forth. So the rules are still
the same. And making sure that you're doing your own
due diligence and understanding how these things are working. It's
central to what we're trying to do from a compliance
perspective in how we govern the use of AI in
our banks and in our shops.
Speaker 3 (12:07):
That's a great point. I mean it's specifically talking about
AI and you know, focusing on operational effectiveness kind of
in this lull from a regulatory perspective that we're in.
I mean, you still think that, you know, these fraudsters
out there are using fourth generation bots as we move
into fifth generation technology and things like that where they're
starting to dart smell or outsmart the banks. As Aaron mentioned,
you know, we have to be very up on these
(12:28):
different models or things that you know, then AI is
coming out with and then being able to kind of
defraud the fraudsters. So also focusing on you know that
operational effectiveness and reducing operational or you know, losses.
Speaker 4 (12:41):
And I certainly think with the technology, you know, becoming
more sophisticated in the growth of and use of AI
in various forms, whether it's the way that we use
it or generative AI. Getting field examiners up to speed
and trained, or people at the regulatory bodies, especially if
they're they're shrinking and and and more experienced examinators are
(13:03):
rolling off IS is only going to be more of
a challenge.
Speaker 2 (13:07):
Absolutely, you know, when we're having these discussions and what
we've been having for the last several years with our regulators.
Is our use of AI and is how our governance
processes work? And what does our oversight look like? And
how does that integrate? You know, like Mike you mentioned
you have to outfraud the fraudsters. You know, the fraudsters
are out there, they're using AI to counter our AI.
So how do those interplay? And you know, our examiners
(13:28):
have been with us as we've gone down this journey
understanding how we're making these decisions. We're making the due diligence,
we're doing the testing, we're doing the evaluation of the results,
and you know, the loss of that experience and the
loss of the folks that have gone on that journey
with us, I think that would be a blow for
us and how we serve our customers and how we
(13:52):
protect our customers because you know a lot of AI too.
It's not just granting loans and giving credit. We use
a lot of AI on the back end to monitor
for fraud and different different things there. So you know,
the examiners that have kind of grown up with us
in this space, them not being there could really be
detrimental with some of our efforts and having to bring
newer ones up to speed on what we're doing. It
(14:15):
could be time consuming and really put a damp on
some of our efforts.
Speaker 4 (14:20):
Yeah, you know, we've certainly spent you know, despite not
being a bank or having a bank as part of
our organization, We've spent a lot of time with the
regulators over the years, and I've met with the FDAC,
along with our head of government Affairs and our chief
risk officer and the OCC and so we've taken the
stands as a fintech to be very proactive in our
regulatory outreach and to kind of open our doors and
(14:43):
try to help drive that education forward. And knowing that
then we're working with all of our bank and credit
union partners to support their exams. And it is a
it is a constant. There's the I think volume and
velocity of information right now and changes is very high
compared to, uh, you know where it may have been
several years ago. How do you think about on your
(15:08):
committee through the CBA, staying up to speed with what's
happening with the CFPB and then using that to help
put of educate your members or drive your agendas internally.
Speaker 3 (15:20):
Yeah, I can go for it. First, I would say specifically.
I mean as we even share these secrets, you know,
across the committee members and whatnot, we try to focus
more on sharing what I think are best practices and
still building up maybe are our CSA you know, cosa
framework CMS, you know, frameworks and things like that. To
then better be able to attack these types of things.
You know, you have to have a skilled staff. And
(15:41):
as we talk about, you know, potentially you know, lead
examiners that have many years of service and many years
of experience kind of going off. I mean, we have
a new generation I think that will eventually come in
where they have a little bit more of these heightened
skill sets too.
Speaker 2 (15:54):
So yeah, and I think you're engaging with through our committee.
You know, obviously there's some things we can talk about,
there's some things we can can't talk about. But what
I think is unique about the compliance and risk community
is there's no competition in compliance, right. You know, everybody
has to comply with the rules they apply across the
board to all of us. And you know, when you
look at the discussions we have, what is working, what
(16:16):
is not working? How do we risk assess certain practices?
