Remember the game of Clue? Through deductive reasoning, players must figure out which character, weapon and location are in the secret file. To do this, players must uncover what cards are in other players’ hands by making more and more accusations. Once a player knows what cards the other players are holding, they will know what cards are in the secret file. It’s a great game for those who enjoy reasoning and thinking things out.
Determining what compliance training a company must provide to their staff these days is much like playing the game of Clue. You are provided with the game board to play on by the Consumer Financial Protection Bureau (CFPB), the CFPB Supervision and Examination Manual. From the Exam Manual, we must read through the various sections to find clues to determine exactly what compliance training should be included in a company’s compliance management system the CFPB expects companies to have in place.
Gone are the days where a company can leave training up to the individual loan originator to complete on an annual basis. It is not enough for a company to merely require NMLS continuing education for their originators. Now, a company must look for and provide compliance training for their entire staff, including training for compliance professionals, managers, processors, originators, underwriters, closers, funders, pre-purchase reviewers, etc.
Clue number one: The importance of training to the CFPB
We find our first clue when we search the Exam Manual for the word “training.” More than 120 times, the word “training” is noted in the CFPB Supervision and Examination Manual, yet you will not find a single list of what training is specifically required for a company to have in place. This leaves many companies wondering, “What training am I required to provide to my staff?” There is no magical list that exists to tell companies what training they should be providing to their staff. The CFPB expects that, as a company, you are providing compliance training to the appropriate personnel based upon their job function. This means that you are providing training on the federal consumer financial laws which are related to the job that they perform.
Clue number two: Details of examination procedures
The CFPB Supervision and Examination Manual, details what the CFPB is reviewing in a company’s training program in Part III of their examination procedures. This is the portion of the exam where the examiners will provide comments regarding what they have reviewed during the exam. This is a great place to start when developing your company’s compliance management system and also a good clue as to what your company should be developing for your training program. It also tells us how important training is to the CFPB because it is listed as part three out of six parts that they provide in their compliance management review.
Table 1—CFPB Supervision and Examination Guide—Page 891
III. Examination Procedures—Training
To evaluate the quality of the entity’s compliance training program, examiners should:
1. Request and review the schedule, record of completion, and materials for recent compliance training of board members and executive officers.
2. Determine the involvement of compliance officer(s) in selecting, reviewing, or delivering training content.
3. Request and review policies, standards, schedules, and records of completion for compliance-specific training of compliance professionals, managers, and staff, and documents demonstrating that service providers who have consumer contact or compliance responsibilities are appropriately trained.
4. Request and review samples of the content of training materials and comprehension tests, including training related to fair lending, new regulatory requirements, new products or channels of distribution, and marketing (including scripts).
5. Request and review training developed as a result of management commitments to address monitoring, audit, or examination findings and recommendations or issues raised in consumer complaints and inquiries.
6. Determine whether the program is designed to provide training about the specific regulatory requirements relevant to the functions of particular positions for loan officers, such as the Truth-in-Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA).
7. Review records of follow-up, escalation, and enforcement for units with training completion rates that do not meet the supervised entity’s standards or deadlines.
8. Request and review the supervised entity’s plans for additions, deletions, or modifications to compliance training over the next 12 months and any plans for changes to the overall training resources and compare actual training activities to prior plans.
Table 2—CFPB Supervision and Examination Guide—Page 892
Draw preliminary conclusions about the strength, adequacy, or weakness of the compliance training program. Consider whether:
a. Compliance training is current, complete, directed to appropriate individuals based on their roles;
b. Training is effective, and commensurate with the size of the entity and nature and risks to consumers presented by its activities;
c. Training is consistent with policies and procedures and designed to reinforce those policies and procedures; and
d. Compliance professionals have access to training that is necessary to administer a compliance program. Confirm the preliminary conclusions through a risk-focused review of the compliance training program.
Clue Number Three—Examination Objectives
Although the CFPB does not provide us with a written list of what training they want to see in a company’s training program, we can look to the examination objectives they provide for clues regarding what they are looking for.
Table 3—CFPB Supervision and Examination Guide—Examination Objectives—Page 40
Education of an entity’s board of directors, management, and staff is essential to maintaining an effective compliance program. Board members should receive sufficient information to enable them to understand the entity’s responsibilities and the commensurate resource requirements. Management and staff should receive specific, comprehensive training that reinforces and helps implement written policies and procedures. Requirements for compliance with Federal consumer financial laws, including prohibitions against unlawful discrimination and unfair, deceptive, and abusive acts and practices, should be incorporated into training for all relevant officers and employees, including audit personnel. Examiners should seek to determine whether:
1. Compliance training is current, complete, directed to appropriate individuals based on their roles, effective, and commensurate with the size of the entity and nature and risks to consumers presented by its activities.
2. Training is consistent with policies and procedures and designed to reinforce those policies and procedures.
3. Compliance professionals have access to training that is necessary to administer a compliance program that is appropriate for that supervised entity and its business strategy and operations.
Let’s look for the first clue …
“Board members should receive sufficient information to enable them to understand the entity’s responsibilities and the commensurate resource requirements.”
This means that all individuals who are in an ownership position or executive level receive to help them make the decisions they need to make for the company. Even if you are an individual broker owner you need to complete compliance training to help you effectively manage the regulatory requirements of your business.
