blueprint for constructing y a compliance program
TRANSCRIPT
![Page 1: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/1.jpg)
BLUEPRINT FOR CONSTRUCTING YOUR UDAAP COMPLIANCE PROGRAM
Carl Pry, Treliant Risk AdvisorsTerri Oster, Bank of the WestOctober 9, 2014
AA
Much Attention on UDAAP
• CFPB enforcement actions
• Prudential regulator enforcement (UDAP)
• Inclusion other issues
• Focus and program and management (CMS)
• Where should you focus your attention?
![Page 2: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/2.jpg)
No matter what your bank’s size, refer to CFPB’s Supervision and Examination Manual’s UDAAP section– http://files.consumerfinance.gov/f/201210_
cfpb_supervision-and-examination-manual-v2.pdf
Current UDAAP Hot Topics• Overdraft protection• Ancillary debt products• Identity theft protection• Vendor products• Collection practices• Prepaid cards• Lender placed insurance• PMI
![Page 3: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/3.jpg)
Current UDAAP Hot Topics
• Products aimed at vulnerable consumers
• Claims of improving a consumer’s credit score
• Zombie debt schemes
• Innovative sources of fee income
• B2B Relationships (e.g., credit bureau)
Fairness Principles• Value
– Consumer receives value that is reasonably related to the cost of theproduct or service
• Predictability– Consumer can predict how the product or service will perform
• Understanding– Consumer understands the terms and conditions of the product or service
(particularly any limitations or exclusions)
• Appropriateness– Provide products that are appropriate for customers and customers can
rely on the bank to show them the most appropriate product
![Page 4: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/4.jpg)
Value• Is pricing similar to others or is it an outlier?
• Is profit margin in line with other similar products sold by competitors?
• Can the value proposition be clearly articulated to aconsumer or another third party?
• Considering the cost of the product, is it offering a net benefit to the consumer?
• Is consumer feedback incorporated into product changes?
Predictability• From the information provided, can the consumer predict the
performance of the product or service?
• Are fees or penalties timed throughout the lifecycle so that aconsumer can avoid them?
• Is important information (such as exclusions) omitted from product brochures or other written material?
• Do most members receive the essential benefit of the product or service that was promoted or sold?
![Page 5: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/5.jpg)
Understanding• Are all advertising and marketing written in simple language so that
the average consumer can understand it?
• Is enough information provided in product information anddisclosures to allow the average consumer to clearly understand the terms and conditions?
• Is critical information isolated and/or highlighted to draw members’ attention to factors that should shape their choices?
• If marketing information is provided in a language other than English, are product terms and conditions also provided in that language?
Appropriateness• If the product is specifically aimed at a “vulnerable” consumer segment, is
extra care given to assure understanding and appropriate choices?
• Does the institution strive to offer the consumer products that are appropriate for him or her?
• If the consumer chooses an inappropriate product does the bank explain thatfact to him or her?
• Are product marketing campaigns aimed at appropriate consumers?
• Are sales tools written so that employees will offer appropriate products?
• Are sales incentives designed to avoid encouraging inappropriate sales?
![Page 6: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/6.jpg)
IdentifyfyIdeO
ntiffIdeOOutreach
fyfychOO treatreacutut
Size hhacaccchch
eSizeSSizeS e eRisk
DesignnDesignOutreach OutreachOutreachch
Resourcesh hhesResourceResource
Documenteeesesntnnt
BuilddBuildOutreachchOutreacOutreaacchch
Resources
CompleteteCompletOutreach
ettechhOutreaOutreac
Assessccchchh
sssssssessses
EnhanceceEnhancOutreach
ccehchhOutreOutreac
Sizehhheaceacchch
zeSizSizRisk
zezeskRisRissksk
LookbackckckcRRDD
Program Development Lifecycle
Identify
Outreach: Talk to business lines for needs assessment and assessment of current/long term goals
Size Up Your Institution: How far will your program extend?Test your institution's UDAAP awareness level – give an idea of resource needs. How complex are products and services?
Address Risk: Determine you risk appetite. Assess the current regulatory environment. Look at complaint data - what are customers saying? Review regulatory agency guidance, commentary,enforcement activity
cecooy
eeeeze
aa
RR
tee
eeetttoo
du
ee
![Page 7: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/7.jpg)
Design
Outreach: Build a design team (Business Lines, Marketing, Legal). Great opportunity to educate while create. Leverage skill sets and become allies in UDAAP compliance
Resources: Plan for progression over time and spend wisely. There will never be enough!
Program Document: Blueprint program; mission statement; objectives; governance/oversight; complaint review/responserisk assessment (new/modified products, recurring high risk review, program risk); training; corrective action; vendor management; control activities
neneeeeebbssrces
amraarogrewieevrev
sk risrgh rt
Mass
is
Outreach: Leverage talent across business lines. Does the build meet design expectations? Use for testing effectiveness during build phase (risk assessment; training)
Resources: Assess resources during build, communicate build to groups
d
pppiii
Design (cont’d)
Define Roles: Who does what? Start with top down Governance; UDAAP Officer, Business lines, Compliance, Legal, Audit. Work in conjunction with UDAAP policy
g bugins. ees line
Unce;iinDefD
nctiojun
pdbb
cnn
alent acrross brossBuild
![Page 8: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/8.jpg)
CompleteOutreach: Testing and feedback; stress testing; provide support
Assess: Evaluate controls; is risk adequately addressed; resource allocation
“It’s kind of fun to do the impossible.”Walt Disney
Enhance
Outreach: Assess effectiveness of Program; business lines review of controls; training needs
Size: Re-examine product complexity and long term goals; project resources; business lines needs
Risk: Re-assess regulatory environment; products and services complexity; complaint data
![Page 9: BLUEPRINT FOR CONSTRUCTING Y A COMPLIANCE PROGRAM](https://reader034.vdocuments.us/reader034/viewer/2022051412/627df8b85e149b2975255dc4/html5/thumbnails/9.jpg)
Policy / Program document Risk assessment
Enforcement action tracking (use as guidance) Consumer fairness forum (UDAAP) Complaint review / escalation
UDAAP dedicated staff (SMEs) Training / detailed examples System for review of products Consider UDAAP guide for bank reference
Corrective action procedures Monitoring/testing, Audit
Toolbox Essentials
nannaaor baprppfof
aittae/ deAADADUU
ass
Questions?