What are the things you consider in your risk assessment?
That I might not consider in mind and vice versa.
So you know, these are things where we're talking about
the framework of our compliance management programs and getting best
practices from each other and how we navigate through you know,
(16:37):
anytime really, but really through uncertain times like this. What
this is the time you might use term law. I
think it's that you know, right now, we're not hearing
as much from our regulators, so it's a time to pause,
breathe after what we've seen the past several years with
the volume and pace of change, and shore up our
(16:58):
compliance programs, not that they were you know, substantids to
start with, but take the take the time to you
kind of go through and you know, button up things
that you know may not have gotten as much attention
because we're focusing on other issues, or better document some
of our processes and some of our methodologies and different things.
(17:19):
So this is a good time for us to collaborate
and kind of talk through what we're what we're seeing,
and where we want to go from here.
Speaker 3 (17:26):
I would even say that it's still you know, an
emphasis for us to focus on our other regulatory bodies
that really aren't having a lot of fluctuation right now
many of us are larger institutions that are regulated by
the OCC the FDIC, so there's still that oversight lunction there.
Speaker 4 (17:39):
True. True, it's we're kind of focused on the c
FPB in this conversation that there's certainly the rest and
then all the states as well. I really like that
that idea of like that's you know, if you if
you are having a little bit of a lull or
a little bit of quietness, like taking the time to
you know, kind of revisit your you know, make sure
your house is in order to make sure you're doing
(18:00):
anything else. I guess any maybe kind of bold predictions
for you know, what you expect to see from the
CFPB over the next I'll just say a few months
or even quarter. We'll make it short, because I think
even trying to do a year is probably unreasonable at
this point.
Speaker 2 (18:17):
I think it's really hard to tell. I mean, I
think that we're my personal prediction. I think, you know,
there's the rules that they've put out. You know, some
of the final rules they're subjects of congressional review, but
some of them aren't right, So maybe we focus on
the known at this point. So I think the ten
seventy one small business rule that's out there. There's litigation
around that, but I think the CFPB has to finalize that.
(18:41):
You know, it's something that there is a consent order,
and I think a lot of people forget, well maybe
they can just go away. No they can't. I mean
court is forcing them. You have to do this. But
I think a prediction from me on that side might
be we see a new proposal that subsequently changes what
the requirement are going to be, because I think that's
(19:01):
been where the industry and the Bureau have but heads
a little bit. Is Dodd Frank says thou shalt collect
this cefpb's rules, So thou shalt collect this plus all
of these other things as well. So I think that
we may see a proposal that shifts more towards what's
in the Dodd Frank Act itself there, and I do
think we'll see continued movement on ten thirty three. You know,
(19:23):
the open banking rule. I don't think that's going to
go anywhere, because I think that that's something where it's
going to open up information flow between between banks, between
banks and FinTechs, between FinTechs and fintexts. And that aggregators
and different things. So that has the potential to really
change how we do business. And I think that that's
not something that this administration will likely touch. So I
(19:45):
think that that's going to be, you know, something that
is going to move on status quo. So I think
that's going to stay status quo. But I think we'll
see a new proposal. In ten seventy one.
Speaker 3 (19:54):
Aaron hilarious or hilariously pulled out a magic eight ball
in one of the sessions that he moderated earlier in them,
and I would say that that's exactly.
Speaker 1 (20:00):
An actual magic eb all.
Speaker 2 (20:01):
Again in liter I brought a literal magic that's great.
Speaker 3 (20:04):
Yeah, And I mean that really is kind of the
environment that we're in. And I'll just emphasize maybe on
what Aaron said is that, you know, ten thirty three,
I think that's one of the bigger ones that we're
still going to see an emphasis and focus on. And
it's more about the potential for future acquisitions of customers.
