SALES PRACTICES is the extreme sport of compliance.
As UDAAP consent orders have involved and even defined hot
topics, traditional regulatory practices are a nostalgic memory.
We have become athletes. And, we bungee into the danger zone
confronting the enormous risk, inherent in sales practices.
For the UDAAP aficionado, improper sales practices are
an “extreme” example of a UDAAP violation because of the
compounding inherent risk. Every financial entity engages
in some version of sales practices, rendering this issue far-reaching by its very nature. The root cause of these improper
practices is steeped in the traditional marketing approach of
utilizing compensation and sales goals to incent employees. It
is especially difficult for a bank to monitor its sales practices,
especially those occurring during in-person transactions.
Compliance officers are not generally known to be adrenaline junkies. We may be drawn to risks but prefer to manage
and lower them. So, what governance measures are appropriate to reduce the risk to something closer to our collective
comfort zone—a decidedly less “extreme” risk appetite?
Just like extreme athletes, compliance officers will need speed to establish
a sales governance process as quickly as regulators expect. We must exert
our compliance strength to move the proverbial needle with long standing
sales practices. We will need to consider specialized gear to monitor and
track employee sales.
While we may feel as though confronting sales practices is akin to
mountain climbing, the goal remains relatively straightforward. Ultimately,
the customer must get all of the information he or she needs, in an understandable way, to make an informed decision about what is the best
product or service for the customer. Sales staff should provide all material terms, including fees and limitations to customers
without pressuring them into a product that benefits the
sales staff, or worse, signing customers up for products
without their knowledge. Financial institutions must have
a governance structure in place to detect and mitigate
related risks. It will likely mirror that of existing bank
compliance programs with a few added bonuses:
■ ■ ■ Documented express consent
■ ■ ■ Incentive compensation and sales goals
■ ■ ■ Sales practice governance:
• risk assessment
• policy and procedures
BY MEG SCZYRBA, J.D., CRCM
AND KARA TUCKER, ESQ.