Let’s look for the second clue …
“Management and staff should receive specific, comprehensive training that reinforces and helps implement written policies and procedures.”
This means that everyone in a company, from the managers to the processors complete training that reinforces the policies and procedures a company has in place. So, if you have a policy in place for how you handle consumer complaints then you should be providing training that reinforces that policy and if there are any problems which arise or changes you need to make to your consumer complaint policy that you must provide updated training to your staff to make sure they know and understand the changes.
Let’s look for the third clue …
“Requirements for compliance with Federal consumer financial laws, including prohibitions against unlawful discrimination and unfair, deceptive, and abusive acts and practices, should be incorporated into training for all relevant officers and employees, including audit personnel.”
This means that you; as a company, should be training your staff on all of the federal consumer financial laws, including Fair Lending, Fair Housing, ECOA, UDAAP, MAPs, SAFE Act, TILA, RESPA, GLBA, HMDA, etc. which relates to the job they perform.
Want the full list of required training? Sorry, it doesn’t exist. However; if we move on to Clue Number Four, we can get a better idea of what that training that list may include.
Clue number four: CFPB Consumer Financial Protection regulations
If we look to the list of consumer financial protection regulations on the CFPB Web site we can get a better idea of what they are looking for in a training program. These are all of the regulations which the CFPB refers to in their Supervision and Exam Manual and what they expect; along with your policies, procedures and processes that you train your staff on.
Table 4—CFPB Consumer Financial Protection Regulations
►Regulation B: Equal Credit Opportunity
►Regulation C: Home Mortgage Disclosure
►Regulation D: Alternative Mortgage Parity Act
►Regulation E: Electronic Fund Transfers
►Regulation F: Fair Debt Collection Practices Act
►Regulation G: SAFE Mortgage Licensing Act—Federal Registration of Residential Mortgage Loan Originators
►Regulation H: SAFE Mortgage Licensing Act—State Compliance and Bureau Registration System
►Regulation I: Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance
►Regulation J: Land Registration
►Regulation K: Purchasers’ Revocation Rights, Sales Practices and Standards
►Regulation L: Special Rules of Practice
►Regulation M: Consumer Leasing
►Regulation N: Mortgage Acts and Practices—Advertising
►Regulation O: Mortgage Assistance Relief Services
►Regulation P: Privacy of Consumer Financial Information
►Regulation V: Fair Credit Reporting
►Regulation X: Real Estate Settlement Procedures Act
►Regulation Z: Truth-in-Lending
►Regulation DD: Truth-in-Savings
►Disclosure of records and information
►Rules Implementing Equal Access to Justice Act
►Enforcement of Nondiscrimination on the Basis of Disability in Programs and Activities Conducted by the Bureau of Consumer Financial Protection
►Procedure Relating to Rulemaking
►Rules Relating to Investigations
►Rules of Practice for Adjudication Proceedings
►State Official Notification Rules
►Defining Larger Participants of Certain Consumer Financial Product and Service Markets
Winning the game of Clue
The player who eliminates all false possibilities the fastest during the game of Clue is most likely to win the game in the end. However; any turn not used to make a suggestion is essentially a wasted turn. So it is important to always look for clues and make suggestions. Same goes for your company’s training program. By looking at the CFPB Supervision and Exam Manual, we can find clues to what they are looking for in their exams. Look to the industry for articles, experts, conferences, Webinars and training for suggestions as to what others are doing and then find a good resource or solution that fits your business model.
Follow the suggestions below when developing your training program. Think this is something new? No. Guess where it came from? Want a clue? It came from the CFPB Web site in their 2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide on page 15. Why is this important? Because the CFPB expects you to train your staff on all of the new regulatory changes that are happening in January 2014. Yes, another clue. The CFPB Web site is full of great information and clues to help you become and stay compliant. It is just a matter of reading through the information, looking for clues and making sure you are implementing the right training for your company.
Table 5—2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide—Page 15
1. Have you determined what training needs to be developed?
2. Have you determined who needs training?
3. Have you considered the following questions in developing training:
►What information will be covered in the new training?
►What will the format be for training? (Instructor-led, online, etc.)
►How will training vary based on job duties?
►How do you document completed training?
►What are the consequences for employees not completing training by the assigned deadline?
►Have the changes to the training program been fully integrated into your full training program and ongoing schedule?
4. How will you roll out the changes to your training program?
►When will training be completed?
►Do training timelines allow for enough time for staff to fully understand rule requirements prior to the effective dates?
►Have you done any testing of training program changes?
5. Who is responsible for developing course content?
►Did you purchase content from an outside vendor?
►How is senior management involved in developing and approving course content?
►How did you determine that course content is adequate?
►What is the process for identifying the need for additional changes?
6. Have you determined what training will be needed to address operational changes?
►What areas are impacted by the changes?
Ginger Bell, a renowned education specialist in the mortgage industry, is the best-selling author of Cracking the Success Code, a book she co-authored with Brian Tracy and other business owners. Ginger was recently named national compliance training director for C3Compliance Consultants, a division of Offit Kurman Attorneys at Law, one of the top law firms in the mid-Atlantic region. In 2011, Ginger was awarded the “Professional Woman of the Year” Award by the National Association of Professional Women (NAPMW) for her commitment to training and education. She may be reached by phone at (503) 318-6152 or e-mail [email protected]