You know, it's not just about you know, creating less
barriers for customers to be able to then see their
data across multiple institutions. It's also to then be able
(20:26):
to create, you know, some competition within the market and
then kind of start to you know, really pull into
folks the fact that you want to increase your volumes
for both deposits, loans, et cetera, you know, within your institution.
Speaker 4 (20:37):
So well, thank you, Aaron, Mike. Appreciate you joining us
today and taking the time out of your schedules to
chat with this a leader's blending.
Speaker 2 (20:44):
It's been a pleasure.
Speaker 3 (20:45):
Thank you.
Hi, Welcome to Leaders and Lending. This is Lynd Souderbil.
We're joining you today from CBA live in Orlando, and
I have Aaron Rakowski and Mike Reynolds here joining us
on the panel. So Aaron, Mike, would you take a
minute to introduce yourselves and tell our listeners what you do?
Speaker 4 (00:22):
Sure?
Speaker 2 (00:23):
Hi, I'm Eron Kkowsky. I'm the Chief Compliance Officer for
West Banco, headquart in Wheeling, West Virginia. We're about a
twenty eight billion asset bank at the current time, with
offices in nine different states, and I'm responsible for all
of our regulatory compliance programs.
Speaker 3 (00:39):
You, Mike you Reynolds, I'm Director of Compliance for Science
Bank Corporation. We're based in Salt Lake City, Utah, and
we're almost about one hundred billion in assets.
Speaker 4 (00:47):
And Aaron and I realized leading up to this that
we live probably a couple hours apart in Ohio and
have met each other for the first time in Orlando, Florida,
which is always fine. And both of you are on
this CFPB committee for Sumer Bankers Association.
Speaker 1 (01:02):
So can you kind provide our listeners with kind.
Speaker 4 (01:05):
Of an overview and of how CBA and then its
members engaged with the CFPV.
Speaker 2 (01:09):
Well, this was a lot clearer answer a couple of
months ago. Right now the jury's out. We really don't
know how we're engaging with the CFPV at present, you know,
given some of the some of the goings on in Washington.
But you know, ways that we have in the past
is by having dialogue between the membership of CBA and
the CFPB, you know, interacting with that agency. And it's
(01:32):
really unique that we have a committee that is dedicated
to relationships between the banking industry and a particular regulator.
And I think that's what makes this committee unique. You
know this, the regulator has direct supervision authority over banks
with ten billion assets and larger and has it's a
unique structure. So having a committee that is able to
(01:53):
take the concerns of the association's memberships and have that
dialogue at times directly with the agency, see to provide thoughts, feedbacks, concerns,
you know, where we think that you know, some of
their their rulemaking or some of their their activities can
help benefit consumers and benefit our customers, and you know,
the membership and communities at largely, I think that that's
(02:14):
one of the ways we really try to engage, and
you know, we'd also get feedback from our membership to
provide input to the Consumer Bankers Association that they use
when they draft comment letters or when they have discussions
directly with the regulators as well. So in normal circumstances,
that's really how we have historically engaged. Right now, Jerry's.
Speaker 3 (02:37):
Out, I would say for us, I mean there's still
that ongoing or up until maybe two months ago, you know,
the touch points that we would have with the CPP.
I'm kind of focusing on what Aaron said to coming
together in our committee to then you know, discuss kind
of current trends, things that are going on with exams,
you know, or hotspots up until about two months ago.
But still you know, trying to abide by the law
for what it is right now.
Speaker 4 (02:58):
Sure, and I think you know, we a lot of
us have talked about that recently, just the uncertainty and
it's much more straightforward and easy to build a compliance
organization and a period of clear roles and clear oversight.
But you know, given the changes in the administration, uh,
this is probably it's a hard one to forecast. But
(03:19):
you know, if you had to say what you know,
what do you think is going to happen, And with
CFPB regulations in the year ahead, how do you think
that those may change and ways that impact the CBA members.
