Is Your Compliance Management System CFPB-Ready? 4 Ways To Find Out

Does your board of directors have oversight over your organization’s CMS?

An effective board of directors communicates its expectations by adopting a clear policy statement about consumer compliance—not only within the organization, but also to your service providers. Board of director oversight translates to visibility through reporting.

How much visibility? To use the CFPB’s terminology, strive for a “reasonable” level. If your organization lacks a board of directors, consider the closest equivalent role. It may be the owner, senior leadership or senior management.

Is your compliance program in top shape?

A well planned, implemented and maintained compliance program will…

• prevent or reduce regulatory violations
• protect consumers from non-compliance and the associated harms
• decrease the costs and risks of litigation affecting revenues and operational focus
• help align your business strategies with outcomes

Think of a compliance program as the nuts and bolts of your CMS. It should act as a library for all policies, procedures, guidelines and trainings that your employees need to be following, and which ensure your organization maintains the minimum level of compliance with the law.

Here are some of the Fair Lending policies that lending organizations typically include in their compliance programs:

• unfair, deceptive, or abusive acts or practices (UDAAP) policies
• Equal Credit Opportunity Act compliance policies
• Truth in Lending compliance policies
• Telephone Consumer Protection Act (TCPA) compliance policies
• fair credit reporting policies

How does your consumer complaint response process function?

First things first: Why monitor and analyze complaints? To understand and correct weaknesses in your program that could lead to consumer risks and violations of law. The CFPB has increased the consumer finance industry’s focus on this area by a) making it easier for consumers to file complaints and b) following up on those complaints.

Your company needs to be able to prove that you are taking complaints seriously, reviewing them promptly and—when warranted—providing remediation. Keep in mind that complaints frequently arrive outside the CFPB’s portal as well, through avenues such as the Better Business Bureau, email, phone calls and even walk-ins.

Your CMS should be able to track all these complaints, demonstrate due diligence and, moreover, identify trends so that you can avoid future grievances before they occur. Consider if your CMS can tell you whether you receive more complaints in one location or line of business versus others.

Can your organization successfully complete an independent audit?

An audit program loops back to Question 1 by providing your organization’s leadership with a determination of whether your policies and standards are living up to established objectives. Audits give you the ability to manage and implement change; without them, you have no idea what to fix and where to shift directions.

The depth, breadth and frequency of audits once again hinges on what’s reasonable, and varies primarily by the size of each organization. Expectations for a 20-person company would be drastically different than those for a 200- or 800-person company. Regardless, the CFPB and your financial partner both need to know that your CMS can be—and has been—tested.