How I Learned To Love Compliance

A panel at BAI Retail Delivery focused on “turning lemons into lemonade” with a culture shift that makes compliance a customer service imperative.

 
 

Amid the drumroll of despair about the regulatory burden, here’s an idea: Capitalize on it.

A panel of speakers at BAI Retail Delivery this week in Las Vegas drilled down into that potential paradigm shift in a session titled “Turning Lemons Into Lemonade; Capitalizing on Compliance to Enhance Business & the Customer Experience.”

That’s what’s happening at U.S. Bank, says Ed Dwyer, chief risk officer, community banking and branch delivery, at the Minnesota-based big bank. “Now we hear, ‘The audit guys seem to love you,’” he says. “That’s because we’ve built a collaborative relationship.”

That relationship is built around the idea that compliance concern on the retail side stems from customer complaints, and improving whatever is causing those complaints will have the palliative effect of satisfying both internal and external examiners.

“The CFPB has more than 700,000 consumer complaints on file — about credit cards, student loans, credit reports, you name it — and those complaints are often the same thing you hear from your voice of the customer programs, tellers, and out in the community,” says Steven Ramirez, CEO of Beyond the Arc, a customer experience consultancy that analyzes that data.

The result of all that griping is that regulators are taking notice.

“A growing doctrine in the regulators’ framework at the CFPB, OCC, and beyond is assessing UDAP [unfair, deceptive or abusive acts and practices] at financial institutions,” Ramirez says. “So, are you being clear with your customers and members? Are you lowering opportunities for them to be misled? Consider these complaints an early warning sign.”

Turning Warnings Into Action. The panelists at the Wednesday session compared turning compliance into a driver of organizational change to both medical and psychological processes. Along with healing the body — treating compliance as an ailment and the internal cultural change as a cure —you have to heal the mind, they say.

To that point, the third panelist — Karl Dahlgren, managing director, learning and development at BAI — says the industry’s organizational reaction to the regulatory burden is going through stages of denial, then anger, then bargaining, then depression, and finally acceptance.

“We’re now in the depression and acceptance stages,” he says. But, ultimately, that sets the stage for using compliance as a driver of organizational change.

At U.S. Bank, Dwyer says he spent 23 years on the revenue side and the past two years building out teams that represent a cross pollination of risk and compliance on one side and business on the other.

“We’ve added 50 people in the past 18 months in areas like AML and fair and responsible lending,” he says. “But our vice chair, who I report to, says while it might feel like it’s killing you to add non-revenue people, keep in mind what you’re taking off the plate of the people who are revenue producing.”

Dwyer says that such an atmosphere liberates front-line employees to serve customers without being distracted by such things as sales campaigns that tempt branch managers and other supervisors to urge their charges to cross compliance lines about how to sell mortgage refinances, for instance.

He also pointed to an example in the big bank’s auto lending business. There were so many exceptions being made in one market that it was rising to the board level as a potential risk problem.

“We know that market and we knew those lines were fine,” Dwyer says.

Meanwhile, in another market across the country, exceptions were almost nil.

Risk and business people got together, revised the policy in the first market, and the exceptions dropped there, too.

“That’s a perfect example of working together to lower our risk profile while adding loan volume and revenue,” the U.S. Bank executive says.

Dahlgren, the BAI training director, says a positive compliance culture can positively impact ROI in the following ways:

  • Reducing complaints
  • Reducing fines
  • Improving customer satisfaction
  • Reducing attrition
  • Building brand

Training is a key element in building a compliance culture. That’s a key first step in making the compliance officers more than a "department of no," Ramirez says. Instead, that’s the beginning of making compliance a part of customer service.

Who’s In Charge Here? Changing the culture to improve profitability also was the topic in another session Wednesday, this one led by Jaime Hernandez, vice president and regional manager for Vantage West Credit Union ($1.50B, Tucson, AZ).

Hernandez says she worked for Chase for 36 years and then five years ago made the move to the Arizona credit union.

"Soon after, we began what I call our company journey, to define our company culture and who we are as a company,” she says.

The results were brainstorming sessions that led to new levels of employee engagement and cross-departmental cooperation, fostered through the freedom to speak up, an emphasis on “acting on fact” and buy-in from “the landscaper to the chairman of the board,” Hernandez says.

Training also played a big role in the creation of a working environment in which everyone understands everything they do impacts the bottom line. Hernandez illustrated that with a PowerPoint slide that showed percentage gains of a couple points in various metrics, advancements that began taking place in the months immediately following the beginning of the “company journey.”

“Either you manage the culture or the culture manages you,” she says.