Banking 2021 Compliance Priorities, Up to date | ABA Banking...

2021 Compliance Priorities, Up to date | ABA Banking Journal


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By Lyn Farrell and Kathryn Reimann

Much has occurred since December 2020, once we final supplied our thoughts on 2021 compliance priorities. Compliance professionals have to be agile and in a position to pivot so their priorities match the altering occasions within the nation in addition to the dynamic regulatory atmosphere {that a} new administration brings. In our first put up we urged a concentrate on Truthful Lending, UDAAP, CARES Act and COVID-related dangers, and Truthful Credit score Reporting Act compliance. We have now seen some developments that reinforce our perception on this listing. Listed below are a number of updates, in addition to a number of extra recommendations:

Truthful lending

The push for racial justice within the U.S. has intensified and the Client Monetary Safety Bureau has made clear that this will likely be a spotlight of the company. It’s crucial that compliance leaders take a clear-eyed have a look at their truthful lending analyses throughout their product traces. If anomalies happen, dig into the info to seek out any issues as early as attainable. Devise a rigorous plan to right them and have your story properly in place earlier than any examinations occur.

Additionally along with truthful lending, take an excellent have a look at your promoting, not only for lending, however for banking companies themselves. Truthful entry to banking companies is just not truthful lending, per se, however it’s a shut cousin and one wherein the CFPB appears to have an curiosity. Be sure that your promoting efforts are supposed to attain all customers inside your market areas.


We suspected that UDAAP may be an space wherein enforcement would warmth up, and the alacrity with which the brand new administration on the CFPB has reversed its January 2020 coverage on pleading and imposing the Dodd Frank Act prohibition on abusive acts or practices serves to bolster our view. The 2020 coverage, the legality of which was not examined at regulation, mirrored partially debate in regards to the which means of “abusive” as distinct from “unfair” or misleading.” The 2020 coverage acknowledged that the CFPB wouldn’t discover an exercise “abusive” if it was additionally discovered to be “unfair” or “misleading.”

In its reversal the bureau acknowledged that the 2020 coverage failed to supply further certainty across the definition of “abusive,” and criticized the “proof” supplied in help of the director’s determination. It additionally famous that “adhering to a coverage that disfavors citing or alleging conduct as abusive when that conduct can be unfair or misleading is opposite to the Bureau’s present precedence of maximizing the Bureau’s potential to efficiently resolve its contested litigation, because it doesn’t enable the Bureau to say various authorized causes in a judicial motion of administrative continuing.”

So what ought to compliance officers do? Financial institution administration might anticipate to see the “abusiveness” prong of UDAAP as soon as once more pleaded in enforcement actions. In reviewing promoting, disclosures and options of services and products, compliance officers could be sensible to pay particular consideration to interactions with the aged and different shopper segments. Disclosures or assumptions that may be “truthful” when analyzed in opposition to the entire shopper universe might be assessed otherwise if the advertising effort targeted on a particular shopper section with distinctive vulnerabilities. Scholar mortgage prospects would possibly arguably additionally fall into such a class beneath sure circumstances, significantly as congressional and administration policymakers improve their concentrate on questions on mortgage forgiveness. Care ought to proceed to be taken when monitoring complaints and assortment actions concerning pupil mortgage servicing exercise. Complaints and name middle monitoring must also be constructed to spotlight tendencies in complaints about particular services or products options, or charges, which may recommend {that a} distinctive or significantly susceptible shopper section is complaining at a considerably greater fee than the general buyer base.

On this regard, when mining criticism knowledge, be looking out for service provider fraud as properly. A number of weeks earlier than the CFPB’s rescission of its January 2020 “abusive” assertion, the bureau filed a federal court docket go well with in opposition to fee processor Brightspeed Options and its former CEO. The bureau’s description of this motion is instructive: The company alleges that “Brightspeed . . . continued to course of . . . remotely created test funds” for consumer firms that “tricked customers, usually older Individuals, regardless of being conscious of practically 1,000 shopper complaints, a number of inquiries from police departments across the nation, and return charges averaging greater than 20 %.”

