plaining about banks, in particular rates and fees and practices
that increase fees, is not over and will take some time to diminish. If there is any uncertainty about how strongly people feel
about banks, visit some of the following websites: www.zazzle.
www.complaintsboard.com; and www.my3cents.com.
■ ■ Mandated studies signal areas of concern. Those areas include
but are not limited to reverse mortgages, escrow payments,
and credit scoring.
■ ■ Complaints will inform rulemaking. The CFPB will have an
Office of Complaints that will likely inform the bureau of
emerging unfair, deceptive, or abusive practices.
■ ■ Scrutiny of nonbanks. Specifically, these nonbanks include
mortgage lenders and servicers, payday lenders, private education
lenders, companies that are large participants in an industry,
and companies about which many customers complain.
■ ■ Protection of the “economically vulnerable.” The Dodd-Frank
Act defines as “economically vulnerable” people who are low-income, elderly, have language barriers, or are minorities. While
not quite a protected class in a nondiscrimination sense, this
“group” may be thought of as a protected class in an anti–
predatory lending sense.
■ ■ The pace of enforcement action will continue. The Dodd-Frank
Act allows state attorneys general to enforce federal consumer
laws transferred to the bureau as well as any rules issued by the
bureau. This plus the DOJ’s recent fair lending initiative could
easily result in more enforcement actions.
■ ■ Change in the scope of compliance. Faced with the focus on
“fairness,” compliance departments may expand their scopes
to include ensuring compliance with core values (especially if
‘fairness” or “integrity” is among those values). The focus on
fairness may also push compliance departments to play a larger
role in reputation risk.
Given these changes, what should a compliance officer do? To
start, make sure that the risk identification element of your
compliance program is as strong as possible. This is a time to
be especially alert and observant. The CFPB will be issuing new
rules and some old rules will be discontinued. There may be
changes in examination procedures and examination staff. The
next several years may be a time of rapid change, confusion, and
even contradictions. Exercise caution and patience.
As proposed rules are published, be sure your bank has a
process in place to consider the proposal, assess the impact on
the bank and its customers, and provide comments to the CFPB.
As a compliance officer, perform a mini–risk assessment of the
proposed rule or change as part of the process.
Meet early, often, and regularly with line-of-business executives and staff to keep them abreast of the changes, including
the uncertainties, because they will have the responsibility for
implementing the changes in the regulations. Help them prepare
for the future.
Carefully review customer complaints individually and in
the aggregate. Consider complaints as an early warning system.
Listen to phone calls from customers; read e-mail from cus-
tomers, monitor the Internet, and, of course, read customers’
written complaints. Look for trends and complaints about fees
and practices. Meet with those responsible for the policies and
practices that customers most often complain about. Work with
business partners to develop alternative policies and practices
Think about what your bank can do to improve customer
understanding of financial products and services. Make a sincere
and visible effort to educate and inform customers and potential
customers. Consider all possible avenues of outreach such as the
bank’s website, partnering with schools, and working with trade
Study enforcement actions and pay particular attention to the
corrective action specified. Although enforcement actions are a
lagging indicator, they do offer valuable information about what
regulators believe banks should be doing.
Conduct a study of the fees charged by the bank. Determine
how they are established and how they are charged. Determine
whether the fees are reasonable and document how you reached
your conclusions. Be in the loop when fee changes are being
considered in the bank; be part of the decision-making process
and voice any concerns you may have.
Advise directors as they navigate the future. Here are some suggested points to communicate to them about the future of compliance:
■ ■ Compliance requirements and regulator expectations are
changing and increasing. This means that compliance risk is
changing and increasing. Going forward, a major component
of compliance risk will be “fairness.” Because fairness is not
always simple to define, this is a significant change.
■ ■ Because of the future fairness component of compliance risk,
compliance and reputation risks will be closely related, if not
intertwined. Understanding this relationship is crucial because
the combination of compliance risk and reputation risk will
be even more difficult to measure.
■ ■ This is not the time to be penny-wise and pound-foolish;
compliance risk mitigation can be challenging to measure
but the failure to adequately mitigate can be extremely costly.
■ ■ Policies should be revisited to ensure they are consistent with
the changing world of compliance. This may mean developing and adopting a “responsible banking” policy. In addition,
if the board has adopted core values for the organization, they
should incorporate the concept of “responsible banking” and
adherence to those values should be monitored.
■ ■ Now more than ever, fees—including the amounts and practices—will be a hot button. Be prepared for conflicts between
earnings and compliance. If fees are an important driver of
earnings, take action to determine that fees are easily understood
and clearly communicated. ■
About the Author
JeAnIne CAtAlAnO is a special adviser at Promontory
Financial Group, a global financial services consulting firm.
She is based in San Francisco and can be reached at