The popular term for compliance is regulatory burden. Granted, compliance is burdensome. It is stuff that just doesn't happen naturally. But the law makes us do it and do it a certain way - and often that way isn't the way we would choose. That's why we like to call it a legislatively mandated unnatural act.
Looked at it in this context, compliance is a burden. It requires training, tools, procedures, policies, and constant attention. The attention comes in the form of compliance management, audits, monitoring, controls, and revisions to policies and procedures. In short, it is a lot of work.
What did the banking industry do to deserve this?
What the industry did was a lot or nothing, depending on how you look at it. Some products and services actually cost consumers more than they felt was fair. In other situations, the institutions practiced a form of benign neglect, failing to notice when it could make products and services more suitable for its customers.
Consumers got attention the usual way - by going to Congress. The result is legislation in the form of many consumer protection laws. The goals of the laws are laudable. But any industry member can tell you that the devil is in the details. It is the details (such as calculating payment streams correctly for TIL disclosures) that result in violations.
We are now in a period of heightened attention to practices that may or do harm consumers. Predatory lending is high on the list of concerns. Regulators are using and referring to Unfair or Deceptive Acts or Practices (UDAP) more than ever before. This could all lead to more regulatory burden and that additional burden - well, you know about the last straw and the camel's back.
How do we prevent more burden? Preventing additional burden is something over which the industry actually has a great deal of control. Even though the laws are generated by others, it is the industry's practices that place fuel on the fire.
The existing regulatory burden provides us with signposts to the path of regulatory burden prevention. When we look behind each consumer protection law, we can see what led to the practice.
For example, when banks placed 30-day holds on check deposits to new accounts, their new customers were understandably frustrated. It didn't help that these holds happened to Congressional staffers or to the daughter of a Governor of the Federal Reserve System. Customers wanted access to their money within a reasonable time and we now have Regulation CC - and all that work designing and implementing holds, to say nothing of the training involved!
And can you imagine a time when the lender told the customer to just sign on the dotted line and don't ask any questions? Enter Truth in Lending.
And what about using access to the credit bureau reports to find out how your neighbor paid for that satellite TV set-up or the new car? FCRA put a stop to that - at least it was supposed to.
It wasn't long ago that financial institutions forgot about their fiduciary role with respect to customers and considered the personal and transaction information about their customers to be a commodity that they could sell. In their excitement about the addition to the bottom line, these institutions overlooked how their customers would see this - as a serious violation of trust.
In short, it is easy to generate regulatory burden. Just get greedy and don't look at the consequences. Take a look at what you and other members of the industry are doing and how consumers react. You should see some things that belong on your radar screen. You should see some things that lead to best instead of bad or worst business practices. Follow the best practices and help prevent more regulatory burden.
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