Examiners may conduct targeted exams regarding the alternative party where appropriate. Authority to conduct exams of 3rd parties could be founded under a few circumstances, including through the financial institution’s written contract because of the party that is third part 7 regarding the Bank service provider Act, or through abilities given under part 10 associated with Federal Deposit Insurance Act. Alternative party assessment activities would typically consist of, although not be limited by, overview of payment and staffing methods; advertising and prices policies; administration information systems; and conformity with bank policy, outstanding legislation, and laws. Alternative party reviews also needs to consist of screening of specific loans for conformity with underwriting and loan management recommendations, appropriate remedy for loans under delinquency, and re-aging and remedy programs.
Third-Party Relationships and Agreements the application of 3rd parties certainly not diminishes the obligation associated with board of directors and administration to ensure the activity that is third-party carried out in a secure and sound way plus in conformity with policies and relevant regulations. Appropriate corrective actions, including enforcement actions, might be pursued for inadequacies associated with a third-party relationship that pose concerns about either security and soundness or the adequacy of security afforded to customers.
Examiners should measure the organization’s danger management system for third-party lending that is payday.
An evaluation of third-party relationships includes an assessment associated with the bank’s danger evaluation and strategic planning, along with the bank’s research procedure for choosing a qualified and qualified 3rd party provider. (relate to the Subprime Lending Examination Procedures for extra information on strategic planning and research.)
Examiners additionally should make sure plans with 3rd events are led by written agreement and approved by the organization’s board. At least, the arrangement need:
- Describe the duties and obligations of every celebration, such as the range for the arrangement, performance measures or benchmarks, and responsibilities for supplying and getting information;
- Specify that the 3rd party will adhere to all relevant regulations;
- Specify which party will give you customer compliance disclosures that are related
- Authorize the organization observe the next celebration and occasionally review and confirm that the 3rd celebration as well as its representatives are complying with the institution to its agreement;
- Authorize the organization therefore the appropriate banking agency to own use of such documents associated with alternative party and conduct on-site transaction screening and functional reviews at alternative party areas as necessary or appropriate to guage such conformity;
- Need the alternative party to indemnify the organization for prospective obligation caused by action regarding the alternative party pertaining to the payday financing program; and
- Address client complaints, including any obligation for third-party forwarding and responding to such complaints.
Examiners should also make sure that management adequately monitors the party that is third respect to its tasks and gratification.
Management should devote adequate staff aided by the necessary expertise to oversee the party that is third. The financial institution’s oversight program should monitor the next celebration’s economic condition, its settings, together with quality of the solution and help, including its quality of customer complaints if managed by the party that is third. Oversight programs should be documented adequately to facilitate the monitoring and handling of the potential risks connected with third-party relationships.