The Consumer Financial Protection Bureau has once again utilized its broadest and most powerful weapon—Unfair and Deceptive Acts and Practices—to levy large fines. This time, it was Bank of America that received a $727 million dollar fine for "illegal credit card practices."
These practices included alleged deceptive marketing by inaccurately describing the benefits of certain add-on charges and the billing process for such charges. In particular, it is alleged that telemarketers "went off script" in describing the benefits and charges of certain credit protection plans to coax consumers into receiving them.
Many smaller lenders still utilize telemarketer driven leads for all or part of their business. Even more lenders rely upon loan officers during initial conversations with consumers to accurately communicate the benefits and risks of certain loan products as well as describing the lending process.
To the extent the CFPB can apply the unfair and deceptive acts and practices label to "off script" communications with consumers, lenders need to give particular attention to being able to prove what is said, by whom, and when. When it involves telemarketing—whether it is done by the lenders or a lead company they hire—lenders need to pay attention to the content of the script and the manner in which the telemarketer ensures it is followed, as well as a telemarketers' compliance history (after all, lenders could be held responsible for independent telemarketers through third-party vendor rules).
Addressing communications directly from internal loan officers, lenders need to rely upon training and should increasingly consider occasional monitoring to ensure proper communications are maintained. Better yet, lenders should consider integrating certain communications systems into the origination process that ensure the lender is able to document the accuracy of communications with borrowers.
Such processes do not detract from the origination process, but rather add to it by removing loan officers from the compliance process, and allowing them to focus on sales and customer service.
The last thing lenders want to consider these days is spending more on compliance. However, there are new options emerging that protect lenders and assist in origination efforts. More than ever, lenders should consider new alternatives to avoid the risks of "off script" communications.
Ari Karen is an attorney at Offit Kurman.