Compliance Management System
- It's not a computer
EXCERPT FROM CFPB PRESS RELEASE
The CFPB expects the companies it supervises – regardless of size – to have fully developed compliance management systems to ensure all federal consumer financial protection laws are followed.
A good CMS ensures that employees know about their responsibilities, creates structures for reviewing operations, and takes corrective actions when needed. A good system also lessens consumer risks and reduces the potential for violations.
Prior to the CFPB’s existence, many supervised nonbanks had not been subject to federal or even state examinations. Perhaps because of this, CFPB examiners found that many nonbanks are more likely to lack robust compliance management systems. The Bureau found that many nonbank institutions are:
Missing a comprehensive consumer compliance program: The CFPB found that often individual branches of a business were looking out for relevant federal laws without an overarching system in place at the company. This creates a lack of consistency in following the laws across products and across locations. The result can be the erratic treatment of consumer problems. It can also mean that root causes of regulatory violations go undetected.
Lacking formal policies and procedures: Not having formal, written documents that both detail consumer compliance responsibilities and instruct employees on the appropriate methods for executing these responsibilities can lead to inconsistencies, sloppy recordkeeping, and ultimately, consumer harm because nobody at the institution is clearly responsible to make sure laws are being followed.
Forgoing independent consumer compliance audits: Independent audits are a good way for a company to routinely conduct quality-control checks on its operations. A compliance audit program provides a board of directors or its designated committees with information about whether policies and standards are being implemented. Without such a program, it is difficult to recognize any significant deficiencies in an institution’s compliance management system.
The CFPB is committed to helping the industry establish good compliance systems and today’s report also offers guidance in how to do so. In general, both banks and nonbanks have committed to improving their compliance management systems in the future.
See Part II Section A and Section C
About Dr. Schell:
Dr. Andy Schell, Ph.D., DBA, MSML, MBA, CPA/CFF, CMB
Dr. Schell is CEO, Managing Partner, and Co-Founder of Mortgage Banking Solutions and the Founder of MBS Financial Services ("MBS"), based in Austin, Texas. Dr. Schell is known for his ability to turn "vision into reality" and "chaos into order" as he finds creative solutions to the challenges his clients face addressing Revenue Stability, Technology Enhancement, Financial Management, and Workflow Efficiency.
He has 4 decades of experience as a strategist directing the activity of both small and large groups of employees including mortgage lending activity at Bank of America. His leadership knowledge extends from his hands-on experience and his academic training in his MBA, his master's degree in leadership, and his doctoral work to examine employee dynamics given leader stimulus.
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