BLOG VIEW: The Consumer Financial Protection Bureau (CFPB) made headlines last year when it hit a mortgage lender with a whopping $20 million fine over the way it advertised rates. According to the regulator, the company's methods not only lured borrowers in with great rates while failing to honor them, it also trapped borrowers into paying costly upfront fees without proper notification.
Since then, the bureau has shown a propensity toward enforcing the Truth in Lending Act, Mortgage Acts and Practices Advertising Rule, and other federal consumer laws that address the problem of deceptive advertising.
As a lender, you might read such headlines and think, ‘We don't do that here,’ and you may be right. But, at the same time, chances are that your company lacks complete control over marketing collateral distribution to the public. Here's the disturbing reality: In today's regulatory era, just one mistake – innocent or not – can expose a lender to fines, penalties and negative reviews that can go viral on social media in seconds. At the very least, poorly executed marketing that is either substandard or inappropriate can damage brands and result in significant business losses.
As the mortgage industry embraces ever-intensifying rules and regulations, a substantially diminishing tolerance for noncompliant marketing is a fact of life. Many lenders have very little control over marketing activities, especially at a branch or loan-officer (LO) level – but at the same time the industry is more exposed to business-crushing penalties than ever before. Even though lenders realize that compliance is important, today's regulations and requirements can become so daunting that lenders either panic or go into ‘committee’ mode (wasting countless hours on analysis rather than implementing timely solutions). As a result, marketing efforts remain in the hands of individual branches and LOs – a situation that heightens regulatory disaster with every passing moment. Lenders need to take control – before a noncompliant email or other marketing element sets off a CFPB disaster within their organization.
How do you start? By being proactive. Marketing oversights can quickly turn into compliance nightmares, requiring lenders to establish a complete understanding of what their LOs are currently doing and how they are doing it. The ultimate compliance goal is to provide LOs with access to effective, compliant and pre-approved marketing products and campaigns through a centralized platform. And in doing so, one can be certain that there is enough depth and breadth in the library of topics (as well as functional controls that allow users to enhance and further personalize templates that satisfy individual and ongoing needs).
These are just a couple of the dynamic, yet compliant, business-development initiatives that today's lenders need to control. And with proper hierarchies and tools in place, compliant marketing will greatly aid the organization in generating new business with high-impact, quality communications that won't set off the alarms of industry regulators.
While examining your marketing activities, keep a lookout for specific issues. Are LOs overstating their titles, qualifications, and expertise in communications to borrowers? Does your customer relationship management (CRM) platform lock down personalization fields that require human resources validation? These are examples of functional controls that LOs must be able to rely on to distribute compliant, personalized marketing. Entrepreneurial mortgage environments must allow LOs to create individual flyers and social media postings that are protected by systemic compliance controls, rather than simply being discouraged or turning a blind eye on it.
To regulators, laissez faire marketing is a major problem for lenders – and a major contributor to the heightened governances around mortgage marketing. It has simply been too easy for fields of salespeople to place random messaging in materials that grossly violate CFPB guidelines. Allowing LOs to individually push the boundaries of compliance and professionalism in their individual marketing efforts is nothing less than a CFPB disaster waiting to happen.
Create A Must-Have List
Taking meaningful action starts with gaining a comprehensive understanding of your enterprise-wide marketing activities in order to assess corporate exposure and compliance needs. What follows is a list of fundamental capabilities that all lenders should consider:
1. Centralized marketing. Lenders need to have up-to-date and appropriate disclaimers, licensing fields, and regulatory seals automatically generated on all communications and marketing collateral. At the same time, LOs require fast access to marketing materials that are approved and compliant – or that can be further customized and sent through automated approval loops within the marketing framework. The best way to accomplish these objectives is to provide LOs with 24/7 access to centralized CRM and Web-to-print solutions that house compliant and approved materials and content. And, when LOs need to make changes to flyers, for example, or prefer a blank template to work from, dynamic processes should already be in place to efficiently and effectively manage the ever-changing, on-demand marketing needs of the entire organization.
From a compliance perspective, centralizing marketing efforts through a flexible platform allows LOs to drill down and find what they need – or to request and build new materials quickly. Not only does this method satisfy the needs of LOs, but it also keeps everyone safely within the boundaries of compliance – while reducing manual workloads and stresses on individual staff members and departments, too.
2. Licensing controls. Many loan producers rely on CRM software to market to borrowers. However, without the right controls in place, the tools can become dangerous – very dangerous. System controls, for example, should be used to align LOs' licensing data with corporate lead campaigns in order to lock down any communications that would otherwise be sent to prospects in areas where LOs are not licensed.Â This simple illustration is just one of many functional aspects that require immediate attention. As the mortgage industry realigns itself to the purchase side of the business, a major emphasis is being placed on lead generation. Without the necessary controls in place, fundamental business development initiatives can quickly add up to a multitude of compliance errors, with each incident capable of resulting in substantial fines or penalties.
3. Automated approval loops. LOs continue to demand the ability to build sales and marketing materials on the go, placing the organization at major risk. Industry-leading CRM solutions embrace on-demand marketing functionality with built-in compliance-approval loops that streamline processes. With the right technology, hierarchies support decision-tree analytics to decipher rule-based compliance flows, which ultimately track authorized approvals or edit requirements before public distribution is granted. In short, if it doesn't pass timely and consistent inspection, it never sees the light of day.
4. Great marketing collateral. Throughout the years, every lender has paid for substandard marketing at some point in time, whether it was simply low quality or language written so poorly that it failed. Lenders today can rely on high-quality, cost-effective and, most important of all, compliant marketing without exception. They also can steadily establish marketing for all occasions and audiences, such as referral partners and new recruits.
5. Transparency. No matter the size, lenders need to be assured that the systems, policies and hierarchies in place are compliant and protective of the organization and LOs, especially from costly fines and penalties. To meet CFPB requirements, lenders must rely on third-party marketing vendors that can ensure all borrower information (such as addresses and other personal data) is properly protected.
When researching vendors, dig deeply into track records and capabilities. Do they specialize in the mortgage industry? Do they manufacture and fulfill print, email, and marketing collateral all within their own facility? Do they steadily pass audit inspections to ensure that proper controls are in place to protect data? Generating complete order histories and access to past orders for auditing purposes must also be a core attribute (including the ability to control access to system reporting on a hierarchical basis). Transparency is no longer a buzzword – it is a minimum benchmark for every lender's marketing efforts that satisfies the accessibility rigors of auditors and regulators alike.
6. Rebuild it with technology. Once you have assessed your current marketing activities and identified what is needed to develop consistent, compliant and high-quality marketing, put your needs into action. It does not have to be difficult or time-consuming. Each of the attributes described above has a common thread: world-class, affordable technology.
World-class technology places dynamic controls and fulfillment into the hands of lenders to steadily build compliant, high-impact marketing. It is not just a competitive issue any longer – it is a regulatory mandate that time-tested, robust technology can adequately solve. Regulators are steadily making examples of lenders that cross the line, innocently or not. And as recent regulatory actions show, there is very little margin for error.
Mary Beth Doyle is founder of LoyaltyExpress, a provider of marketing automation and cloud-based CRM solutions for mortgage companies and banks.
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