Day 2 – ABA RCC

Welcome from Orlando and day two of the annual ABA Regulatory Compliance Conference. It was a jammed packed day of listening and learning from boots on the ground peers.

My focus today was on a variety of topics; from CRA modernization, Patty Joyner’s take on today’s hybrid work environments, UDAAP, and the evolution of risk framework. It was hard to choose what sessions to attend. There were so many great topics to choose from. However, for today’s recap, I thought it would be of the most benefit to focus on UDAAP. Especially with the recent changes the CFPB made to their exam manual to focus UDAAP on fair banking. The big take ways from this session were:

1. Getting our arms around UDAAP for Fair Banking

  • The room was standing room only, many of us were interested in this topic, especially since the CFPB seemed to have circumvented the regulatory process by changing their exam manual and not asking for a new law or regulation. No ANPRM needed? This was a hot button for a few of the audience members that attended this session.
    • There was some conversation about is being guidance vs. a rule and how this really needed to be addressed. But most all seemed to agree that Fair Banking is the right thing to do. We do not want any discrimination in our products or services.

2. What does the CFPB UDAAP manual change mean to my organization:

  •  If I am not a CFPB regulated organization, do I care. We should be proactive and consider incorporating the exam practices. They have requested the other regulatory bodies follow them. It would be a good idea to understand what our financial institutions are doing and incorporating what make sense.
  • Considering the CFPB exam manual changes, institutions should utilize the basic fair lending concepts with deposits and services:
    • Use Reg B as your guideline for life cycle management of your deposit relationships. It is no longer just lending. You need to take those fair lending controls and apply them to all your institutions products service. Looking for fair, equitable opportunity and treatment.
    • Look to your current fair lending controls and see how you can modify them to implement those controls in your deposit products and services.

3. Where do we start:

  • Complaints – provide FIs with a wealth of knowledge. They give you the bad and ugly for products, services, and process. Use these to understand the challenges you might have in your deposit products. (i.e., fees. unfair practices, perceived deception)
  • Exceptions – We all know these exist! Especially in fee waivers or by status (good customer). Do you track these? Do you know what demographics gets the fees waivers, what frequency, why?
  • Product Suite – Are your products available to everyone? Do you have special conditions to get certain products (professional or wealth management customers; even good customer status)? Is everyone who would qualify for your special products offered them or are employee cherry picking who gets the “specialty accounts” referrals?
  • Marketing – is a challenging area to get your arms around. Do you understand and test models, materials, scripting, and social media? Do we understand what the channels are doing, images used, algorithms employed? Do they really hit the full demographics of the intuition and not just the upper income customers?

4. How do we get our business and vendors on board?

  • Training is key – we need our business unit partners to understand the what, the why, and the value add to the institution. We can no longer just give them regulation training. They need it applied to their roles so they can clearly understand the reasoning behind the need to be fair.
  • Vendors – They need to clearly understand through the negotiation and contracts that we expect them to be trained in accordance with our Bank standards and we will be testing to ensure expectations have been implemented.

5. What will we do to know we are implementing fair banking standards:

  • Testing – it is the key to an institution’s success! An Institution cannot know if things are working as intended without proper testing and monitoring. Start with fees and exceptions. These areas will give you a good idea of the challenges you may have in process.
    • Make sure you have enough resources and knowledge to do a thorough review and analysis.

The biggest thing you need to be able to do is tell your story. Just like with fair lending testing and analysis is needed to provide you with a clear understanding of what you have. It gives you the ability to mitigate risk and explain the steps the institution is taking to make changes.

-Kimberly Boatwright

EVP and Director of Risk and Compliance