Third-Party Risk Management Guidance: Consumer Protection Considerations

In guidance published in June of 2023, the Federal Deposit Insurance (FDIC), Federal Reserve, and Office of the Comptroller of Currency (OCC) outlined a framework for banks to manage risks throughout all stages of working with third parties.

Now, in 2024, these agencies provided updated guidelines to help banks manage the risks of working with third-party organizations like fintechs, adding more specific details and clarifications.

The guidance reminds banks that they are responsible for the actions of their partners:

Engaging a third party does not diminish or remove a bank’s responsibility to operate in a safe and sound manner and to comply with applicable legal and regulatory requirements, including consumer protection laws and regulations, just as if the bank were to perform the service or activity itself.

Here’s what this means for banks as it relates to consumer protection—and how PerformLine can help.

Consumer protection considerations for banks

This guidance emphasizes the importance of ensuring third parties comply with consumer protection laws and regulations, including fair lending laws and unfair, deceptive, or abusive acts and practices (UDAAP).

Due to the varied risks associated with third-party relationships, it is important for community banks to appropriately identify, assess, monitor, and control these risks as well as ensure that activities are performed in a safe and sound manner and in compliance with applicable laws and regulations.

A third party’s compliance with consumer protection laws should be assessed before entering into a formal partnership as part of a bank’s due diligence process. Has this third party shown that it can comply with consumer protection laws?

Another key consumer protection consideration is consumer complaints. Does the third party have a robust complaint management system? Do they have a good history of resolving complaints in a timely manner?

Then, once a formal partnership is entered, banks must continuously monitor third party activities, including those related to consumer protection, to ensure that they’re meeting contractual standards and that any issues or compliance violations can be quickly identified and remediated. 

Use PerformLine to help streamline consumer protection efforts across third party partners

PerformLine offers several solutions to help banks follow best practices as outlined in the guidance, specifically focusing on consumer protection and marketing compliance.

Partner vetting and due diligence

PerformLine’s technology empowers banks to conduct thorough due diligence on potential partners by monitoring communication channels to identify and flag potential consumer protection concerns. This process can also help identify consumer complaints across these mediums.

Using this technology is especially helpful because it allows a bank to discover potential red flags that they may not have been able to find manually during the due diligence process. 

Automated content review and ongoing compliance monitoring

PerformLine allows banks to streamline the review process of partner marketing materials. Partners can submit materials for review and receive an automated compliance verdict with feedback almost immediately—saving banks time and resources while ensuring partners adhere to consumer protection regulations.

Then, PerformLine automatically monitors partner content across the web, social media, and emails to identify any potential compliance issues and discover any unknown promotions. Any instances of noncompliance are flagged and sent for review and remediation directly in the platform. 

Consumer complaint identification

Whether it’s across partner web pages and social media or in calls and messages, PerformLine can identify and flag consumer complaints that need to be addressed. 

Risk-rank third party partners

With PerformLine’s Business Intelligence, banks can identify and rank their most compliant partners, and their least compliant. This data can help drive business decisions, like when to terminate a partnership due to a failure to comply with applicable consumer protection laws.