Speaker 2 (03:32):
I think a lot of that depends on the time
frame and confirmation of a new director. So you know,
obviously there's an arum director and now there's been a
couple of them since the new administration has taken office.
But you're really understanding the thought process and priorities of
the administration and the new director and what that's going
(03:54):
to look like. So right now it's hard to forecast.
I know the current nominee for the director has experience
on the FDIC board, so he knows what it's like
to be a bank regulator, to be part of an agency,
to lead an agency, to manage through that. So what
(04:15):
we're hoping for as members is we kind of get
back into common sense regulation. You know, enforcement. I believe
in enforcement, I believe in supervision. But enforce the regulations
as they are as they're written, examine based on the
exam manuals as they are and as they're written, and
have that transparent dialogue with your banks when you're in there.
You know, part of my background, I'm an next examiner.
(04:36):
I was an FDIC examiner years ago, and that was
always the mentality that I took. You know, here's the
exam manual, here's the rule. How are you complying with this?
So when we're talking about supervision regulation, you know, I
would look for and expect the agency to adhere to
the rules as they're written and follow their exam manuels.
(04:57):
At least that would be the whole Yeah.
Speaker 3 (04:58):
That's squat point. I mean, we still have to apply
with rules that are codified you know currently, and all
of these pending rules that are still under the Congressional
Review Act, you know, and we have some time still
to go for some of those. I mean, it's still
status quo for us. It's nothing normal. And I would
say even since twenty twenty when COVID hit and we
had a bunch of regulatory reform because of consumer harm
and whatnot, you know, I mean, it's just, you know,
(05:20):
business is usual for us right now.
Speaker 4 (05:21):
So sure, sure, yeah, And we you know, we work
within a number of banks and credit unions on our platform,
some banking as a service providers, some traditional banks that
originate and retain as well as credit unions. And so
while we're not directly regulated by the prudential regulators, you know,
we do get state examines examinations, and we support a
(05:42):
variety of examinations, and we you know, had a partnership
with the CFPP for a period of time. And I
think that's the one thing I was talking to some
other folks earlier, that the banks don't want to do
consumer harm, right, like you can't harm your customer, you
still need will do those things even in the absence
of CFPV may be coming in. So, you know, if
(06:03):
the CFPP, if some of the trends towards defunding and
decreasing the size of the CFPB and even some of
the other regulatory agencies continue or accelerate, even anything that
you can see on like broader implications for what that
means for the banking industry as a whole.
Speaker 2 (06:19):
Well, if they see kind of a shrinking of the
exam workforce, I think that that'll depending on how they
go about that. I think you could see a lot
of broad implications. They're both for consumers and consumer protection regulation,
but also safety and soundness of risk management examinations. You know,
the way Typically these things happen is they look at
seasoned examiners at the top of the pay scale and
(06:41):
offer them, you know, early retirement options, or you look
at people that are coming up through the ranks and
maybe going through various schools and training and onboarding that
have not earned their commission yet to write exams, and
they maybe let go. They may be probationary employees or
ones that have not fully gone through the education and
onboarding process, so the exams have to happen, right, you know.
(07:02):
From the credential regulatory side, you know there's rules that
you have to come in every so often to look
at consumer compliance, to look at community reinvestment, to look
at fair lended compunts with fair lending laws. And you know,
a reduced examination workforce is going to leave less resources
to examine banks, but you also lose that relationship that
(07:24):
you've built with your regulators. You know, the end goal
is a safe and sound banking system, a safe and
sound bank, and nobody wants to do harmon consumers. You
have been in banking over twenty years and never once
have I been in a room where somebody said, well,
let's how much in fees can we get on this
or how can we really you know, do something other
than what's in the best interest of our customers. But
(07:47):
you know, you still have you know, the regulatory side,
and people need to come in, and a lack of
experienced examiners that don't have the institutional knowledge, that don't
have that relationship with management, can't have those sometimes hard
conversations how did you think this through? Why are you
doing this this way? It could lead to things that
(08:09):
don't get caught, or it could lead to questions that
don't get asked or issues that don't get resolved. So
you know, when I would look at this, like you know,
anybody would listen to me anyway, But I would say,
you know, just kind of proceed with caution when you
look at right sizing, if that's the right term, an
examination workforce, to make sure you still have the right
people looking at the right things on the right frequency.
