QUESTION
I want to thank you for your FAQs. We really appreciate them.
In a few weeks, we are going to have a UDAAP examination. We are a medium-sized bank in the northwest. Our compliance and legal staff – of which I am a member – are preparing for it. The big issue is to be sure that we are getting everything ready for the regulators to review. They already requested many documents, but we knew there was much more needed, and we wanted to anticipate as much as possible.
We plan to retain you for the UDAAP Tune-up for our mortgage lender subsidiary. So, it seems you may know about the examination requirements for the UDAAP.
What are some of the documents and information we need to get ready for the UDAAP examination?
ANSWER
We developed the UDAAP Tune-up® to emulate
an examination audit.
It takes sixty days and is inexpensive. The UDAAP Tune-up® is conducted hands-on by one of our Directors. You receive a report, with findings and a risk rating, along with actionable compliance recommendations.
Our UDAAP Tune-up® is designed to assess the quality of the institution’s compliance risk management systems, including internal controls and policies and procedures, for avoiding unfair, deceptive, or abusive acts or practices (UDAAP).
But you are just a few days away from the UDAAP examination, so I sense the urgency and will provide some high-level guidance. Keep in mind that knowing your actual operations makes a big difference in providing more detailed advice.
During the preparation process, you should identify acts or practices that materially increase the risk of consumers being treated unfairly, deceptively, or abusively. The assessment process should also gather facts that help determine whether the institution is engaging in prohibited acts or practices when offering or providing consumer financial products or services that are likely to be unfair, deceptive, or abusive.
Based on the assessment results, management should review for potential unfair, deceptive, or abusive acts or practices, taking into account an institution’s marketing programs, product and service mix, customer base, and other factors, as appropriate.
Even if the risk assessment has not identified potential unfair, deceptive, or abusive acts or practices, the compliance advisors should be alert for situations that warrant further review.
Generally, we categorize preparation for a UDAAP exam into three sections:
(1) documentation procedures,
(2) management and policy-related procedures, and
(3) transaction-related procedures.
In this answer, I will offer some guidance with respect to the documentation procedures.
- Select a group of stakeholders and task them with providing the following documents and information.
- Then hand out the following list of documentation and information requirements.
And remember, getting the documentation together is only one of three parts to preparing for a UDAAP examination. You must be able to understand the rules, regulations, Best Practices, and applicable laws that will be invoked in the regulator’s evaluation of your UDAAP compliance, especially in light of the implications involving your specific UDAAP compliance profile based on the presented documentation and information.
UDAAP Documentation Procedures
Obtain and review copies of the following:
· Training materials.
· Lists of products and services, including descriptions, fee structure, disclosures, notices, agreements, and periodic and account statements.
· Procedure manuals and written policies, including those for servicing and collections.
· Minutes of the meetings of the Board of Directors and management committees, including those related to compliance.
· Internal control monitoring and auditing materials.
· Compensation arrangements, including incentive programs for employees and third parties.
· Documentation related to new product development, including relevant meeting minutes of Board of Directors, and of compliance and new product committees.
· Marketing programs, advertisements, and other promotional material in all forms of media (including print, radio, television, telephone, Internet, or social media advertising).
· Scripts and recorded calls for telemarketing and collections.
· Organizational charts, including those related to affiliate relationships and work processes.
· Agreements with affiliates and third parties that interact with consumers on behalf of the institution.
· Consumer complaint files.
· Documentation related to software development and testing, as applicable.
Chairman & Managing Director
