Regardless of the industry, businesses rely more and more on outside vendors to provide both standard and custom products and services. Nowhere is this truer than in the financial services industry where the complexity of laws and regulations amplifies the need to seek outside expertise. In-house counsel stand poised as the gatekeeper to manage — or at the very least review — third party vendor relationships. With the Consumer Financial Protection Bureau (CFPB) aggressively reviewing these relationships for "unfair, deceptive or abusive acts or practices" as described in the Dodd Frank Act, in-house counsel must be prepared to assist with the vetting process. Most recently, on July 10, 2013 the CFPB issued a bulletin identifying concerns for creditors as it relates to third party debt collectors. Previous guidance from the CFPB targeted add-on products (often developed by vendors) as sources of potential UDAAP risk. Meanwhile, bank examiners routinely scrutinize vendors and their products and services as part of compliance exams. Often the exam concludes with admonitions to enhance processes or formal orders that require improvement in the vendor management process.
Counsel plays a critical role in assuring that the expectations of the regulators are met and that the risk to their institutions is effectively managed. "Contracts 101" can be our starting point. However, a deeper dive is needed into the murky waters of regulatory requirements.
