There is a memorable scene in the old holiday movie, “It’s A Wonderful Life,” when Jimmy Stewart as George Bailey, president of the Baily Savings and Loan, welcomes the Martini family to their new home which he just presumably funded for them. He makes a speech on the front steps offers gifts of salt and wine to welcome them. Whenever I spoke to new MLO classes as a lender management consultant, I would recount this scene and explain that this is what consumers expect from our industry: personal and caring service at an exciting yet stressful time in their lives. Somehow, I would add, our industry has forgotten to care about the consumer in the quest to sell loans at any cost.
The implementation of Dodd-Frank and the birth of the Consumer Financial Protection Bureau (CFPB) were, in part, a legislative effort to make sure we never forget that the consumer is the heart of our business. This is the heart of QM and ATR, and the vendor management rules our company helps lenders implement and manage.
This year will be the year of the consumer, and lenders need to make sure that they implement policies and procedures, or amend existing ones, to ensure that they are consumer-centric. From better quality origination and ability to repay safeguards, to vendor management and data privacy and security, lenders will be on the hot seat more than ever over how consumers are treated by them. It will not be long before we read about large fines and penalties against a lender for failing to heed this warning.
Some of the key areas expected to face scrutiny in audits and regulatory oversight this year include:
The key takeaway for lenders is that anyone not making an effort to design their business around the consumer, rather than viewing the consumer as a means to an end, may very well being paying a price for it sometime this year. The CFPB is on a mission, and as George Bailey reminded Old Man Potter, “borrowers are human beings not just cattle… they deserve better!”