Decades have shown that the federal government, along with federal banking regulatory agencies, have directed the trajectory of our industry with a variety of regulatory requirements. Ranging from Truth in Lending to Truth in Savings and the complexity of TRID, among others, regulators have placed our industry at the forefront of ensuring the consumer is treated fairly. We also must provide proper disclosures, keep detailed records and keep our financial risk levels as low as possible.
How do we manage to keep these rules and regulations in check?
In the past, we simply relied on the success of branch representatives or loan officers to ensure the rules were being followed. Those days have passed. Our ever-evolving industry has developed an array of departments to ensure each regulation receives appropriate attention, adhering to its complexity in its entirety. As a result, financial institutions have expanded beyond customer-facing employees to include compliance and audit teams to maintain accuracy. These groups of specialists are ready to flex their strengths in regulatory knowledge and assessment skills and will use their expertise to confirm placement of safeguards and adherence to regulations.
For example, if a regulation is set forth by FinCEN on CIP guidelines, your compliance department will take responsibility for interpreting, applying this rule properly to both lending and savings, and adjusting appropriately, as needed.
Compliance will play a key role to confirm regulations are integrated effectively with policies and procedures, making certain they are continually updated as current resources for employees to follow.
Alternatively, the audit department will take a systematic approach to monitoring and "stress testing" the variety of regulations, policies and procedures set forth within an institution. Working together, these two departments will integrate upcoming regulatory changes within the policies and procedures set forth by the institution.
For example, advertisements are potentially impacted by several regulations. As the advertisement is designed, developed and published, the audit team will ensure adherence to compliance advertising requirements. Questions that may be asked can include:
- Is this a lending ad? If so, does it follow guidelines set forth for the product e.g., fixed rate, ARM, HELOC? If that is the case, is there a triggering term and are the proper additional disclosures included?
- Is the ad for a deposit product? If an APY or a bonus is included, are the appropriate disclosures included?
Detailing regulation guidelines plays a critical role for the audit team. Audit groups will use their regulatory knowledge, combined with a detailed approach, to ensure all facets of the institution's processes are followed to certify compliance is maintained.
Ever-changing regulatory environments have set a high bar for financial institutions to adhere to a wide spectrum of regulatory requirements. Having an audit program is critical to ensure regulatory compliance. Supporting the audit group with a strong compliance team is critical for the success of a financial institution as well as meeting the expectations of regulators.