CFPB spotlight

CFPB Regulations Put the Spotlight on the Financial Services Industry

In its quest to eradicate potential unfair, deceptive or abusive acts or practices (UDAAP) that violate the Consumer Financial Protection Act and other consumer financial laws, the CFPB has broad power to examine the practices both banks and non-banks. And while banks with more than $10 billion in assets fall directly under CFPB regulations, any provider of consumer financial products and services, or their service providers, are within its reach.

In fact, the CFPB can examine any entity, regardless of its assets, based on its authority to supervise “risky” financial products and services that it believes are harming consumers. As part of its mandate, the CFPB may examine:

  • Board of Director and management oversight
  • compliance programs
  • consumer complaint responses
  • compliance audits
  • operations
  • marketing and lead generation
  • third party relationships
  • internal controls
  • consumer interaction
  • information sharing and privacy
  • payment processing

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With so much power, it’s not surprising that both banks and non-banks are scrambling to ensure they comply with CFPB regulations before they become the subject of an audit.

“It’s a really challenging time for the financial services industry,” says Kathleen Sanchez, Director at Treliant Risk Advisors. Sanchez helps financial institutions to develop regulatory compliance programs, including the creation of enterprise-wide consumer complaint programs.

“It’s been a massive endeavor to meet the CFPB expectations, to meet Dodd-Frank expectations and deadlines,” says Sanchez. “The financial services industry has invested much time and focus in proactively preparing for CFPB examinations. At the same time, there’s still a business to run; there’s still a credit need to be met,” she says.

Good Customer Service = Good Business

While needs of the financial services industry might seem to be on the back burner during this transition time, the consumer will be the overall winner. And the idea that treating consumers well is good for business shouldn’t be lost on the institutions that are scrambling to comply.

Many of the inquiries fielded by Sanchez are in the area of customer complaints, an area about which the CFPB has been fairly clear. CFPB regulations dictate that companies need to have a reliable complaint management system in place, and provide periodic reports on complaints received and resolved.

CFPB Complaints Portal

In addition, the Bureau has set up its own complaints database that any consumer can access to file a complaint against a financial service provider. So service providers need to ensure their own complaints management systems are serving the needs of customers to avoid becoming a line item in the CFPB’s complaints database.

“I think the intention of the regulations is to help the banks run a good business,” says Sanchez. “The goal is to stay competitive and compliant, to meet the credit needs of the consumer while running a sound business,” she says. “Whether it’s new software implementation, whether it’s overhauling your compliance program to hire new staff members to be responsive, it’s going take time and effort. But in the end the intention is to benefit the consumers, because without consumers, we as banks wouldn’t be around. We should be mindful of protecting their interests as much as we want to protect our risks as a business.”

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