Compliance Program Topic Center

While every organization has unique compliance needs, members of the financial services industry need to abide by a specific set of laws and regulations. According to the CFPB, every Fair Lending compliance programs should cover the following:

• Unfair, deceptive, and abusive acts or practices (UDAAPs). According to the Consumer Financial Protection Bureau, an act or practice falls under UDAAP categorization when the act or practice “causes or is likely to cause substantial injury to consumers,” “the injury is not reasonably avoidable by consumers,” and “the injury is not outweighed by countervailing benefits to consumers or to competition.”
• The Equal Credit Opportunity Act (ECOA). ECOA prohibits finance companies from making a determination of a consumer’s creditworthiness on the basis of a protected characteristic, such as race, gender, national origin, or marital status.
• The Truth in Lending Act (TILA). TILA requires organizations that offer loans to disclose certain information, such as leasing provisions and credit terms, to consumers before lending money.
• The Telephone Consumer Protection Act (TCPA). Under TCPA, lenders must obtain prior express written consent from customers to whom they intend to send text messages or make phone calls.
• The Fair Credit Reporting Act (FCRA). FCRA establishes rules for ensuring fairness and privacy for consumers applying for a loan or line of credit.

A compliance program cannot address Fair Lending laws in the abstract. Each statute enumerated above includes subset of specific regulations that address a wide range of organizational processes:

• disclosure of nonpublic personal information
• information security
• privacy and security practices of service providers
• an identity theft prevention program
• information sharing with consumer reporting agencies
• advertising and marketing of consumer loans and leases
• approval and denial of loans and leases
• pricing for loans and leases
• compliance training and related materials
• document retention

Once you have mapped out all of the laws your organization must comply with, you will need to define roles at your organization and assigned the appropriate policies and trainings to each role. Your loan originators and underwriters, for instance, will need to undergo training on UDAAP and ECOA policies, while sales and marketing personnel should follow TCPA regulations, and your collections team will need to understand fair debt collection practices.

It’s a lot to manage, regardless of your organization’s size and composition. With so much role-specific information to absorb and become competent in—on top of the daily rigors of doing the job—no one person at your organization may be able to hold onto all the regulatory facts that pertain to your business. Every employee and department may have deep knowledge of their individual compliance responsibilities, but an incomplete understanding of the full CMS. A compliance program ensures that, in a multi-dimensional organization made up of different audiences who have different compliance needs, every incomplete piece fits together to form a cohesive picture.

In the consumer finance sector, compliance is not just a matter of training employees once, but keeping them apprised of ongoing updates to the law. The only constant is change—so how do you make certain your staff is staying current on the latest developments in a convoluted, dynamic, and ever-evolving regulatory environment?

Your best bet is to rely on subject matter experts—be they compliance personnel within your organization, or external consultants—to take on the burden of writing and reviewing your policies. But expertise can only go so far. Once you’re confident your policies are up to date, you need an efficient way to distribute them, as well as a means to ensure your team reads and understand the policies.

The only surefire way to do all of this is with an automated compliance management system. Consider the risks of handling ongoing compliance updates through manual processes:

• A compliance manager, HR administrator, or attorney might miss an important agency bulletin or learn of it too late.
• Certain personnel, departments, and third-parties may engage in outdated practices due to information silos.
• Without an automated system sending notifications and reminders, employees might neglect or forget to complete trainings on regulatory updates.
• Managers and supervisors may not understand what compliance data to collect, or how frequently, and could struggle to produce timely, relevant reports…
• …and, as a result, the CEO and board may lack top-level oversight of the organization’s overall compliance.

Automation allows your organization to conduct compliance the way regulators demand you do: thoroughly, securely, and without delay. An automated CMS houses and organizes your policies, procedures, training materials, and supporting processes and forms. The CMS should automatically schedule, distribute, and track these activities through the various components of your workforce.

An automated CMS can streamline your compliance program by organizing and assigning compliance activities by role. For example, the system can be configured to manage and track all specific policies, procedures, and trainings assigned to employees in your collections department. You can set a schedule for each activity as well, so employees always know if they’re updated or behind on their responsibilities.

Because an automated CMS applies to roles—and not the individuals who occupy those roles—anyone can be plugged into the system, at any time, with a minimum of effort. Nothing slips through the cracks when organizational changes occur. As soon as a new employee is assigned a job title, role, and location, the system takes care of the rest. You no longer have to rely on a manager or supervisor to place the right stacks of paper on somebody’s desk, or to dig through file cabinets full of documents.