Speaker 3 (08:30):
And I would say that even though there's a roll
right now, you know, from that perspective, I mean, we're
still gearing up for potential state regulation then to kind
of come in and swing. We've got you know, the
midterms coming up. I would say in about a year
and a half and so that may be another pendulum
swing that we have to then prepare for, or a
moot house where you know, there's a lot to be
unexpected I think right now.
Speaker 4 (08:51):
So yeah, and I think that the impact of a
patchwork of state regulations that may be very strong would
be very difficult to deal with. You know, even for
a fintech like ours that lends nationally or works with
banks to lend nationally, those state regulations can be very
difficult for us to manage our business and understand volume
and and ensure that we're we're applying them, like the
(09:12):
Colorado UH law, if we had to put that into effects,
you know, and spending time and money and and certainly
a time and money expends on banks for for especially
with uncertainty and less clear I really liked it you said, though, Aaron,
about less experienced examiners and kind of the team where
you know, they really maybe knew the bank partnership and
(09:33):
and had insight there, particularly as it relates to say,
you know, use of AI partnerships with FinTechs UH or
or new technologies.
Speaker 1 (09:43):
You know, what would.
Speaker 4 (09:44):
You you know, one with some of the changes in
the regulatory bodies right now, like what do you think
the risks are there in their ability to oversee those?
And I guess I would say too, like, you know,
how how can the cb I members think about working
with them to maybe help educate them on the new
(10:05):
technologies or partnerships that they have.
Speaker 2 (10:07):
It's a very broad question. So I think here AI
is becoming more prevalent. General of AI is becoming more prevalent,
and I think that banks and through that through just
using it directly, developing it directly, or partnering with FinTechs
offering it directly. You know, they're looking to find ways
to go to market and work with their customers in
(10:28):
the most efficient way possible, and this is kind of
a way to do that. Really, looking at the risks
of AI, it's to me, you know, starting with your
third party management or risk management program and being sure
you understand what the what the service is, what the
AI can do, what the variables are, because again, the
(10:48):
the compliance risk is always there and it's still there,
ends Mikey mentioned earlier, the codified rules and regulations are
still there. We still have an you know, upstarting the
lending space and looking at AI and Algareth algorithms used
in lending for automated decision and approval. You still have
to ensure that those models that you're using, the AI
(11:08):
you're using is operating fairly. You know those rules and
those laws. Equal credit opportunity does not go away. You
know you're still going to be examined for it. You
still have your prudential regulators that can look at fair
housing if you're in the mortgage space and using some
AI to help with your decision making. So you know,
the basic blocking and tackling of your compliance program does
(11:29):
not change regardless of you know, the political environment or
the regulatory environment. And just be honest, because things ebb
and flow. You know, we've seen a lot of ebb
and flow over the last ten years as far as
which administration is currently sitting in the White House or
which administration or which party is currently controlling Congress. You
(11:49):
see swings back and forth. So the rules are still
the same. And making sure that you're doing your own
due diligence and understanding how these things are working. It's
central to what we're trying to do from a compliance
perspective in how we govern the use of AI in
our banks and in our shops.
Speaker 3 (12:07):
That's a great point. I mean it's specifically talking about
AI and you know, focusing on operational effectiveness kind of
in this lull from a regulatory perspective that we're in.
