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Abbott and Costello compliance?

Dumb errors surface. But is the joke on us?

Abbott and Costello compliance?

The emphasis in compliance management these days is on Risk Management.

Compliance has grown so massive and complex that most compliance managers have to manage it by continually assessing the compliance risk of a situation, activity, product offering, function, or what-have-you and focus resources on the higher- risk issues first.

Setting priorities and managing available resources is the order of the day.

And, that is good compliance management, because resources are not unlimited and the supply of compliance regulations seems to be unlimited.

But, when you do that, sometimes the small details don’t get enough attention and errors are made.

Where rubber doesn’t meet the road

When I perform loan, deposit, or any compliance monitoring I regularly find what I would classify as silly mistakes. Things like…

• Telephone numbers in disclosures that are disconnected or go to unintended destinations.

• Website links that don’t work—a tiny mistake in a URL will lead the consumer astray.

• Disclosing outdated or incorrect addresses for consumers for mailing notices or contact.

• Periodic rates that when multiplied by 365 or 12 don’t equal the Annual Percentage Rate.

• Basic errors in interest rate calculations in periodic statements.

Some examples from real life

Here are some examples of what happens when the small stuff isn’t sweated:

Prose by Abbot and Costello. I’ve seen examples of deposit disclosures (terms and conditions) that botch the usage of “we” and “you” by flip flopping them halfway through the document, causing the reader to completely lose sight of who “they” are and what “they” are supposed to do. (Or is it him or her? Who’s on first?)

Phantom in the phone system. There was one example of a consumer deposit rate sheet that was used by a financial institution to disclose current APYs and interest rates to consumers in the branches. The rate sheet contained a telephone number to call for the most current rates and terms. When I called the telephone number and heard rates that did not match the rate sheet and asked the compliance manager to investigate, we discovered that the voice on the telephone belonged to a person who hadn’t worked for the institution for over 11 years.

Obviously, the rates on the telephone line hadn’t been updated in a while.

But does anybody read this stuff?

Careless players risk not only technical violations of regulations like Truth in Savings and Truth in Lending, but also UDAAP exposures.

However, it’s also interesting to note that it’s not the consumers who are noticing these mis-directed phone numbers and addresses, non-functioning URL web addresses, obviously incorrect periodic rates, etc. in the disclosures that they receive.

Which prompts a questions: If consumers need this information so much, as Congress and regulators insist, why aren’t they reading them? 

After all, if they were reading them, wouldn’t they be mentioning these errors? 

Of course, my sample of institutions and experience with this is not scientific and very small, but possibly, not unique.

I remember a story many years ago about a bank that inserted a sentence in the middle of one of its regulatory disclosures that said, “If you read this, call us and we will give you $25.” 

Reportedly, no one called to get the $25.

I’m not sure if this story has become one of those urban legends that has little basis in fact or a true great social experiment. If anyone remembers, please share.

But I think it would be an interesting way to test whether anyone (besides compliance geeks) read all those disclosures. It would be worth at least $25.

Nancy Derr-Castiglione

"Lucy and Nancy’s Common Sense Compliance” is blogged by both Lucy Griffin and Nancy Derr-Castiglione, both Banking Exchange contributing editors on compliance. Nancy, a Certified Regulatory Compliance Manager, is owner of D-C Compliance Services, an independent regulatory compliance consulting services business that has provided expertise in compliance training, monitoring, risk assessment, and policies and procedures to financial institutions since 2002. Previously, Nancy held compliance positions with Bank One Corporation and with United Banks of Colorado. In addition to serving as a Contributing Editor of Banking Exchange, Nancy has served on the ABA Compliance Executive Committee; National and Graduate Compliance Schools board; conference planning committees, and the Editorial Advisory Board for the ABA Bank Compliance magazine. She can be reached at [email protected]

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