Mortgage Market Share Report – February 2014

Compliance Risk & Consumer Protection

The passage of the Dodd-Frank Act by Congress in 2010 ushered in consumer protection as an additional level of regulatory focus for banks, credit unions and other providers of consumer financial services, including title companies. Prior to Dodd-Frank, the safety and soundness of financial institutions was the primary focus of regulators. Dodd-Frank put consumer protection on equal footing and created the Consumer Financial Protection Bureau (CFPB) to act as judge, jury and executioner.

Bulletin 2012-03 issued by the CFPB on April 13, 2012 (ironically, a Friday) reminded its supervised institutions that they were responsible for the acts of independent third party service providers used by the bank to provide services to the bank?s customers. The FDIC, Federal Reserve, OCC and the NCUA each have provided similar guidance, both before and after the CFPB bulletin. Additionally they have provided instructions regarding risk assessment, due diligence and monitoring of those third party relationships.

A consistent theme in all of this regulatory communication is that the protection of a consumer?s personal, non-public information (PPI) by third party service providers should be near the top of a financial institution?s due diligence. Title companies come into possession of a bank customer?s PPI in the ordinary course of closing real estate transactions.

In the context of this regulatory focus and in the wake of regular breaches of large sophisticated consumer data bases?most recently Target and Neiman Marcus?John Bethell Title recently upgraded its IT network infrastructure in order to assure our clients that the information entrusted to us is maintained in a secure environment. Our servers are now housed in a sophisticated data center that is annually certified to SSAE16, ISAW3402 and AT-101 standards and accessed via an encrypted private network. Additional enhancements will be implemented throughout 2014.

Protecting PPI is just one part of the consumer protection regulatory burden. Other areas of third party provider risk with title companies include trust account management, on-line banking practices, pricing and consumer complaint tracking and resolution mechanisms.

If you or your compliance team would like to discuss the effects of consumer protection regulations on your title and closing service provider relatiohships, I?d be happy to meet with you. Just let me know.

~John Bethell