If your partners are not compliant, neither are you.
That’s one message at the heart of the Consumer Financial Protection Bureau’s enforcement actions. In the CFPB’s perspective, you are not only responsible for how your company operates, but also for your vendors, agents, affiliates and any other third parties who represent you or do business on your behalf.
This new paradigm, which requires organizations to closely and continually monitor the third parties with whom they work, is one of the primary ways in which the CFPB differs from its predecessors and other enforcement bodies such as state attorneys general and the Department of Justice. By and large, the laws and regulations the CFPB enforces are not new; rather, it’s the agency’s sweeping scope that has compelled organizations to reassess and alter their compliance practices.
The need for ongoing third party management is also one of the reasons companies aligned with the consumer finance industry choose Compli. Our solutions allow our clients to quickly and painlessly monitor their third-party relationships and exchange compliance information with vendors, agents, and so on. With Compli, you have tools to request the details of third-party procedures, and additionally, to ask partners to commit to your policy.
Just a Reminder: We’re not your lawyer (of course, right?) Remember that this article’s for informational purposes and not intended to provide legal advice.
Clients find Compli’s third-party reviewing functionality particularly useful for addressing unfair, deceptive or abusive acts and practices. It’s not only lenders who need to pay attention to UDAAP. An automotive dealer, for example, may be asked by an auto finance company to be a funding partner. If the financier does not act responsibly toward consumers, its entire network is on the hook—including the auto dealer.
Accordingly, every organization needs to vet every one of its partners, regardless of whether the partner is directly associated with the consumer finance industry or not. The CFPB is prepared to hold you accountable for any company that represents you to consumers, and a single faulty link can implicate the entire chain.
That means companies should consider their own roles as others’ “third parties” as well. If you outsource your collections, for instance, think about how much you know about how the collection agency operates. What are the agency’s callers telling the debtors on their list? How often are they calling, and at what times of day and night? These questions have prompted the CFPB to propose new regulations, and they should be at the forefront of your mind now rather than after the fact.
Finally, ongoing review matters to stakeholders other than the CFPB. In the aftermath of the agency’s newsmaking enforcement activity and fines, financial institutions have intensified their vetting processes and are asking business clients to provide more documentation about those clients’ partners. If you can’t provide proof that your vendors, agents, and others are compliant, you risk losing your relationship with your bank. When your finances and line of credit are on the line, that’s a mistake you can’t afford to make.
Fortunately, Compli is on your side. Our solutions take the guesswork out of monitoring and reporting. Learn more about how Compli helps organizations of all kinds demonstrate CFPB compliance.