You might know Rhonda McGill as PerformLine’s Sr. Director of Client Solutions—but what you might not know is that she’s also our resident compliance fortune teller (at least, that’s what the marketing team calls her!).
At the end of 2021 and at the very beginning of 2022, Rhonda shared a few of her predictions for this year as it relates to regulatory compliance and areas of increased scrutiny. And, spoiler alert—she hit the nail on the head with all of them.
Here’s a summary of the compliance predictions she made for 2022, where things landed in the world of regulation, and her predictions for what we can expect to see in 2023.
Increased regulatory scrutiny on data and fintechs
In October of 2021, Rhonda spoke on a panel at the Lend360 conference and said:
All eyes are on the data and fintechs need to show how they’re ensuring equity and their lending practices.
Fast forward to 2022, fintechs (and the banks that they partner with) have been under increased scrutiny by regulators, most notably the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of Currency (OCC).
Rhonda explains:
Fintech platforms have really taken off and gained a lot of speed and a lot of popularity amongst consumers. Unfortunately, there are a lot of unknowns still in the regulatory space in terms of how to engage with them. And from a regulator standpoint, which parts are they responsible for? We’re starting to hear a little bit more about the “true lender” rules in these scenarios.
From the consumer level, some folks don’t know who they’re actually getting the loan from. They don’t know all the things that they don’t know. So, it’s gonna be important that there’s some clear definition in the regulatory space so that we’re able to protect consumers.
More enforcement, demand letters, and examinations from the CFPB
During a mortgage roundtable in Q1 of 2022, Rhonda said:
Over the next few months, we’ll see more enforcements, more demand letters, more examinations, the CFPB is gonna bring larger penalties, and higher enforcement amounts. Chopra doesn’t hesitate to make these things public.
Rhonda made this prediction after the CFPB put out a notice asking consumers to weigh in on rulemaking, which was just the start of a slew of advancements they would make toward consumer protection.
The CFPB definitely amped up its enforcement over the last year. Since being confirmed as Director, Rohit Chopra has:
- Focused on repeat offenders, or in his words, “recindivists”
- Prioritized enforcement over consumer protection
- Taken 20 enforcement actions against organizations with significant penalty amounts
- Bolstered enforcement by states
Rhonda explains:
If consumers are complaining because they feel that they’re not getting what they were promised, or whatever their issue is that they’re complaining about, the CFPB is actually following up on those complaints.
So, it’s one of those things where, again, we’re in a time where people are complaining more and people are feeling a little bit more empowered. They know that they can just drop an email, send something via direct mail, or they can get on the phone and call in. They’ve got so many means now of reaching out to regulators that I think folks are really taking the approach that they’re going to make the complaints, and regulators are taking the approach that they’re gonna follow up on them.
This is where the consumers are definitely being given that upper hand advantage, and it means that from a business perspective, the industry really has to take that under consideration as they’re making their decisions around compliance.
Focus on fair lending and redlining
Again, during the Q1 mortgage roundtable, Rhonda predicted:
The CFPB will be focusing on POC and minority neighborhoods in the future.
Not long after this prediction, the CFPB took two separate enforcement actions against mortgage companies for deliberate discrimination against minority neighborhoods.
Redlining was a pretty huge topic at the beginning of the year. If you remember, the Department of Justice, the CFPB, and the OCC announced an initiative around combating redlining. At this particular point, the Department of Justice has settled four huge redlining paces with settlements totaling over $38 million in relief for impacted communities.
Again, I keep telling folks, yes, you can look at the CFPB, but there are other regulatory agencies, even on down to the state level, that are really looking at what’s the long-term impact? Are there redlining issues? How are we going into communities and are we bringing equal business opportunities or equal housing opportunities? What’s happening in that space?
Enforcement is happening across the board. You might focus on the CFPB, but the DOJ is also doing quite a bit based on that initiative.
More mortgage servicing compliance challenges
To wrap up Rhonda’s predictions for 2022, the last one she made was around mortgage servicing:
Because forbearance is ending, a lot of eyes are on servicers and ensuring that consumers are protected.
And in May of this year, the CFPB published a report that outlines observations from data collected from 16 servicers. The data identified three main observations from mortgage servicers during the pandemic, which includes call center and hold time variability, delinquency and exits from forbearance, and servicer data challenges.
Thankfully, you know, the forbearance exit has been one that has not been as hard as a lot of people thought, but I think we need to really pay attention in the coming year, especially depending on how the economy lands with the pending recession.
Some people say it’s gonna happen, some people say it’s not, but what is that gonna do to our job market? Are we going put ourselves in the throws of another issue where people are going to end up in forbearances or modifications of their mortgages? I don’t know, that’s one of the areas I’m not as savvy in, but I do see that there is almost like this weird perfect storm that you just can’t put your finger on what it is. And that’s one of the reasons why I really wanted to focus on servicing.
Our upcoming mortgage roundtable will focus on all things mortgage servicing. If you want to join the conversation—and be the first to hear more predictions for the upcoming year—register here.
Predictions for 2023
Since Rhonda has a knack for telling the future when it comes to regulatory compliance, we asked her what she expects to see in the next year.
Here’s what we can likely expect for regulatory compliance in 2023:
- A lot to come in the bank-fintech partnership and BaaS space. The OCC just released its supervisory plan for 2023 and explicitly spoke to third-party relationships and the importance of having a solid risk management program in place. Compliance monitoring in this space will be critical over the next year and beyond to mitigate risks and protect consumers.
- Increased state collaboration and more multi-state examinations. The CFPB has empowered states to do a lot more for consumer protection over the last several months through expanded authority. In the coming year, we’ll likely see more overlap between states and federal regulators, as well.
- Continued focus on enforcement from the CFPB. The Bureau will heavily scrutinize repeat offenders and drive enforcement actions against them. And, for repeat offenders, the CFPB will likely look for non-monetary penalties and more penalties that are structural in nature.
- Don’t sleep on the Federal Trade Commission (FTC). While the FTC’s primary focus is competition in the marketplace, they still provide resources for consumer fraud and consumer protection issues applicable to the consumer finance space. They’ve had a lot of great webinars recently around consumer fraud issues, including those impacting military and elder consumers.
You heard it here first—fintechs and BaaS are in the hot seat, more state collaboration with federal regulators, continued increased enforcement from the CFPB, and more influence from the FTC in 2023. Will these come to fruition? Only time will tell. Check back at the end of 2023 to see where we landed with Rhonda’s predictions!
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