Compliance Management Systems 101

Regulators like the CFPB expect lenders to have an effective compliance management system that’s adapted to its business strategy and operations. But what a CMS is, and how to build one takes a bit of explaining.

What is a Compliance Management System?

A CMS is a best practice program designed to keep you on the right side of Fair Lending regulations.

It’s meant to give you visibility into and control over your organization’s compliance efforts. Without a CMS, you have no easy way to measure or track compliance; and you’re not confident who in your organization is doing what, when or how.

Quite simply it’s a comprehensive compliance program. A CMS is an integrated system comprised of written documents, functions, processes, controls, and tools that help an organization comply with legal requirements and minimize harm to consumers due to violations of law.

A CMS is woven into every functional area in your organization, from sales to advertising to operations and administration. A good CMS can proactively address the risks relevant to your organization while meeting multiple regulatory requirements.

A CMS contains 4 areas of focus:
Mouse over each area to learn more.

Who cares about your compliance management system?

If you’ve made it this far without an established CMS in place, you may be wondering why you should consider adopting one now. After all, a new system is an investment, and a reduction in risk doesn’t always translate to tangible cost savings.

We won’t waste your time reiterating the points made above. Here’s the blunt answer: in today’s regulatory environment, a CMS is virtually mandatory. Three reasons why:

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 CMS 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.

compligo bubbles with laptop
See How It Works

The Backbone of Your
Compliance Management System

Compligo helps finance companies like yours stay in compliance with fair lending regulations, and stay out of both regulator’s and auditor’s crosshairs. The cloud-based system is easy-to-use and mobile-enabled. Compligo provides a turn-key way to:

  • Manage your compliance program
  • Track consumer complaints
  • Monitor & report on all activities

All so you remain audit-ready to CFPB examiners, your bank’s compliance team, and your internal stakeholders.

Fair Lending Compliance Resources

Here are our most recent tools to keep you cool, calm and compliant.

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