I mean, you still think that, you know, these fraudsters
out there are using fourth generation bots as we move
into fifth generation technology and things like that where they're
starting to dart smell or outsmart the banks. As Aaron mentioned,
you know, we have to be very up on these
(12:28):
different models or things that you know, then AI is
coming out with and then being able to kind of
defraud the fraudsters. So also focusing on you know that
operational effectiveness and reducing operational or you know, losses.
Speaker 4 (12:41):
And I certainly think with the technology, you know, becoming
more sophisticated in the growth of and use of AI
in various forms, whether it's the way that we use
it or generative AI. Getting field examiners up to speed
and trained, or people at the regulatory bodies, especially if
they're they're shrinking and and and more experienced examinators are
(13:03):
rolling off IS is only going to be more of
a challenge.
Speaker 2 (13:07):
Absolutely, you know, when we're having these discussions and what
we've been having for the last several years with our regulators.
Is our use of AI and is how our governance
processes work? And what does our oversight look like? And
how does that integrate? You know, like Mike you mentioned
you have to outfraud the fraudsters. You know, the fraudsters
are out there, they're using AI to counter our AI.
So how do those interplay? And you know, our examiners
(13:28):
have been with us as we've gone down this journey
understanding how we're making these decisions. We're making the due diligence,
we're doing the testing, we're doing the evaluation of the results,
and you know, the loss of that experience and the
loss of the folks that have gone on that journey
with us, I think that would be a blow for
us and how we serve our customers and how we
(13:52):
protect our customers because you know a lot of AI too.
It's not just granting loans and giving credit. We use
a lot of AI on the back end to monitor
for fraud and different different things there. So you know,
the examiners that have kind of grown up with us
in this space, them not being there could really be
detrimental with some of our efforts and having to bring
newer ones up to speed on what we're doing. It
(14:15):
could be time consuming and really put a damp on
some of our efforts.
Speaker 4 (14:20):
Yeah, you know, we've certainly spent you know, despite not
being a bank or having a bank as part of
our organization, We've spent a lot of time with the
regulators over the years, and I've met with the FDAC,
along with our head of government Affairs and our chief
risk officer and the OCC and so we've taken the
stands as a fintech to be very proactive in our
regulatory outreach and to kind of open our doors and
(14:43):
try to help drive that education forward. And knowing that
then we're working with all of our bank and credit
union partners to support their exams. And it is a
it is a constant. There's the I think volume and
velocity of information right now and changes is very high
compared to, uh, you know where it may have been
several years ago. How do you think about on your
(15:08):
committee through the CBA, staying up to speed with what's
happening with the CFPB and then using that to help
put of educate your members or drive your agendas internally.
Speaker 3 (15:20):
Yeah, I can go for it. First, I would say specifically.
I mean as we even share these secrets, you know,
across the committee members and whatnot, we try to focus
more on sharing what I think are best practices and
still building up maybe are our CSA you know, cosa
framework CMS, you know, frameworks and things like that. To
then better be able to attack these types of things.
You know, you have to have a skilled staff. And
(15:41):
as we talk about, you know, potentially you know, lead
examiners that have many years of service and many years
of experience kind of going off. I mean, we have
a new generation I think that will eventually come in
where they have a little bit more of these heightened
skill sets too.
Speaker 2 (15:54):
So yeah, and I think you're engaging with through our committee.
You know, obviously there's some things we can talk about,
there's some things we can can't talk about. But what
I think is unique about the compliance and risk community
is there's no competition in compliance, right. You know, everybody
has to comply with the rules they apply across the
board to all of us. And you know, when you
look at the discussions we have, what is working, what
(16:16):
is not working? How do we risk assess certain practices?
What are the things you consider in your risk assessment?
That I might not consider in mind and vice versa.
So you know, these are things where we're talking about
the framework of our compliance management programs and getting best
practices from each other and how we navigate through you know,
(16:37):
anytime really, but really through uncertain times like this. What
this is the time you might use term law. I
think it's that you know, right now, we're not hearing
as much from our regulators, so it's a time to pause,
breathe after what we've seen the past several years with
the volume and pace of change, and shore up our
(16:58):
compliance programs, not that they were you know, substantids to
start with, but take the take the time to you
kind of go through and you know, button up things
that you know may not have gotten as much attention
because we're focusing on other issues, or better document some
of our processes and some of our methodologies and different things.
