United States: The Myth Of Fingerprints: Maturity In Compliance

Last Updated: January 19 2016
Article by David K. Stein

There is a generally subscribed to notion that "my bank or mortgage company" will not be held accountable for compliance and will not be the subject of close regulatory scrutiny given its business model, size, history, etc. A common conclusion is that the Consumer Financial Protection Bureau (CFPB) is simply focusing on the "big fish," looking for large trophies to show off, and that smaller lenders, community banks and even credit unions have an implied "pass" to skate by without giving much thought to compliance management or corporate governance.

Fingerprints are unique to each individual. Likewise, every company is unique. Thus, the notion that onerous examination, and the need to plan and develop a mature compliance strategy, differs from one financial institution to another is akin to the myth of fingerprints. Paul Simon sang about this myth: the false notion that every person, with his or her unique qualities, is different from one another — when, in fact, we are all the same. This is evident through the CFPB's actions during its relatively short history.

We have all read about large enforcement actions for egregious failures in various aspects of compliance management. The CFPB has covered nearly every area of concern: advertising and sales practices, originator compensation, fair lending and kickbacks, to name a few. These actions have hit large and small institutions alike.

What is not closely tracked, and is only available by anecdotal discussion, is that the CFPB has examined hundreds of banks and nonbank lenders. In doing so, the bureau has closely reviewed every detail of a company's operations. Typically, examiners issue private guidance and specific expectations for the future based on their findings. And, usually, the results are not pretty. This is all the more evident when considering that the CFPB will return in three to six months to assess whether a company has corrected its failures.

It is notable that the CFPB has not financially crippled every institution in which it has found problems. However, the bureau is continuously learning, and examiners are becoming very familiar with common weak points and vulnerabilities. By now, they have seen it all, again and again.

The results of these private reports are sometimes a harsh wake up call. More and more, the lessons to be learned are the same. Bank and nonbank lenders are repeatedly being held culpable for failing to maintain a mature compliance management system and provide proper governance and oversight. These institutions, because of a failure to plan, then open themselves up to repeated CFPB visits, very significant costs of correction and continued oversight by "big brother."

If you are a student of the CFPB's examination manual, one would assume that the bureau views compliance as "one size fits all." The same goes for examination guidelines from the OCC, FDIC and state regulators. While one size does not fit all, there is a commonality among all financial institutions — the need to plan and execute a comprehensive system of checks and balances.

This is not accomplished by simply publishing policies that are bought off the shelf or by reacting, after the fact, to changes and new guidance (as we have seen in the past month on the subject of MSAs). It is accomplished by being proactive and dedicating thought and resources to discover and fix problems before they become systemic in nature.

It is expected that every institution will have a system in place that provides effective oversight and control over every element of its business. The need for that system to be a central pillar in every organization — to display the maturity desired by the CFPB — is the same for every regulated institution.

Yes, every lender may have its own set of fingerprints. However, the need for every lender to maintain effective management and control is the same across the board. Every financial institution is in the same boat, whether or not you think the CFPB will examine you and whether or not you feel your organization is subject to the bureau's oversight. (Yes, they can and will regulate any company coming between a consumer and its money.)

As more and more companies are receiving "private" write-ups for failing to maintain a "mature" compliance management system, we expect to see large fines and published penalties on this very subject in the near future. They are definitely in the works.

What is the correct action plan? The first step is honest evaluation and gap analysis of where your company may be falling short. This is often best accomplished by an outsider with a fresh set of eyes. Companies must also tighten their governance structure and document their efforts. When the CFPB comes knocking, you must have something to report. When we are asked by clients to evaluate these issues, we often see an absence of structure and a lack of planning and accountability.

Large and small banks, credit unions and nonbank lenders continually fall into the same traps. They are not unique. However, the art of implementing effective tools to fit each company's particular gaps is where companies may differ, and where a trained outsider can assist.

What are you doing to address this issue? Are you prepared to handle the scrutiny that may be headed your way?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions