Consumer Protection

The recent financial crisis exposed critical areas in which consumer protections were inadequate and highlighted the potential for such inadequacies to have systemic consequences for the financial system as a whole.

The U.S. responded by shifting many consumer protection responsibilities from existing banking regulators to a newly created agency dedicated to consumer protection. We believe the Consumer Financial Protection Bureau, endowed with sweeping new powers and a broad mandate to ensure consistent application of consumer protections across banks and nonbanks, will have a significant impact on the financial services industry.

Promontory has been at the forefront of developments in this area. Retained by some of the largest mortgage servicers in the country, Promontory has been actively engaged in evaluating the foreclosure and loss mitigation practices of these servicers and helping them identify and remediate financial injury to borrowers. This work gives us considerable insight into successful strategies to satisfy new and evolving regulatory expectations for mortgage servicing practices.

Promontory also has extensive experience working with clients and regulators to respond to other regulatory concerns in the consumer area, including enforcement actions related to fair lending, as well as unfair and deceptive acts and practices. Our experts’ regulatory backgrounds give them unique knowledge and understanding of the expectations of the regulatory agencies, including the CFPB. We expect the CFPB to vigorously pursue enforcement and examination, including abusive acts or practices. For nonbanks unfamiliar with examination by a federal regulator, the CFPB’s examination authority will pose unfamiliar challenges. Promontory has worked with many nonbanks in the past to prepare them for federal regulatory scrutiny, including conducting mock examinations led by former federal regulators.

Core Products & Services

Promontory offers products and services in the following areas:

Risk Management, Compliance, and Governance

Many of our offerings are designed to support providers of consumer financial products and services throughout all phases of consumer-compliance examinations and enforcement activity.

In anticipation of regulatory examinations or investigations, we offer:

Baseline reviews of compliance risk-management programs to evaluate:
- Compliance risks across all lines of business and by regulatory mandate
- Policies, procedures, and internal controls
- Core program elements, such as risk-assessment methodology and protocols for monitoring, testing, training, reporting, and corrective action
- Governance structure, including executive and board oversight and reporting
- Complaint management
Compliance risk assessments and gap analyses to:
- Identify products, services, and processes that expose regulated institutions to consumer-compliance risk
- Evaluate disclosures, marketing materials, websites, call-center scripts and recordings, and other materials for regulatory and reputational risk
- Evaluate internal controls and compliance risk-governance routines
- Assess the effectiveness of compliance controls, through transaction testing using applicable regulatory procedures and guidance
- Review oversight of affiliated and third-party service providers
Mock examinations to test the ability of firms and key stakeholders to manage an examination by:
- Preparing a request letter for use in gathering and organizing documents
- Reviewing documents, including policies and procedures, audit reports, disclosures, marketing materials, websites, and third-party arrangements for regulatory and reputational risk
- Interviewing key staff
- Assessing the compliance-management system and specific business practices or processes using examination manuals and guidance of the applicable agencies
- Identifying weaknesses in existing policy, procedures, and controls, as well as gaps requiring corrective action
- Conducting examination-preparedness training
Investigating issues that have potential regulatory implications and making recommendations for a full range of corrective action

During and after examinations and enforcement actions, we:

Formulate responses to agency requests and inform negotiations regarding requirements of informal or formal enforcement actions
Design corrective action and remediation plans responsive to regulatory expectations, including:
- Implementing specific regulatory requirements (ranging from MRAs to MOUs and consent-order provisions)
- Enhancing oversight of the board and senior management
- Updating policies, procedures, and controls
- Calculating restitution
- Process reengineering
Advise on, implement, and validate remediation tasks

Transactional Reviews, Testing and Statistical Analysis, and Compliance Support Services

We execute projects that demand substantive regulatory expertise and applied know-how, including:

Agency-mandated independent reviews
Statistical disparate-treatment or disparate-impact risk assessments, including conducting proxy studies and matched-pair analyses
Transaction testing across the full range of consumer financial products and services
Validation of the quality and completeness of remediation-plan deliverables
Developing technologies to simplify implementation and maintenance of compliance protocols and to facilitate enterprise-wide aggregation, reporting, and integration of compliance risk-management functions, such as issue tracking
Comprehensively assessing how consumers experience a firm’s products and services and helping firms improve marketing materials, disclosures, sales scripts, websites, and other transparency tools to enhance that experience
Providing compliance training, including designing training programs and courses and conducting seminars and workshops for directors, management, and staff at all levels.

Strategic Advice

We provide wide-ranging strategic advice to help our clients in all facets of their businesses. We can help clients navigate changing regulatory expectations by:

Analyzing the impact of regulatory reforms to identify where changing expectations require new data analytics and systems, product redesign, and process reengineering
Redesigning products, processes, services, and compliance programs to implement new regulatory requirements or other relevant changes
Advising on the implications of proposed rules and assisting with the crafting of comment letters responsive to the client’s business concerns and respectful of the agency’s objectives

We can help clients secure regulatory approval for innovative products by:

Evaluating new consumer products for regulatory and reputational risk
Restructuring consumer-finance business models for compatibility with regulatory oversight
Designing the governance framework needed to conduct business as a regulated institution

We can inform clients’ strategic decision-making about protecting their brands and expanding their businesses by:

Conducting regulatory diligence in the context of proposed mergers and acquisitions, recruitment of new service providers, and process reengineering
Developing compliance and regulatory communications strategies
Evaluating regulatory implications of downsizing and outsourcing strategies

Representative Engagements

Risk Management, Compliance, and Governance

Promontory conducted a mock examination to assist a larger participant in the consumer-reporting market prepare for CFPB supervision. In conjunction with the examination, we assessed the entity’s compliance-management program, performed a gap analysis to identify areas requiring improvement, and prepared an initial risk assessment covering its inherent compliance risks and the quality of its existing controls.
Promontory assisted a large U.S. bank by performing a gap analysis of compliance-management policies and procedures relative to supervisory expectations; preparing new and revised consumer-lending policies and procedures; and advising on regulatory expectations for credit add-on products and vendor management. We also designed and assisted the bank’s risk management self-assessment of its mortgage-servicing activities, again relative to supervisory expectations, and helped review its compliance program in relation to “strong” risk-management expectations of the Office of the Comptroller of the Currency.
Promontory performed a gap analysis of a regional thrift’s compliance-management policies and procedures to identify gaps relative to the expectations of the OCC, and prospectively, of the CFPB. Our review covered the thrift’s processes for managing consumer complaints, the adequacy of its procedures to protect consumers against unfair, deceptive, or abusive acts or practices, and its compliance with federal consumer laws and regulations. Promontory also conducted a high-level review of the institution’s fair-lending compliance program, with a focus on its mortgage-servicing operations.

Transactional Reviews, Testing and Statistical Analysis, and Compliance Support Services

Promontory assisted a large U.S. regional bank with a compliance self-assessment spanning the full range of consumer and fair-lending regulations. Our work strengthened the bank’s enterprisewide risk-assessment process by establishing strong lines of defense; building a strong central compliance function based on regulatory expectations; and in-depth control testing to ensure compliance. We evaluated whether regulators might perceive the bank’s policies and strategies as increasing the risk of noncompliance with fair-lending laws, and whether its fair-lending compliance staffing, testing program, and complaint-handling procedures satisfied regulatory expectations.
Promontory helped a large regional bank that had been cited for compliance violations prepare for a federal regulatory examination by conducting a targeted review of compliance with new regulatory requirements. Promontory interviewed business-unit and compliance personnel, and provided management with feedback and actionable recommendations to correct vulnerabilities identified through our review. The resulting reforms were critical to the success of the subsequent regulatory examination.
Promontory advised a large regional bank on responding to preliminary regulatory findings that the bank had sold products to customers for whom they were not suitable. Promontory reviewed sales-transaction files and provided its own suitability analysis flagging additional facts and considerations that resolved many of the regulator’s concerns. Ultimately, transactions deemed unsuitable by the regulator fell more than 90 percent from the preliminary findings, mitigating the need for an enforcement action.

Strategic Advice

Promontory provided strategic advice and support to a large U.S. consumer-services company seeking to improve its enterprisewide compliance risk-management program in response to various supervisory and enforcement actions. Our comprehensive effort addressed the company’s structure and governance (including coordination of compliance among its legal entities), compliance-risk assessment, issue remediation and prevention, remediation planning, affiliate oversight and vendor management, complaint management, regulatory training, audit, and regulatory relations.
Promontory advised an innovative, nonbank payments-provider on consumer-compliance requirements, identified deficiencies in its current practices, and recommended improvements to meet regulatory requirements and expectations.
Promontory assisted an Internet-based specialty-finance company with the development of its funding and liquidity strategy, including potential transactions to acquire or form an insured depository institution. Our team provided regulatory and strategic advice, and identified the advantages and disadvantages of each corporate structure under consideration.

Consumer Protection

Core Products & Services

Risk Management, Compliance, and Governance

Transactional Reviews, Testing and Statistical Analysis, and Compliance Support Services

Strategic Advice

Representative Engagements

Key Contacts

Experts

News & Insights