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On the other side , a financial institution may feel incentivized to completely overhaul their programs , spend a lot of time and effort on them , and yet still end up with regulatory violations and illegal practices years later due to insufficient analysis and downstream training failures . This is also something that happened to Wells Fargo in their mortgage servicing programs .
The issues of evaluating loan-modification applications led to a five-year correction attempt that ultimately failed , while other aspects of their mortgage programs also contained grave errors costing the bank multiple millions of dollars not emphasized during the initial program overhaul . A lack of an overarching training overhaul and compliance mechanisms essentially nullified the work Wells Fargo put in to researching and identifying the specific issues , because management and employees continued to engage in other practices containing errors .
Avoid Feeding the Cycle
Generally , the way to stop the “ rinse-repeat ” cycle is simply to stop committing regulatory violations . In practice , this approach can be looked at in a few ways .
Financial institutions who have received findings from a regulatory agency , consulting group , auditing group or other entity are officially on notice that something in the institution ’ s programs is not compliant with the law . At this point , the financial institution should identify the problems within the products or services , and work with management and employees to determine a more adequate approach .
This can mean measures such as compliance policy overhauls , employee training and education sessions , and additional brochures , manuals and materials for employees commonly working with the noncompliant or insufficient programs . It can also include removal of certain problematic programs , hiring out a consulting group to work with management on new policies and procedures , or increased monitoring and examinations to catch violations before an official regulatory agency does .
In any case , the financial institution is taking a closer look at their programs and services . A more “ holistic ” approach may include a review of all relevant products and services offered by the financial institution , or a more “ targeted ” approach may only include a review of the specific problems within those products or services , such as the language in disclosures .
Waiting is a Disadvantage
An important part of avoiding the label of “ repeat offender ” is prevention .
Waiting until a regulatory agency imposes a fine on a financial institution means it is too late . Problematic products and services can always be amended , but the financial damage from the penalty , plus the possible reputation damage from an illegal practice or regulatory violation can affect the long-term success of the financial institution , especially if the institution is smaller .
While it is possible to hold-off on program overhauls , it isn ’ t a recommended practice for the same reasons Wells Fargo continues to be featured on the CFPB ’ s blog . As compliance issues and illegal practices continue to go unchecked , it takes even more time for the financial institution to rectify the issue retroactively , while also developing new systems for compliance , and reviewing other products and services for similar violations .
None of the issues cited were new . Most , if not all the issues had been known to Wells Fargo for a number of years , some of which were attempted to be remedied , only to end in ultimate failure due to systematic errors and inadequate prevention . By waiting and continuing to expand products and services to consumers before successfully addressing already existing issues , Wells Fargo ended up harming millions of consumers and owing billions of dollars .
As a financial institution , preventative measures are a valuable asset to a compliance program . Not only do they act as a checks and balance for existing products and services , but preventative measures also act as a deterrent for any compliance issues with new products .
Don ’ t allow products and services to become fodder in a regulatory violation “ rinse-repeat ” cycle . Instead , focus efforts on eliminating the cycle altogether by identifying issues , implementing protective and preventative measures , and taking remedial actions necessary to rectify any harm to consumers . •••
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