CFPB to Examine Service Providers—Are You Affected? June 13 Webinar Has Answers!

Lightbulb2A recent blog by law firm Ballard Spahr reports the Consumer Financial Protection Bureau (CFPB) has begun to examine service providers on a regular, systematic basis, particularly those supporting the mortgage industry.  The blog recounts information provided by the CFPB during an American Bar Association (ABA) Business Law Section meeting held May 7, 2017, stating: “The change represents a significant expansion of the CFPB’s use of its supervisory authority and will substantially increase the number and types of entities facing CFPB examinations.”  To be fair, the blog does not specifically mention law firms or title and settlement agencies, but both law firms and title agencies are groups that clearly fall into the category of service providers “supporting the mortgage industry.”

Fortunately, there will be an opportunity to hear more detail about whether title and settlement agents will be subject to increased supervision.  Ballard Spahr is conducting a free webinar June 13, 2017, from 12-1 p.m. (ET) which could provide an opportunity to specifically ask such questions.

For further background on this topic prior to the webinar, carefully read the CFPB’s Bulletin 2012-04, “CFPB to Hold Financial Institutions and Their Service Providers Accountable.”  As is obvious from the title of this five-year-old bulletin, the 2017 announcement to directly examine third-party vendors is not an announcement of new policy, but clarification of how the CFPB intends to implement its longstanding policy to hold third parties accountable.

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On My Soapbox—Is it Fair to Make Title Agents and Law Firms Prove Compliance with Best Practices?

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Speakers’ Corner Hyde Park 1970’s – Leonard Bentley

For those in the title and legal industries, it can be more than a little annoying to have one’s role in representing lenders characterized as merely that of “third-party service provider.”  Title agencies and law firms perform the same trusted services for the lending community today—handling confidential bank client information and millions of dollars of lenders’ funds, as they have day after day for the last half century!

That being the case, why are title agencies and law firms now being required to jump through hoops to prove they are in compliance with either newly imposed bank standards or ALTA Best Practices?  Can anyone point to an explosion of cases where title agencies and law firms providing services to bank clients have been repeatedly harmed?

The short answer is “no”—currently there is no extensive list of data breach cases that could give rise to the conclusion that any sort of crisis has arisen from dealing with title agencies and law firms.  For those two specific industries, there is almost nothing that lenders can point to and say, “That’s why we need to make every one of you prove that you are following existing law.”  To the contrary, many in the title and legal industry want to tell the lending community, “We are doing a good job, and there is no reason to make us prove compliance when there is no proof of non-compliance.”

Unfortunately, there are some highly visible examples of other bank service providers who have caused the banking industry huge losses.  The following is a list of fines that were levied on financial institutions, not because of what they did, but as a result of the compliance violations committed by third-party vendors hired by those financial institutions.  The blog “Regulators Go After Banks for Vendor Management,” by Reed White, an associate in Bryan Cave’s Atlanta financial institutions practice, outlines the following examples of some of the levied fines:

  • Consumer Financial Protection Bureau (CFPB): Discover Bank, $14 million civil penalty (September 2012)
  • Office of the Comptroller of the Currency (OCC): American Express Bank, estimated $6 million in restitution (September 2012)
  • CFPB: J.P. Morgan Chase, $309 million in restitution and $20 million civil penalty (September 2013)
  • CFPB: American Express, $59.5 million in restitution and $9.6 million civil penalty (December 2013)

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“Beeeeeeeeeep… This Is a Test.”

Ahhh…the jolting sound that sometimes interrupts our prime-time television programming: This is a test.  For the next thirty seconds, this station will conduct a test of the Emergency Broadcast System.  This is only a test.

EBS ScreenThough they are prickly interruptions, we tolerate these tests because they are brief and, perhaps most importantly, we understand that should a real emergency occur, the Emergency Broadcasting System (EBS) would keep us informed.  As it should, system testing takes place before an actual emergency to ensure that notifications function properly before the need is dire.  In the same way, emergency preparedness for a cyberattack should occur before an attack happens.  This blog will concentrate on testing your emergency plan in advance of an attack and analyzing your established insurance policies to see if you would be covered for inevitable financial costs associated with such an attack.

The EBS and its predecessor notification programs have been operating almost the same way since 1951.  When we take a look at why, several underlying principles become apparent:

  1. It’s critical to anticipate a wide variety of potential disasters.
  2. It’s important to have plans in place to deal with such disasters before they occur.
  3. It’s critical that the plans can be implemented in a timely fashion to minimize loss.
  4. It’s crucial to get people’s attention, so the established plans are repeatedly tested.

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PYA Title Industry Experts to Facilitate Roundtable Discussions at ALTA Springboard

ALTA SpringboardEugene McCullough, the title industry service director at PYA will join Debra Gentry, a director within the ALTA Best Practices Services group, as facilitators for the American Land Title Association’s (ALTA) 2017 Springboard.  The Springboard is an opportunity for title insurance and settlement industry professionals to network, attend informative sessions, and derive inspiration for their careers.

McCullough and Gentry will facilitate general sessions during the “Ideas Festival,” covering such topics as:

  • Staffing and development
  • Culture of compliance
  • Connecting to the customer

The Springboard takes place March 8-9, 2017, in Fort Worth, Texas.  Learn more and register.

If you would like more information about ALTA Best Practices compliance or implementation, or would like to request a speaker on this topic for your organization or event, contact one of our executives below at (800) 270-9629.