CARES Act and COVID-related Issues

The Paycheck Safety Program has been prolonged till Could 31, 2021. This system continues to be a bit unwieldy, and new procedures are being written as this system persists. The press continues to spotlight allegations of program abuses and fraud. Since lenders are required to certify their debtors’ certifications, there’s a risk for legal responsibility in future opinions of this system. Having wonderful danger administration controls across the taking and processing of purposes is crucial, as is ongoing monitoring and testing of accomplished transactions, with quick follow-up on pink flags or suspect exercise.

The CFPB has made clear that it’ll concentrate on how its regulated establishments responded to authorities efforts to supply COVID-19 associated help, together with: whether or not mortgage debtors had been supplied the suitable forbearance: whether or not stimulus funds had been topic to setoff for unpaid charges or loans; and whether or not banks have a coverage of taking PPP purposes solely from pre-existing prospects. Compliance leaders want to grasp what their group’s stance is on these points and act to doc the explanations for all actions taken, in addition to the controls that had been in place to stop unfair exercise.

Rising areas of focus: anti-money laundering packages

The Monetary Crimes Enforcement Community has a raft of latest powers and has not too long ago proven that within the aftermath of profitable felony prosecutions, it is going to observe up with banks that supplied banking companies through the years to prospects responsible of cash laundering. Mix this with: the rising use of cryptocurrencies and transactions in conventional channels; the Company Transparency Act’s tightening of oversight required for LLCs shoppers; and the rising availability of higher know-how for managing AML monitoring with a concentrate on outcomes and also you give you a conclusion that prudent CCOs must be fascinated by upping their banks’ AML diligence and sport on the whole.

Meals for thought

State regulation developments. Is your financial institution’s mechanism for maintaining with state laws and driving the adjustments by way of your change administration course of as much as the duty? State legislatures and banking departments proceed to be lively in areas as various as predatory lending, privateness protections, financial entry and pay parity, hashish legalization and extra.

Aspirational and different disclosures, together with ESG. It’s the hope of any chief compliance officer that the board and senior administration set the suitable tone on the high of their financial institution—backed up by the sources and supportive actions. What impact would it not have in case your financial institution administration was not prepared to publicly say that it was dedicated to inserting integrity, honesty or its shoppers first? Would it not make a distinction in compliance and disciplinary program effectiveness if the financial institution’s workers now not signed on to a code of conduct that required them to uphold these requirements?

As we write this, the Supreme Courtroom considers whether or not a public firm will be sued for fraud in a category motion on the bottom that if the corporate did not disclose a battle to a counterparty, its public statements similar to “integrity is on the coronary heart of our enterprise” and “our shoppers’ pursuits all the time come first” are fraudulent misrepresentations. No matter your views on this subject, the evolution of environmental, social accountability and governance matters in boardrooms and amongst monetary regulators must be heightening concentrate on aspirational statements and their foundation.

Who, for instance, will make a willpower as as to if a financial institution has sufficiently affordable grounds for stating that will probably be carbon-neutral in 10 years? As extra monetary establishments subject ESG-related stories, who within the financial institution is answerable for ensuring that the assertions have factual foundation, and maybe extra vital, that the corporate and its workers act in a way in keeping with these assertions? As these packages develop, CCOs’ concentrate on associated inside course of, governance and possession across the compliance points they current will likely be essential. Is your compliance division concerned in these discussions? Our recommendation is to just remember to are conscious of your establishment’s technique and proceed to teach your self and your colleagues as these areas evolve.

Lyn Farrell is a regulatory technique advisor for Hummingbird, a regtech firm. She is a regulatory lawyer with 40 years of expertise in banking regulation. Kathryn Reimann is a regulatory advisor to Hummingbird and different establishments and has greater than 25 years of expertise main compliance capabilities at public firms, most not too long ago because the chief compliance officer for Citibank and the Citi International Client Financial institution.


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