I’ve been traveling for the last few weeks and have seen a trend that is very disconcerting. More and more compliance people are wondering why their company even hired them!
This trend is not coming from the banking community, as they have been regulated for quite a while. It is feedback from the mortgage arena and quite frankly I’m perplexed. Let’s visit the purpose of the compliance professional and what role they serve:
1. The compliance head (not just the general counsel) should report to the President or the Board. Why? They are in the fray of your business every day and know what is happening. If they report to General Counsel only, you may be missing some very important issues that can cost your company millions. This is not because the General Counsel isn’t well-qualified; it is because it takes the legal experts in conjunction with the mortgage experts, to properly assess a situation before a decision should be made by the President or the Board.
2. Hiring a compliance person is not just an act of “look I complied” because I have one on staff. Their role is to serve as your eyes and ears on the entirety of the operation, and to give you a heads up on any risk you should consider.
3. The CFPB expects you to be highly pro-active with your compliance management systems. This takes monumental support to go from a little compliance program, to a lot, which is the expectation of the CFPB. Waiting until you get a letter of a pending inquiry is not the time to start this process.
4. The CFPB or another regulator will find out about your practices. They are no secrets anymore. You have whistleblowers in your company, complaints from borrowers, complaints from other companies doing it the right way and social media. If you think you are too small, think again. I’ve had several clients that are considered “small” receive an exam.
5. Every system and facet of your business should be accessible to the compliance lead. They need to understand what the company is doing in each business unit to understand your risk profile and properly address that risk.
6. The compliance person saves you money even if you don’t look at it that way. Here is a great example. One of our clients was one of the first to get a Fair Lending exam. Over a million dollars in attorney/consultant costs and a 4 million dollar fine resulted in their demise. Having been through this, their Operations and Compliance Director was picked up by another company and he quickly got things in order. Just recently, the new company received an inquiry from the CFPB. As he began to demonstrate the compliance management systems he knew were essential, the CFPB was satisfied and left! That’s right; they left because he was prepared. This likely resulted in saving his new company the millions that the first fallen soldiers absorbed. At the very least, it saved months of time in staffing costs, attorneys and consultants.
It’s important to understand that the CFPB can send an inquiry and not open up an exam, if they feel you are under control. They have many companies to review who are not under control.
Moral to the Story: Take compliance seriously as it may be the best way to save your company and your bottom line! And if you were lucky enough to get a highly skilled compliance person, it is in your best interest to keep them, before someone else sees their benefit.