What is a Compliance Management System?

Your capital partner needs to see it

Banks have heard the message loud and clear: they’re on the hook for their clients’ actions. Your funding source is looking for evidence of your compliance—that you abide by rules and regulations, that you address consumer complaints promptly, that your board of directors makes sure your compliance program is running smoothly—and if they don’t like what they see, you could lose access to the capital keeping you in business. Conversely, if they do like what they see, they are more likely to keep your rates lower, making it easier for you to stay competitive.

The Consumer Financial Protection Bureau is looking for it

A CMS allows your organization to quickly respond to a CFPB inquiry or investigation (or Civil Investigative Demand in CFPB lingo) with exhaustive data in real time. As such, it’s essentially a requirement of the bureau. But don’t take it from us—according to the CFPB:

“Nearly every examination or targeted review conducted by the CFPB contains an assessment of an entity’s CMS, whether it is an assessment of how the entity manages its compliance program enterprise-wide, or how the entity meets its consumer compliance responsibilities within a specific product line.

The CFPB has found, through supervisory work, that nonbanks are more likely to lack a robust CMS, as their consumer compliance-related activities have not been subject to examinations at the federal level for compliance with federal consumer financial laws prior to the Bureau’s existence. Lack of an effective CMS has, in a number of instances, resulted in violations of federal consumer financial laws. In these instances, the CFPB expects the institution to implement appropriate corrective action, and in general, both banks and nonbanks have committed to improving their CMS accordingly.”

It makes good business sense

A well-designed and well-implemented compliance management system minimizes the time, money, and hassle you spend on compliance. You will also learn how the information gathered from your CMS influences a wide range of pivotal decisions for your business moving forward.