Does your bank’s messaging have hidden UDAAP risks? If you haven’t performed a systematic review of your customer-facing communications, the answer is probably yes. New regulations are shifting how banks must interact with consumers, and as a result, they can powerfully affect your institution. Practices that may have gone unchallenged in the past now face sharp scrutiny by the Consumer Financial Protection Bureau (CFPB). Take action now to assess your UDAAP risk and prevent unwanted attention from the CFPB.
How to assess for UDAAP risk throughout your company
As we have noted in the past, an analysis of customer complaints is an excellent starting point to understanding potential areas of risk.
Every good program needs metrics and ways to monitor and test for UDAAP-related compliance. The CFPB complaint database and your customer analytics can provide a wealth of information to help you track and monitor progress. Consider bringing a data scientist on board to create a dashboard for your company. You can use the dashboard to keep management updated and highlight any emerging risks so they can be quickly resolved.
While it is quite a daunting document, the Consumer Protection Bureau’s Supervision and Examination manual is perhaps your single best reference. The manual has an extensive discussion of the UDAAP doctrines. For each of the standards (Unfair, Deceptive, Abusive) there is a comprehensive definition, insight into how to interpret the standards, and case studies. The manual also has extensive checklists and assessment tools. Each organization will need to create a compliance management program that reflects their unique needs and organizational circumstances, but this is a resource that will be helpful as you shape your thinking.
Taking action to reduce UDAAP risk
As some organizations have found, managing UDAAP risk is not simply a compliance task. On the Beyond the Arc blog we’ve been writing for years about the how critical it is to foster a customer-centric culture. As Gavin James, one of our customer experience strategy leaders has noted, “Just because your servicing communications pass approval cycles doesn’t mean they’ll be good for customers.” Her article 5 Signs You Don’t Have A Customer Centric Culture (And What to Do About It) offers some very practical advice.
Reducing UDAAP risk requires an integrated approach, and a close partnership between Marketing and Compliance. To engineer the needed culture change, there are several required structural elements including complaint analysis, customer communication and collateral assessments, and training for marketing teams.
Ultimately, the single most important step you can take to reduce UDAAP risk is to heighten the importance of customer experience in your organization.