ABA Bank Compliance - July/August 2019

AS THE DAYS AND MONTHS PASS, compliance officers often reflect on the bank’s compliance program, its accomplishments, and what is yet to come. In the case of customer account servicing, the message is clear. Quality and fairness in servicing continues to be in the spotlight. Customers expect high-quality service and regulators continue to focus on ensuring products and services are provided in a fair and equitable manner. The industry is faced with an evolving landscape budding with new products and services that offer unique and creative features and benefits. Compliance officers must ensure they continue to help the bank successfully navigate the landscape by identifying and mitigating compliance risk in all aspects of account servicing, including fair lending and UDAAP. Weaving regulatory requirements throughout the servicing process will enhance service quality and make sure the bank exceeds customer expectations, differentiates itself in the marketplace and avoids regulatory land mines. Every bank desires customer loyalty and it is up to those who service customer accounts—from the front line to the back office—to make certain customers stay.

Fair Servicing Risk

Fair servicing risk can arise as a result of non-compliance with consumer regulations or bank policies and procedures. For a bank to identify and mitigate this risk, its managers, operations teams, and compliance personnel must understand the servicing processes, associated compliance requirements, and compliance risks. Because servicing activities vary by customer and are highly dependent on both the people and the systems involved in the day-to-day maintenance of accounts, robust procedures and guidelines are essential for a bank to minimize its compliance risk and ensure high levels of customer service.

Understanding fair servicing risk starts with identifying the main servicing processes and their sub-processes. For example, when reviewing payment processing, a keen understanding of the related sub-processes for loan payment applications (including payment adjustments, interest rate adjustments, and assessment of late payment fees) is important to identifying all potential risks. Procedures addressing both main and sub-processes should include practical steps and requirements to address the comprehensive risks identified and ensure that controls are focused on accuracy and compliance. That in turn will help make sure customers are treated consistently, accurately and fairly.