Fifth Circuit Pumps The Brakes On Arbitration https://t.co/1M9RuXMhjb
House Financial Services Committee Considers Amendments to the FDCPA https://t.co/joLGqaAVZj
Eleventh Circuit Refuses to Impose a ‘Least Sophisticated Consumer’ Standard to Discharge Violations https://t.co/FwkJpuXtnq
This past November, in the wake of the Wells Fargo debacle, the CFPB issued a Compliance Bulletin which addressed employee incentives and the consumer risks associated with them. CFPB Compliance Bulletins are non-binding general statements of CFPB policy. The Bulletin noted that while businesses and consumers alike may benefit from the use of incentives when properly implemented and monitored, incentives may also lead to significant consumer harm when adequate risk controls are not in place.
Key to the CFPB’s November Bulletin is the CFPB’s articulation of what constitutes an effective compliance management system for addressing employee incentives. While effective compliance management systems are not contemplated to be a one size fits all proposition, the CFPB stresses they should take into account the risk, nature, and significance of the incentive program. The Bulletin describes an effective compliance management system as generally addressing the following:
An effective compliance management system will foster strong customer service and should take into account the following components:
The CFPB notes that policies and procedures regarding incentives should provide:
Training should be implemented and should:
Overall monitoring systems should track key metrics and outliers that may be indicative of abuse. Examples provided by the CFPB include:
The Compliance Management Systems should provide for the prompt identification and implementation of corrective actions addressing any areas of weakness. The CFPB expects corrective actions to include:
As was noted in the Wells Fargo Order and confirmed by the Bulletin, the CFPB expects institutions to collect and analyze consumer complaints for indications that incentives are leading to consumer harm or violations of law in order to identify and resolve the root causes of any such issues.
The CFPB expects Compliance Management Systems to provide for periodic independent compliance audits. Institutions’ Compliance Management Systems should, therefore:
Financial institutions who use incentive programs should take some comfort in the fact that the CFPB acknowledges that incentive programs, when properly implemented, may be beneficial to the marketplace. At the same, time, financial institutions should be aware that incentive programs are being carefully scrutinized. It is, therefore, incumbent on financial institutions to carefully review their compliance management programs as to incentive programs. The level of specificity provided by the CFPB Bulletin suggests that this will likely be the measuring stick used in current and upcoming examinations and that incentive programs will be a point of emphasis by regulators in general.
Caren Enloe leads Smith Debnam’ s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws. Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee. She is also a member of the Defense Bar for the National Creditors Bar Association, the North Carolina State Chair for ACA International’s Member Attorney Program and a member of the Bank Counsel Committee of the North Carolina Bankers Association. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. Caren oversees a blog titled: Consumer Financial Services Litigation and Compliance dedicated to consumer financial services and has been published in a number of publications including the Journal of Taxation and Regulation of Financial Institutions, California State Bar Business Law News, Banking and Financial Services Policy Report and Carolina Banker. ...LEARN MORE