When dark, foreboding clouds appear on the horizon on the morning of your picnic, wouldn’t it be wise to pack an umbrella? It’s simple advice we can apply to what’s happening in the title industry with the Office of the Comptroller of the Currency’s (OCC)—one of the lending industry’s most powerful regulators—decision to revise its 23-year-old penalty guidelines to expand the definition of potential wrongdoers and enhance the punishment that can be meted out to those who commit violations. Title agents and attorneys should take a moment to ensure that they aren’t in the radius of the impending storm, as they unfortunately may find themselves much closer to the direct path than anticipated.
On February 26, 2016, the OCC released Bulletin 2016-5, which updates the OCC’s policies for the assessment of civil money penalties (CMP) and represents the foreboding clouds on the morning of the industry’s picnic. A close reading of this bulletin makes it clear that title agents and title attorneys will likely need a very sturdy golf umbrella, preferably emblazoned with the “ALTA Best Practices logo,” to avoid some of the inevitable consequences of an oncoming storm.
This recent bulletin was preceded by OCC Bulletin 2013-29, which clearly and unequivocally directed lenders to exercise increased due diligence over their third-party vendors, including title agents and settlement attorneys. The current bulletin is focused upon a discussion of CMP, including how these penalties are determined and upon whom they may be imposed.
Although it is clear that the OCC intends to hold individual bankers responsible for their acts, a large portion of the bulletin identifies a broader class of new parties that the OCC intends to regulate through the imposition of CMPs. Those new parties are identified as “institution-affiliated parties,” which by definition includes “independent contractors” providing services to financial institutions (i.e. title and settlement attorneys). The bulletin creates a detailed chart, which is a matrix of factors that will be utilized in determining the size of the CMP that can be imposed upon individuals who, in the OCC’s opinion, violated any law or regulation imposed upon a financial institution.
The creation of the new CMP matrix suggests an increased propensity for the OCC to target groups such as title and settlement agents with CMP actions. For that reason, implementing policies and procedures designed to ensure that you are protecting non-public personal information and exercising appropriate cyber security controls makes good sense. Adopting and implementing the ALTA Best Practices Framework, along with Gramm-Leach-Bliley compliance, would position your organization to defend itself against the OCC’s newly enhanced penalty provisions.
The following article, “OCC Announces Shift in Enforcement Policy: Increased Focus on Internal Risk Management and Personal Liability of Bankers,” is an excellent discussion of the potential ramifications associated with the release of this bulletin