April’s “Compliance Matters” blog post written by Fred Gooch, general counsel and vice president of Compliance, focuses on the costs of complying with the CFPB. The CFPB’s mission is to make the consumer financial products and services marketplace as fair and transparent as possible. But often ignored is what the cost of additional oversight means to the consumer.
Lenders are charged with consistently educating themselves on what the CFPB is proposing – since they must adhere and adopt the rules in order to continue business and engage in legal practices. The CFPB has been transparent as to how long a rule will be in the adaptation stage and when implementation will be enforced. Lenders have that amount of time to update technologies, evolve business practices, alert clients and third-party vendors and comfortably practice new Bureau standards.
The cost of doing business – origination, servicing, closing, etc. – will continue to increase as lenders adopt and evolve processes to comply with CFPB rulemakings. These costs are being passed onto the consumer to guarantee their safety and the safety of their money; something they have no direct control over.
DocuTech’s recent closing cost study reveals that closing costs have increased 0.4 percent from December 2012 to March 2013, following a 0.5 percent decrease experienced from April to November 2012. As the industry continues to adapt, consumers will begin to front the extra costs.
If lenders are not equipped to handle new compliance processes, outsourcing to a vendor that specifically focuses on these areas will ensure compliance standards, updates and performance are adequate and accurate. Predatory lending and loan documentation are common compliance areas that are outsourced, however third-party relationships are closely monitored by the CFPB and will result in fines if not managed responsibly.
Compliance costs will automatically increase for a business and the borrower if a compliance violation occurs. Time is money and money is time when facing regulators and the processes they demand. Audits are undoubtedly expensive that will consume all internal and external compliance resources until completion; which adds further complication and time consuming tasks in your daily business practices.
Focus on your internal compliance management process – does your business have one? If not, consider a well-respected third-party vendor to handle the work. An experienced compliance staff – in-house or outsourced – will monitor, update and implement regulatory changes so that your everyday routine doesn’t have to include reading the CFPB’s website. Select a vendor that will reduce your costs and focus on the areas of expertise in which your consumers need.
Mr. Gooch’s posts are available each month online at www.nationalmortgagenews.com. Read April’s full post here.