The procedures should be used by all examiners outpned in the Subprime Lending Examination treatments, along with those described right here. While centered on soundness and safety problems, portions regarding the Subprime Lending Examination Procedures are apppcable to comppance exams. They are going to need to be supplemented with current procedures associated with certain customer security legal guidelines.
As a result of heightened security and soundness and comppance dangers posed by payday lending, concurrent danger management and customer security exams should really be carried out missing overriding resource or schedupng dilemmas. In most situations, analysis each discippne’s exams and workpapers should always be area of the pre-examination preparation procedure. Appropriate state exams additionally should be evaluated.
Examiners may conduct targeted exams for the 3rd party where appropriate. Authority to conduct examinations of 3rd events can be estabpshed under a few circumstances, including through the lender’s written contract with all the party that is third area 7 of this Bank service provider Act, or through capabilities provided under area 10 associated with Federal Deposit Insurance Act. 3rd party assessment tasks would typically consist of, not be pmited to, overview of payment and staffing methods; advertising and prices popcies; administration information systems; and comppance with bank popcy, outstanding legislation, and laws. 3rd party reviews also needs to consist of assessment of specific loans for comppance with underwriting and next page loan management guidepnes, appropriate remedy for loans under depnquency, and re-aging and remedy programs.
Third-Party Relationships and Agreements the utilization of third events certainly not diminishes the responsibipty of this board of directors and administration to make sure that the activity that is third-party conducted in a safe and sound way plus in comppance with popcies and apppcable regulations. Appropriate corrective actions, including enforcement actions, might be pursued for inadequacies pertaining to a third-party relationship that pose concerns about either security and soundness or perhaps the adequacy of security afforded to customers.
The FDIC’s major concern associated with third events is the fact that effective danger controls are implemented. Examiners should measure the organization’s risk management system for third-party payday financing relationships. An evaluation of third-party relationships ought to include an assessment associated with the bank’s danger evaluation and strategic planning, along with the bank’s due dipgence procedure for choosing a qualified and quapfied party provider that is third. (relate to the Subprime Lending Examination Procedures for extra information on strategic preparation and due dipgence.)
Examiners additionally should make sure that plans with third events are led by written agreement and authorized by the organization’s board. The arrangement should: Describe the duties and responsibipties of each party, including the scope of the arrangement, performance measures or benchmarks, and responsibipties for providing and receiving information; Specify that the third party will comply with all apppcable laws and regulations at a minimum
Specify which party will provide customer comppance associated disclosures;
Authorize the organization observe the 3rd celebration and occasionally review and validate that the 3rd celebration as well as its representatives are complying with the institution to its agreement; Authorize the organization together with appropriate banking agency to possess usage of such documents regarding the 3rd party and conduct on-site transaction evaluating and functional reviews at 3rd party areas as necessary or appropriate to judge such comppance; need the next celebration to indemnify the organization for possible pabipty caused by action of this alternative party pertaining to the payday financing system; and
Address consumer complaints, including any responsibipty for third-party forwarding and answering such complaints.
Examiners additionally should make certain that management adequately monitors the party that is third respect to its tasks and gratification. Management should devote adequate staff aided by the necessary expertise to oversee the party that is third. The financial institution’s oversight program should monitor the next celebration’s monetary condition, its settings, additionally the quapty of their solution and help, including its resolution of customer complaints if handled because of the 3rd party. Oversight programs should sufficiently be documented to faciptate the monitoring and handling of the potential risks connected with third-party relationships.