We’ve all had the experience of putting trust in someone else, whether it’s trusting your hairstylist to give you a haircut that’s not too short, trusting the chef that there’s no peanuts in your dish, or the barista getting your “half-caff,” almond milk latte with extra foam order right.

It’s the same with trusting your service providers to stay on top of compliance issues and keep your concerns top of mind, but the stakes are much higher than getting your coffee order right. The role of a good financial services vendor is not unlike the police department—to protect and serve.

Protection is critical, especially when you factor in the (sometimes harsh) reality that the Consumer Financial Protection Bureau (CFPB) does not distinguish between the activities of vendors and the activities of the financial institutions that those vendors serve.

Importance of Service Provider Management

Many companies rely on service providers to essentially take over part of their functions, using expertise that the company itself may not have. For many, this includes monitoring compliance and risk management. That doesn’t mean you can entirely step away; your involvement shifts, instead, to service provider management or vendor management. This is a multifaceted program designed to oversee all third party activity and manage risks associated with vendor relationships. It is designed to protect the lender, the vendor, and, of course, the consumer.

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