In January 2012, the Consumer Financial Protection Bureau announced its intention to increase the level of focus it pays toward short-term lenders, including payday loan providers. The agency – established as a result of the sweeping Dodd-Frank Wall Street Reform act and designed to advocate on consumers' behalf – says it intends to evaluate the policies and procedures of short-term lenders to ensure compliance with federal laws and limit consumer risk.
In the months since, CFPB has expanded its oversight to evaluate most nonbank lenders and even other financial services providers. For example, the agency announced this week that it would turn its supervisory eye toward the debt collection industry, seeking to ensure that businesses in this sector treat consumers fairly.
Advocates look favorably upon the agency's efforts for the most part, however stakeholders in the financial services industry voice concerns that the relatively young regulator does not yet have the safeguards and procedures in place to give lenders a fair shake in evaluations.
A report earlier this month from the Federal Reserve's Office of the Inspector General said the CFPB still needs to improve its work in resolving consumer complaints, which poses a risk to some lenders. The Fed report noted instances of inaccurate data entry, inconsistent complaint management, and a lack of certain quality assurance measures.
Mitigating the risk of an unfavorable CFPB review with better credit management software
Given those shortcomings, there is potential for some nonbank lenders to be negatively affected if the CFPB's errors in complaint management reflect poorly on their own business. While these lenders should still cooperate and collaborate with CFPB's evaluation efforts, it is recommended they keep their own house in check by making the most of portfolio management software.
With improved technological capabilities, nonbank lenders can ensure their own data is accurate, and provide a more complete account of their procedures and practices when required. As a result, customer complaints can be fairly addressed, and long-term risk is managed appropriately.