NAAA Annual
Convention
Southern Region
Break-Out
September 5, 2013
Agenda
• CFPB overview
• How are consigners and auctions
impacted
• Service provider’s role
• Share IARA meeting with standard audit
recommendation
• Discussion/Questions/Next Steps
CFPB Highlights
• Consumer Financial Protection Bureau (CFPB)
established through Dodd-Frank
– Protect consumers by regulating lenders
– Ensure in compliance with all federal financial laws
– Lender’s responsible for internal actions and their
service providers
– Many consignors are already subject to the CFPB’s
enforcement authority
– Likely be (if not already) subject to supervisory
authority by the CFPB in the near future
Putting the CFPB in Context
• Committed to their mission
• Broad, wide-ranging POWER
• CFPB is a policing agency
⁻ Investigative powers, Civil Investigation Demands, subpoenas
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⁻ Examinations
⁻ Regulations
⁻ Bulletins
Strong on communication and collaboration
Data driven, scrutinize and suspicious of everything
Big on social media
Big on use of technology
CFPB Audit
Highlights Priorities
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Compliance Management System
Effective communications
Board and management involvement/oversight
Training programs
Reliable data
Fair lending, Fair lending, Fair lending
Address complaint resolution
UDAAP
Policy and procedure documentation
3rd party oversight
CFPB Bulletins
• Bulletin 2012-03, Service Providers
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Written company vendor policy
Accountability
Conduct due diligence
Review policies and procedures, internal controls and training material
Include in contracts expectations about compliance as well as consequences
for violations
– Establish internal controls and on-going monitoring
– Take prompt action to address identified problems
• Bulletin 2013-06 Responsible Business Conduct
– CFPB’s guidance to favorably affect the ultimate resolution of enforcement
investigations
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Self-policing
Self- reporting
Remediation
Cooperation
How Are You and Your Clients Impacted?
• Use of third-party service provider does not absolve
Consignor of responsibility for compliance
• Consignor is ultimately responsible for actions of their
service providers
• Policies and procedures to monitor and test for
compliance of third party with federal consumer
protection laws
• Enforcement
And the Fines Continue to Come
• Capital One Bank
– Liable for violations of 3rd party service providers
– July 18, 2012: $150M in restitution; $60M in civil penalties
• Discover Bank
– Must hire independent auditors to monitor future compliance
– September 12, 2012: $200M in restitution; $14M in penalties
• American Express
– New compliance obligations
– October 1, 2012: $85M in restitution; $28M in penalties
• US Bank
– June 27, 2013: $6.5M
Your Role
• Talk with your legal and compliance department
• Work with your clients and prospects as a resource to
understand requirements, due diligence requests,
standardization, etc
• Familiarize yourself with the CFPB-they are everywhere and
not going away
– http://www.consumerfinance.gov/
– Twitter, Facebook, complaint portal, etc.
• Join trade groups, find on-line sources for information from
law firms and others, participate in webinars, and network
• Know the CFPB’s philosophies, “hot topics”, etc.
Challenges for the Service Providers
• Requests require time and resources
• Current variances
– Different formats
– Different wording and number of questions
– Various turnaround times
– Different methods for requesting
• Entity –direct or independent
• Email, formal due diligence document, or automated
process
Review CFPB Auction Standards
Survey Results
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IARA conducted a confidential survey
Goal to develop standardized industry compliance process
23 organizations participated in the survey
65% already have some type of program for 3rd party vendors
53% have program for auctions
40% have vendor management group
70% feel there should be industry standards
67% feel auctions are somewhat in compliance
Need/Benefit of Standardized Audit
Process for Auctions
• 70% responded you would like to see a standardized
compliance process
• Current state of industry
– Consignors
– Service Providers
• Audit/due diligence questions
– 80% are standard
– 20% specific to the client
SAMPLE DRAFT
CFPB Compliance Audit Standards
SAMPLE DRAFT
CFPB Compliance Audit Standards
SAMPLE DRAFT
CFPB Compliance Audit Standards
SAMPLE DRAFT
CFPB Compliance Audit Standards
Questions and Discussions
• Presentation will be available
• This presentation is for general information
and is not intended to be legal advice
• Thank you