A comprehensive technology framework will make the job of compliance easier.
The Dodd Frank Wall Street Reform and Consumer Protection Act (Act) was enacted into law on July 21, 2010. The Act is 848 pages long with thousands of additional pages of rulemaking. Title X established the powerful Consumer Financial Protection Bureau (CFPB). The CFPB is charged with regulating consumer financial products and services covered under federal laws. It is also responsible for administration, rulemaking and enforcement of 15 existing consumer protection laws. Among these are:
- Equal Credit Opportunity Act
- Fair Debt Collection Practices Act
- Home Mortgage Disclosure Act of 1975
- Truth in Lending Act
Since its formation, the CFPB has become one of the nation’s most powerful agencies. The fiscal year 2016 budget is $605 million. To help assure independence from political influences, the CFPB is funded by the Federal Reserve and the director is appointed by the president for a term of five years.
Consolidating administration of consumer finance laws under one agency greatly simplifies the process of submitting complaints and provides effective enforcement. In FY 2015 the consumer response unit handled 265,500 inquiries. The highest proportion of these revolved around debt collection (84,700 complaints) and credit reporting (54,300 complaints). Two of the more effective tools for foreign uncovering possible violations are hotlines and whistleblower protections. Aggrieved consumers can voice their concerns to a CFPB call center or submit a complaint online. Qualified whistleblowers may be eligible for incentive payments of not less than 10% or more than 30% of any settlement in excess of $1 million. Whistleblowers are protected from retaliation by their employers.
Besides banks and other lenders the laws administered by the CFPB extend to insurance firms, auto dealers, appraisal firms, mortgage originators and servicers, real estate sales and others.
Violations Can Be Costly
The CFPB collected $342.1 million in deposits through the end of FY 2015. Collected penalties are deposited into s the Consumer Financial Penalty Fund, from which they are available for payments to victims of CFPB violations as well as for supporting CFPB programs. The table below lists the more notable individual cases.
In addition to the direct costs of penalties and make-goods, businesses incur the costs of litigation and damage to their corporate brands.
Risk exposures exist at every point where the enterprise touches the customer. Examples are communications with the call center, meetings with loan officers, trading instructions to brokers and dealers, collection calls, email promotions, chat exchanges, text messages, website visits, automated responses to customer queries, and postings to social media sites. These add up to many millions of interactions. Businesses require technology that can swiftly wade through staggering volumes of big data to help pinpoint areas that need attention, help assure that issues are properly resolved, and monitor the results. For example, in the Discover Bank, case telemarketers used numerous scripts to help promote credit card products and services. According to investigators, these scripts included representations and omissions that were in violation of applicable laws. Speech and data analytics tools available today can identify specific instances of potential misrepresentations.
There are extensive requirements within the Act for providing consumers with the essential information required to make informed judgments. For example, lenders must reveal all rates and fees associated with credit accounts, including an explanation as to how the fees are calculated as well as all other material information as specified in federal laws that preceded Dodd-Frank. Any material conflict of interest shall be disclosed.
Lenders, investment advisers, appraisers, and other individuals associated with extending financial products and services to consumers must accurately represent their qualifications and provide specified material information about their products and services. If an adviser claims a certification status then the consumer deserves to know which organization conferred the status and if it is accredited. In some instances professional certification is required, such as in the case of appraisers. Lenders must reveal all pertinent details such as fees, interest rates, payment terms, and the basis of anticipated future growth and investment value.
Providers must not engage in unfair, deceptive, or abusive act or practice in connection with any transaction with a consumer for a consumer financial product or attempts by third parties to collect a debt. Discrimination on the basis of race, sex or ethnic group in the solicitation and consideration of offers is prohibited.
Dodd Frank has spawned a cottage industry of companies small and large with solutions that can help achieve compliance. While not the complete solution, a comprehensive and workable technology framework will help make the job of compliance much easier and support management in their effort to monitor success and pinpoint potential trouble spots. A few basic guidelines include:
Capture The solution must be capable of capturing and storing voice and data interactions. Managers must be able to deploy the mechanism selectively, to hone in on the types of interactions which are potentially problematic. Examples include transactions, persuasion messages, obtaining personal information and collection activities.
Retrieval Archived information must be to easily and quickly located and retrieved based on known descriptors. The information could be structured, such as application forms and contracts, or unstructured such as free flow telephone conversations. Since communications today are multimodal the retrieval mechanism must be able to capture and retrieve the full sequence of events and present them in the order in which they transpired.
Isolate In order to identify the cause of potential and actual deviations, technology tools must be able to drill through stored consumer interactions and reveal errors or omissions in scripts, business processes, forms, IVR menus, confusing web dialogs or even unfounded rumors.
Warn A best-of-breed Dodd Frank solution should provide an early warning system that can surface potential exposures before they become problematic. Speech analytics systems can be configured to issue alerts when problematic terms are uttered or significant disclaimers are not recited.
Prevent There needs to be frequent monitoring of the corrective measures put in place to assure that they are properly implemented and performing as specified.
Report Dodd Frank requires the appointment of compliance officers to be responsible for assuring adherence with those rules. These officers are charged with collecting reams of data and issuing periodic reports. Solutions are available that can capture and organize the data automatically.
Contact center professionals are not legal experts nor are they expected to be. That said, it is important to keep abreast of new laws and regulations that can impact your contact center. Senior management will look favorably on departments that can prevent costly violations or offer solid data that can refute charges. Most importantly, work closely with legal and IT experts to make sure you have the right procedures and technology to satisfy the current regulatory environment and accommodate changes in the future. Larger enterprises will have a formal compliance department or at least an individual that has primary responsibility. In smaller organizations you may need to rely on legal counsel. Keeping active in trade associations and reading industry publications are good ways to stay on top of the ever-changing compliance environment.