(17:19):
So this is a good time for us to collaborate
and kind of talk through what we're what we're seeing,
and where we want to go from here.
Speaker 3 (17:26):
I would even say that it's still you know, an
emphasis for us to focus on our other regulatory bodies
that really aren't having a lot of fluctuation right now
many of us are larger institutions that are regulated by
the OCC the FDIC, so there's still that oversight lunction there.
Speaker 4 (17:39):
True. True, it's we're kind of focused on the c
FPB in this conversation that there's certainly the rest and
then all the states as well. I really like that
that idea of like that's you know, if you if
you are having a little bit of a lull or
a little bit of quietness, like taking the time to
you know, kind of revisit your you know, make sure
your house is in order to make sure you're doing
(18:00):
anything else. I guess any maybe kind of bold predictions
for you know, what you expect to see from the
CFPB over the next I'll just say a few months
or even quarter. We'll make it short, because I think
even trying to do a year is probably unreasonable at
this point.
Speaker 2 (18:17):
I think it's really hard to tell. I mean, I
think that we're my personal prediction. I think, you know,
there's the rules that they've put out. You know, some
of the final rules they're subjects of congressional review, but
some of them aren't right, So maybe we focus on
the known at this point. So I think the ten
seventy one small business rule that's out there. There's litigation
around that, but I think the CFPB has to finalize that.
(18:41):
You know, it's something that there is a consent order,
and I think a lot of people forget, well maybe
they can just go away. No they can't. I mean
court is forcing them. You have to do this. But
I think a prediction from me on that side might
be we see a new proposal that subsequently changes what
the requirement are going to be, because I think that's
(19:01):
been where the industry and the Bureau have but heads
a little bit. Is Dodd Frank says thou shalt collect
this cefpb's rules, So thou shalt collect this plus all
of these other things as well. So I think that
we may see a proposal that shifts more towards what's
in the Dodd Frank Act itself there, and I do
think we'll see continued movement on ten thirty three. You know,
(19:23):
the open banking rule. I don't think that's going to
go anywhere, because I think that that's something where it's
going to open up information flow between between banks, between
banks and FinTechs, between FinTechs and fintexts. And that aggregators
and different things. So that has the potential to really
change how we do business. And I think that that's
not something that this administration will likely touch. So I
(19:45):
think that that's going to be, you know, something that
is going to move on status quo. So I think
that's going to stay status quo. But I think we'll
see a new proposal. In ten seventy one.
Speaker 3 (19:54):
Aaron hilarious or hilariously pulled out a magic eight ball
in one of the sessions that he moderated earlier in them,
and I would say that that's exactly.
Speaker 1 (20:00):
An actual magic eb all.
Speaker 2 (20:01):
Again in liter I brought a literal magic that's great.
Speaker 3 (20:04):
Yeah, And I mean that really is kind of the
environment that we're in. And I'll just emphasize maybe on
what Aaron said is that, you know, ten thirty three,
I think that's one of the bigger ones that we're
still going to see an emphasis and focus on. And
it's more about the potential for future acquisitions of customers.
You know, it's not just about you know, creating less
barriers for customers to be able to then see their
data across multiple institutions. It's also to then be able
(20:26):
to create, you know, some competition within the market and
then kind of start to you know, really pull into
folks the fact that you want to increase your volumes
for both deposits, loans, et cetera, you know, within your institution.
Speaker 4 (20:37):
So well, thank you, Aaron, Mike. Appreciate you joining us
today and taking the time out of your schedules to
chat with this a leader's blending.
Speaker 2 (20:44):
It's been a pleasure.
Speaker 3 (20:45):
Thank you.
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