ALTA Asks CFPB for Further Guidance on Vendor Management
December 15, 2015
ALTA recently sent a letter to the Consumer Financial Protection Bureau (CFPB) outlining concerns regarding oversight of lenders’ vendor management programs.
In the letter, ALTA urged the CFPB to provide further guidance and clarification about the bureau’s role and expectations for third-party vendor management programs. Industry members have expressed confusion about how to develop robust vendor management programs for fear that they will not meet the bureau’s expectations.
There are four actions ALTA recommends that the bureau can take to help companies understand the requirements.
- The CFPB should be aware of the types of vendor management programs being adopted in the marketplace. The letter states, “The lack of a comprehensive understanding of what the Bureau, and other federal regulators, are looking for in vendor management programs has led many lenders to impose inconsistent standards for their service providers, exposing service providers to multiple verification processes. These varying processes are proving to be expensive for vendors to adopt, especially for the small title and settlement providers that make up over 65% of the more than 20,000 settlement agents in the United States.”
- The bureau should provide more public statements about good practices within the vendor management programs they are seeing in the marketplace. The letter states, “To help promote its goals of creating a self-policing and self-reporting industry,1 the Bureau should be more transparent about what types of standards are acceptable to the Bureau, such as ALTA’s Title Insurance and Settlement Company Best Practices.
- The CFPB should provide greater direction to companies during the supervision process. ALTA recommends that the bureau enhance its supervision manual to include more specific expectations for vendor management.
- The bureau should clarify how vendor management programs apply when the consumer selects the title or settlement agent. The letter states, “In many instances, title companies are not selected directly by the lender, but are rather chosen by the consumer. In these situations, the lender has minimal control over what settlement agent is employed to complete the closing transaction.”
Contact ALTA at 202-296-3671 or [email protected].