Keeping track of a vendor is a big task, and it can be even bigger if what that vendor does is technical in nature.
Lenders might assume they’ve covered themselves if they simply ask a service provider to address an issue related to technology, in particular if that problem is related to the vendor’s software.
But ultimately-lenders are responsible for monitoring vendors and their software, and when an issue does arise, lenders must either address the problem or suspend the parts of the greater operations that are affected. Even issues that fail to result in any identifiable harm to consumers are under the Consumer Finance Protection Bureau’s microscope these days.
Sometimes though, the systems that are in question are complex, which can further complicate a lender’s ability to identify problems. As one legal expert said recently, the danger is that a lot of compliance violations can be technical in nature, or they could result from system errors that a lender doesn’t even realize could impact a large number of accounts.
That’s why legal experts say lenders must have solid vendor selection and monitoring programs in place that identify compliance issues and resolve those issues in both the near and long term.
Experts say a good program might include the following:
- initial and periodic audits of the vendor’s compliance monitoring program
- periodic audits of the vendor’s compliance monitoring program
- periodic internal audits of customer facing processes to identify potential issues
- tracking of consumer complaints and monitoring trends that might reveal compliance issues
- escalation and followup to ensure identified issues are resolved.
Ignorance of what a vendor is doing is no excuse — keep those eyes open!
