Tag:Banks
Compliance Failures Result in Hundreds of Accidental Foreclosures
Compliance failures in banking can often result in real harm to borrowers. In the case of Wells Fargo, a compliance error resulted in 400 of the bank’s customers losing their homes. Due to an issue in the bank’s software system, the institution denied loan modifications to borrowers who should have qualified. This latest failure adds to the myriad of issues Wells Fargo bungled over the past several months. For compliance professionals, the failure demonstrates the risks of automation in compliance, the importance of technical expertise, and the risks of decision-making without putting the interests of the customer first.
Challenges and Opportunities in Regulating the Banking Industry
Regulation in the financial sector is critical to preventing crimes that include fraud, money laundering tax evasion, human trafficking, aiding drug trafficking, and even financing terrorism. Despite the importance of regulation and banking institutions’ compliance with such regulations, many laws regarding money laundering are outdated and prevent efficient prevention of such crimes. Additionally, enforcement against large financial institutions is a difficult matter because of the harm that penalizing them could have on the economy.
Financial Institutions Join Forces for Vendor Management Compliance
Financial institutions often rely on outside vendors to provide information technology services. While doing so often provides economic efficiency and quicker technological innovation, the risks associated with outsourcing information technology services are significant. Institutions must develop strong vendor management programs to ensure the safety of their customer’s personal information. Several large financial institutions have come together to create a new consortium to perform vendor and partner due diligence.
Congressional Repeal of Consumer Protection Rule Creates Bar to Class-Action Suits Against Banks
In July of 2017, the Consumer Financial Protection Bureau (“CFPB”) Director, Richard Cordray, implemented a rule regulating the ability of banks to prohibit class-action lawsuits from being placed within the fine print of their consumer contracts. By the end of July, the House of Representatives voted to repeal the rule under the Congressional Review Act, which allows lawmakers to overturn any recently issued regulation by an executive agency. The Senate subsequently voted to repeal the rule after a 50-51 vote, where Mike Pence cast his vote to break the 50-50 tie. On November 1st, 2017, President Trump signed the bill repealing the regulation.