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10 Banking Regulatory Collection Trends to Watch in 2016


Increasing and unprecedented new and impending regulation geared toward lending and collection practices makes understanding compliance more important than ever.

For many banks and credit unions, this requires reassessing vendor relationships and instituting improved safety measures and guidance to meet these new, stricter standards.

Regulatory Trends

Presented in no particular order

1. Oversight of third-party relationships: A good working relationship with vendors is no longer sufficient for financial institutions. Additional standards and amplified examination by the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB), as well as the Federal Deposit Insurance Corporation (FDIC) and the Federal Financial Institutions Examination Council (FFIEC), mean financial institutions now have the same responsibilities for in-house and out-of-house services. In previous years, vendor-management compliance issues revolved around ancillary products. In recent times, regulators have expanded their focus by challenging companies whose vendors caused a data breach, while placing increased emphasis on third-party handling of credit reporting as well as know your customer responsibilities.

2. Governance and risk management: Numerous financial institution executives continue to confront challenges in implementing a complete governance program that meets regulatory expectations.

3. Recovery and resolution planning: Big financial institutions are focusing on recovery and resolution planning. This is to help those firms respond quickly to stress events. FDIC Chairman Martin Gruenberg stated that for regulatory agencies, there is no higher priority coming out of the financial slump.

4. Debt recovery: The CFPB indicated it would modernize the Fair Debt Collection Practices Act, which has seen little change since its adoption nearly 40 years ago. Several areas could face scrutiny, including statute of limitation disclosures, debt validation requirements, and caps on debt collector contacts during a given timeframe.

5. Credit quality concerns: While credit excellence indicators continue as positive in general, regulators are progressively more concerned about a measured wearing away in underwriting standards. In particular, regulators voiced definite concerns about leveraged lending and auto finance underwriting.

6. Arbitration: The CFPB is developing a new regulation that will drastically restrict the influence of arbitration clauses in contracts for consumer financial products and services. The agency issued a lengthy report critical of the use of these provisions and questioned the benefits derived by consumers. In October, the CFPB outlined a proposal for a new rule that would prohibit pre-dispute arbitration agreements from restricting class litigation in court.

7. Payday/small dollar lending: The CFPB signaled that in February 2016 it will likely issue new rulemaking proposals covering payday, auto title, deposit advances and similar lending products.

8. Consumer safeguards: The CFPB has transitioned from a new regulatory agency into a powerful body that is changing the consumer financial product environment. As such, the bureau’s actions and direction should be of great importance and interest to financial institutions.

9. Cyberthreats: Cybersecurity is a major issue in banking and a main concern for regulators. The OCC’s unease, heightened by a level of operational risk for financial institutions, stems from risk management areas that might not be keeping pace with the necessary cybersecurity changes. Because technology threats evolve too quickly to legislate against, regulators expect financial institutions to adhere to standards from organizations such as the National Institute of Standards and Technology.

10. Data analytics and reporting: Expectations related to data quality, risk analytics, and regulatory reporting rose dramatically. Regulators now expect at the very least reporting for capital, liquidity, and resolution planning to be more timely and precise. Merely having the unrefined information is not adequate; organizations must be able to aggregate the data and perform advanced analysis in order to arrive at key decisions.

In addition to providing the right technology, IBS offers clients with ongoing and dependable training for your staffs to assure compliance. Our Online Self-Guided User Training Modules provides interactive training at no additional cost to support IBS clients.