1. Coping With Regulatory Compliance Challenges
NCSHA Annual Conference
Miami Florida
September 26, 2016

2. Coping With Regulatory Compliance Challenges Service Provider Oversight NCSHA Annual Conference Miami, Florida September 26, 2016
Discussion Leader:
Howard Zucker – Hawkins Delafield & Wood LLP
Participants:
Dru Jacobs – ADFITECH, Inc.
Alexa Reimelt – Consumer Financial Protection Bureau
Drew Page – Kutak Rock LLP

3. Roadmap for Today’s Discussion
Discuss whether your HFA is a Supervised Entity and subject to the Consumer Financial Protection Bureau’s (CFPB) supervision and examination authority.
Discuss the CFPB’s expectations with respect to a Supervised Entity’s Compliance Management System.
Discuss how Service Provider oversight fits as a piece of a Compliance Management System.

4. CFPB Supervision & Examination Authority
The CFPB examines Supervised Entities for their compliance with “Federal Consumer Financial Law.”
Federal Financial Consumer Law includes 19 different federal statutes and related regulations, including
Truth In Lending Act
Real Estate Settlement Procedures Act
Equal Credit Opportunity Act
Fair Debt Collection Practices Act
See 12 USC 5481(14) and (15).

5. CFPB Supervision & Examination Authority, cont’d
Four Groups of Supervised Entities
Supervised Banks
Supervised Nonbanks
Service providers to Supervised Banks and Supervised Nonbanks
Service providers to a large number of small insured depository institutions or credit unions
See 12 USC 5514, 5515 and 5516.

6. Is your HFA a Supervised Nonbank?
A Supervised Nonbank is
Any covered person who offers or provides origination, brokerage or servicing of loans secured by real estate for use by consumers primarily for family or household purposes, or loan modifications or foreclosure relief services in connection with such loans.
See 12 USC 5514(a)(1)(A).

7. CFPB Supervision & Examination Authority
Supervised Banks are examined “regularly” and those examinations occur simultaneously with prudential regulators examinations.
Supervised Nonbanks are not examined regularly. They are identified for examination on the basis of the risk they pose to consumers.

8. Compliance Management System
Four Elements of an Effective Compliance Management System
Board and Management Oversight
Compliance Program
Response to Consumer Complaints
Compliance Audits
CFPB SUPERVISION AND EXAMINATION MANUAL – Compliance Management Review, at pg. CMR 2.

9. Compliance Management System – Compliance Program
A Compliance Program should include policies and procedures for Service Provider oversight.
A Service Provider is “any person that provides a material service to a covered person in connection with the offering or provision of such covered person of a consumer financial product or service.”
Service Providers are not persons who provide
A support service provided to businesses generally or a similar ministerial service; or
Time or space for an advertisement for a consumer financial product or service.
12 USC 5481(26).

10. Compliance Management System – Compliance Program, cont’d
CFPB’s Stated Expectations for Service Provider oversight
Conducting Due Diligence
Requesting and Reviewing Policies and Procedures
Reviewing Agreements with Service Providers
Establishing Internal Controls to Monitor Service Providers
Taking Prompt Action to Address Problems.
CFPB Bulletin

11. Compliance Management System
“While all of the firms under our jurisdiction must follow the law, we understand that the means that they employ to achieve that goal will – and likely should – differ. We recognize that large, complex entities necessarily have different compliance oversight and management systems than smaller entities or those offering a more limited number of products or services.”
CFPB SUPERVISION AND EXAMINATION MANUAL – CFPB Supervision and Examination Process, at pg. Overview 4.

12. Coping With Regulatory Compliance Challenges Service Provider Oversight NCSHA Annual Conference Miami, Florida September 26, 2016
Discussion Leader:
Howard Zucker – Hawkins Delafield & Wood LLP
Participants:
Dru Jacobs – ADFITECH, Inc.
Alexa Reimelt – Consumer Financial Protection Bureau
Drew Page – Kutak Rock LLP