There's no doubt about it. You want to do some solid research before hitching your wagon to service providers, including (but not limited to) product developers, telemarketers, and call centers. It's not only smart - it's a requirement.
Did you know that the Consumer Financial Protection Bureau (CFPB) released a bulletin in April 2012 requiring banks and supervised non-banks to establish a vendor due diligence process? The process is designed to minimize the risk of putting a consumer in harm’s way through any action taken by you or your vendor in your regular business practice. The "in harms way" is referring to UDAAP or unfair, deceptive or abusive acts and practices for which the CFPB is monitoring for ALL lenders. You can be held accountable for the negligence of your vendors.
Your due diligence needs to be aimed at taking steps to ensure you have a procedure in place to verify and validate your vendors' soundness. The CFPB bulletin recommends "that supervised financial institutions take steps to ensure that business arrangements with service providers do not present unwarranted risks to consumers." These suggested steps include:
- Conducting thorough due diligence to verify that the service provider understands and is capable of complying with the law;
- Requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities;
- Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities;
- Establishing internal controls and on-going monitoring to determine whether the service provider is complying with the law; and
- Taking prompt action to address fully any problems identified through the monitoring process.
It's your responsibility to know your vendors' business practices. So, to avoid trouble with the CFPB, complete your due diligence and be sure to have plans in place for ongoing monitoring.