Here’s a blinding glimpse of the obvious: there are a slew of marketing concepts that would be very attractive to bank customers. However, before a bank can kick off a new program, it needs to know if the new concept will comply with the State and Federal consumer compliance regulations. The question is, despite the obviously wrongheadedness of this, why do banks wait until the very last minute to consult compliance? Or, worse, why do they launch a new marketing program, completely neglecting compliance input?
Here’s why I think bank management doesn’t include the compliance people in the In Crowd: the compliance people are viewed as “rocks in the road” who only know how to say “No.” I’m reminded of the time a CEO introduced the bank’s Compliance Officer as, “the Compliance Nazi.”
Why would bank management have such an adversarial view of the compliance department? Let’s be honest, this viewpoint is likely self-inflicted. Too many times, a new marketing idea comes up only to be met with a knee-jerk, automatically negative response from compliance. This only has to happen a few times and compliance people develop the reputation of being “Dr. No.” This is exactly the last thing the bank needs.
To be fair, the compliance people do have legitimate complaints, principally that they never hear about a new product until they see the promotion in the media. Another legitimate complaint: bank managers rely on their “uninformed intuition.” Or they perceive a competitor bank doing something and incorrectly assume that if it’s “OK for that bank, it must be OK for our bank.” All three of those are no-nos.
Let’s be clear, I’m not suggesting that a compliance department condone stuff that is clearly wrong, like agreeing to pay a cash bonus to a real estate agent who brings in a lot of business. But, at the same time, compliance people should avoid rejecting ideas without doing the research and thinking about how to deploy the new idea while adhering to the rules.
A case in point is the so-called “no-bounce” feature of a checking account. This product is popular with customers; it also earns good money for the bank. Compliance people, often recoil in horror at the mere mention of the product name. Despite that, there’s no doubt that a “no bounce” program can be constructed and deployed in a compliant fashion without too much trouble. The rules are not overly complicated and most banks have the tools to generate the reporting and disclosures required.
Fortunately, this tension between bank marketing and bank compliance can be relieved with a two-part solution. One, bank management must raise their right hand and promise to never even discuss a potential new product or service unless the compliance people are in the room. Second, the compliance people must promise to hear the idea out, do their research and provide practical advice about how the compliance issues can be successfully resolved, if indeed it is possible to do so. This approach aligns the goals revenue goals with compliance.
In the new world spawned by Dodd-Frank and the CFPB, community banks need to take a hard look at every possible profit possibility. Clearly, bank management needs the enlightened, proactive support of compliance people who are willing to look through the right end of the telescope and find a way to do business that keeps the company between the lines.
So, if you are sensing that you may have an issue here, what’s your next step?
Sit down with your line of business managers, your marketing people and your compliance officer. If you have tensions about compliance holding the company back, let’s air them out. This is a good time to set up some action assignments. The business line managers and marketing people should write up the programs they want along with a business case recommendation. Next, the compliance people can do the research and find whether this proposal can be done inside the rules, describing the various disclosures and terms that must be dealt with. Then, the bank can do a risk/reward calculation and decide to go – or not.
If you get serious about improving the work process between marketing and your compliance people, you should talk to us.
We’ve been compliance managers since 1998. We understand both the marketing and compliance imperatives. We can help the bank formalize the process so that the product managers and compliance people have a system they can use to recommend new products to the bank. This is a win for everybody.
What’s the first step?
Call or email me and request phone appointment to talk over your situation and answer some of your questions. I’ll set aside an hour, at no charge, to tell you what I know that can help you and point you in the right direction.
Here’s how we set up the free one-hour conversation to be successful:
We provide a guide or agenda to keep us on track and help us be productive. And before we talk we’ll send a signed Privacy and Non-Disclosure agreement which legally forbids me from divulging any information you share with me so you can feel comfortable about telling me stuff.
What often happens is that after you think this over, especially given all the other stuff you have to get done, you may decide you don’t have the time to devote to this. Maybe you’d like to pay our company to set up a feedback system for your company. Well, that would be great. In which case, I’ll prepare an actual work scope and the details you need to get things approved and in motion.
So, if you want to talk things over, just give me a call or send me an email…. BTW, if you email me about this, please put COMPLIANCE NAZI in the subject line.”