CFPB Increases Scrutiny On Third Party Vendors And Banks That Employ Them
The Consumer Financial Protection Bureau (CFPB) has released an alert to banks and small business financial institutions under its supervision, reminding them that they are responsible for proper oversight of all third-party service providers they employ, to ensure they are compliant with new federal regulations.
The CFPB, established by Congress to protect consumers and ensure compliance with all Federal consumer financial laws, issued a list of steps financial institutions should take in regulating their third party vendors:
- Conduct thorough due diligence to verify that the service provider understands and is capable of complying with the law;
- Request and review the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities;
- Include in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities;
- Establish internal controls and on-going monitoring to determine whether the service provider is complying with the law; and
- Take prompt action to address fully any problems identified through the monitoring process.
This new level of scrutiny by the CFPB mirrors an increased industry-wide emphasis on accuracy and risk management. As Notaries often serve on the front lines of an organization’s risk management efforts, and have both consumer contact and compliance responsibilities, this alert serves as a reminder to organizations to ensure that their Notary employees are well trained and properly supervised.
Notaries in the financial industry can do their part to protect themselves, their businesses, and the public by always following the NNAs Recommended Notary Practices and by ensuring that all signings are done accurately and to the letter of the law, as notarized documents may become part of a future review or audit.