Challenges and strategies in providing refunds to borrowers
In response to heightened pressures, lenders are reexamining their current practices for providing accurate and timely refunds to their borrowers. Many are making an effort towards in-house processes to maintain compliance while reducing costs. However, while seemingly more affordable, this approach comes with its own set of challenges and risks. Complicated workflows involve multiple departments and depend on specialized resources, knowledge, and technology to succeed. When timing and precision are key for compliance, inefficiencies can lead to errors and delays you can’t afford.
Scrutiny from a complex, dynamic regulatory environment is straining resources all while financial institutions nationwide are experiencing ongoing staffing challenges and siloed technology, resources, and processes that are creating additional obstacles.
Let’s focus our attention on identifying the challenges and what can be done.
Challenge 1: Increasingly demanding regulations aimed at safeguarding consumer rights create a challenging and ever-changing landscape for business
The findings presented in the Fall 2022 Supervisory Highlights (PDF download) by the Consumer Financial Protection Bureau (CFPB) emphasized their ongoing focus on ancillary product refunds, marking the fourth instance in the past three years where they have provided guidance on this matter. This repetition sends a clear message to financial institutions that this issue will remain in the regulatory spotlight. It is essential to recognize that state laws are continuously evolving in response to these concerns. Recent examples include the enactment of California Assembly Bill 2311, which introduces new requirements for the sale and administration of Guaranteed Asset Protection (GAP) products. As well as Colorado Governor, Jared Polis’ Colorado House Bill 23-1181.
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