We asked AFSA Vice President of Compliance Education Philip Bohi for his thoughts on compliance issues and his thoughts as we begin planning for a return to more normal business operations.
Q: In the last several weeks you’ve had calls with AFSA members regarding compliance issues for the pandemic. Can you highlight some of those compliance considerations?
There are several. I will start with vendors. In addition to everything else financial services companies are doing to shore up their businesses and serve customers, I recommend they make and execute a plan to contact as many of their vendors as possible. Check in to see if your vendors have had any challenges delivering services at agreed upon levels, or whether vendors need different information or tools from clients during this time.
Some vendors that support your facilities or that work side-by-side with your team may need updates about how and when on-site work will re-start. In checking with vendors, save notes on the conversations. When the pandemic is over, it would be advantageous to show regulators evidence of a great vendor-management effort even in the most challenging circumstances.
Q: We know that a lot of finance companies have moved quickly to help neighbors in need. What about policies and procedures? What should business leaders be thinking about as they begin to return to normal?
Record keeping and updates to policies and procedures should be top of mind. Financial services companies made hard pivots to continue operating in a very different environment. To the extent possible, they should keep records of the decisions made to adapt to changing circumstances during the pandemic. Without records it will be difficult after the all-clear to remember how and why the adjustments to operations during this chaotic time were made. In the next year or so there may be questions from regulators, customers, business partners, and others about how and why businesses changed their practices. Contemporaneous records are the best solution to those inquiries. Some of these records will be sensitive, so talk with legal counsel to discuss how to create and keep these records privileged.
Also, as distressing and disruptive as this period is, it has been a great teacher for what worked and what did not work in each company’s business continuity plan. So when you have a moment after making sure your customers and businesses are stable, pull out any existing disaster plan you have and update to match what you did this time, and what you would do if we face a similar event in the future.
Q: You know we adhere to the old “rule of three” on our blog. One more observation?
I want to thank the business partners who have volunteered as speakers on so many of our recent calls. They have contributed really important information. For example, one of our speakers made the excellent point that for a financial institution offering loan modifications to consumers with financial hardships, that decision has tax and accounting implications for the lender. So, the lender should be talking with its tax and accounting staff or outside vendors to understand the impacts. Likewise, for companies that are getting SBA loans, we all know now that depending on the program, there are strings attached to the money. Recipients of such loans need to act carefully to ensure they understand the regulatory guidance and implications for use of the funds.
Finally (always three), there are a lot of questions about whether repossessions can occur now, with stay-at-home orders and such. Our speakers have pointed out that in considering whether to attempt to repossess, the lender should consider the up- and downstream effects of that decision. Businesses will also want to consider whether the rest of the recovery chain is operating, because there’s no use repossessing a car if it can’t be inspected, or transported, or sold at auction on a regular schedule. These are pragmatic, but important decisions that many businesses will have to consider in the weeks and months ahead.