ABA Bank Compliance - March/April 2017

and quizzing sales staff on product knowledge. (Employees cannot explain to customers what they don’t know, after all.)

Complaint Trending

Because proactive sales monitoring can be so difficult, it is important to have strong back-end controls to supplement the process with data-driven information. The best tool available may be complaint analysis and trending. Banks must have controls in place to isolate complaints related to improper sales or unauthorized account opening and to perform an analysis of trends. For example, banks should look for an indication that customers feel they received a product from which they could not benefit, were not told of a fee or other limitation, or that customers did not authorize. If a bank spots these kinds of issues, the next step is to drill down into the data to determine if there are particular geographic regions or branches that are high risk for sales issues, and take decisive action as quickly as possible.

Banks should also establish an internal ethics hotline, if they don’t already have one. It is important to review these ethics hotline complaints in addition to customer complaints. There should be an impartial internal investigation team that can review sales integrity allegations or data trends to determine validity and root cause. Subsequently, potential consumer harm should be considered by compliance and remediated as appropriate.

Bonus Points: Some customers may express themselves by requesting a fee waiver rather than through an actual complaint. For that reason, banks should track the number of fees it is waiving by product type. A sudden spike in fee waivers or a recurring theme as the reason for requests could indicate a problem on the front end.

Reporting

In addition to complaint trending, banks should use the data at hand to further supplement the monitoring program. Here are some to consider:

■ ■ ■ New account activity–banks should track how many accounts are closed after 30 or 60 days, and the channel through and location at which those accounts were opened. It is also prudent to track how many accounts are not used by the customer within the first 30–60 days as an indication that the customer may not be aware of the account. Pay attention to fee assessment during this time. It could be an unfair practice to charge customers for services they are not receiving.

■ ■ ■ Account closures–the bank should review account closures, particularly of new accounts, to ensure there are no spikes indicating that customers may have felt misled in some way. ■ ■ ■ Incentive payouts–the bank should review incentive payouts; if an employee is way above his or her peers or experiences a sudden upward spike in incentive pay, it might be time to do some digging. Please see the column on page 18, Using Data Science to Mitigate Bank Employee Fraud for additional reporting ideas.

Training

It is important to train sales staff before they start talking to customers, and annually thereafter. As a baseline, they should be trained on all of the products and services they will be selling. As noted above, an employee who does not understand a product cannot explain it to the customer.

In addition to product knowledge, sales staff should be coached on sales integrity. At the outset, training should establish the expectation that staff report any potential ethics violations to the ethics hotline. Sales staff should also receive job-specific UDAAP training on the following how to’s:

■ ■ ■ Providing consumers with all available options that may meet their needs. For example, sales staff helping customers with a mortgage should explain both fixed and adjustable rate loans so that the customer can decide which option may be most appropriate. Bankers should never assume they know what is right for the customer and present him or her with limited options to make it “easier” for the customer.

■ ■ ■ Explaining product terms and limitations. It is usually easy enough to convince staff to provide the key terms. However, it may be another story to persuade them to explain product limitations.

It doesn’t sell!

■ ■ ■ Not offering a product to customers if they know
they will not receive a benefit from it. For example,
if the bank offers credit protection products that
benefit only customers that are currently employed, sales staff
should not recommend that product to a customer that has
mentioned he or she is unemployed or retired. Ideally, sales staff
should be scripted to clearly explain all limitations such that all
customers can understand when they would not derive a benefit.
■ ■ ■ Cautionary Tale 6: While a bank may want to explain what it
believes is “ethical” in terms of when an employee can claim a sale
or a referral, that in and of itself does not constitute sales integrity
training. For example, while the bank may set rules that prohibit
claiming a sale if the customer walked in requesting a particular
product, these scenarios should not be the main focus of sales
training. The bulk of the materials should clarify expectations for
customer interactions such as how to obtain consent. Scenario-
based training with real examples is most effective though.
While the area of sales practices compliance continues to evolve,
it is important to jump on it with all of the speed and perseverance
of an extreme athlete. We’re all free falling together but if we’re
supporting each other, it’s a little less scary. ■

ABOUT THE AUTHORS

MEG SCZYRBA, J.D., CRCM, has been involved in the compliance industry for over 20 years and currently chairs the Boards of the ABA Compliance School and ABA Bank Compliance magazine. She is the Fair and Responsible Banking Risk Program Manager at a large bank and was honored as ABA’s 2011 Distinguished Service Award recipient.

KARA TUCKER, ESQ., manages a team in the Consumer Fair and Responsible Banking division at Sun Trust Banks. She also serves on the ABA Compliance School Board and Faculty. Kara can be reached at TuckerKara@gmail.com.