Richard Cordray, the Consumer Financial Protection Bureau (CFPB) director, reiterated at a recent Consumer Advisory Board Meeting in February the Bureau’s efforts on how to improve the way consumer financial markets operate for the American people – specifically focusing on holding financial institutions accountable for its service providers’ actions.
Financial institutions must do their research when choosing to contract with a vendor. Identifying the type of relationship the bank wishes to contract with the vendor will set the stage as to how the two will operate day-to-day. The reputation, experience, effectiveness, security and products are all factors financial institutions must consider when establishing a vendor relationship. Different size vendors are able to offer different capabilities that might or might not fit a financial institution’s business goals or meet customer demands or standards.
However, third party relationships do not come without risk. Updates and details simply fall through the cracks and can damage the relationship, compromise compliance and cost money. Constructing a remediation action plan, and having it ready for deployment at any given minute in the event of a crisis or compromised situation, will address the issue from both sides and keep the bank’s and vendor’s strategies and takeaways in mind. Separate, yet cohesive crisis communication plans to address how the issue arose, how each party will initiate efforts to resolve it and how they will overcome it, will make for a stronger relationship that is capable of overcoming unforeseen problems.
Constant lines of communication between a financial institution and its third party vendors is the only dependable way to guarantee objectives are met, regulatory changes are addressed and associates are aware of updates and strategy shifts. Vendors should notify the financial institution associates directly associated with maintaining the relationship of all regulatory changes and document revisions to ensure compliance. Individual changes are frequent, time consuming and require adherence by a set deadline. Monitoring and assessing the status of the relationship, as well as guaranteeing both parties are in line with governing bodies’ standards will compose a fluid relationship.
Read the full article: “Maintaining Compliant Third Party Vendor Relationships”