Due Diligence and Ongoing Monitoring

  • 1.  Indirect Lending Program Dealer Relationships

    This message was posted by a user wishing to remain anonymous
    Posted 09-09-2021 01:31 PM
    This message was posted by a user wishing to remain anonymous

    Good morning all, does anyone include the Dealer relationships in your Indirect Lending Program as  vendors in your Vendor Management Program?  Do you risk rate them individually and subject them to the standard due diligence?  Our Compliance Dept is wondering if they need an ID Theft Red Flag statement from each dealer and whether we should require the dealers to report any complaints about our Bank to us.  I am currently not tracking the dealers as a vendor relationship.  Also, has anyone received any comments from their regulator about whether the dealers should be included in the VMP?  Any feedback would be appreciated!


  • 2.  RE: Indirect Lending Program Dealer Relationships

    Posted 09-15-2021 09:58 AM

    Hello,

    Many firms are not currently including these relationships as vendors. However, that is about to change as the proposed interagency guidance requires all third parties to be in scope. (Link to new guidance) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20210713a1.pdf

    Although the guidance is not effective yet, it is an excellent time to review and expand your current scope to include your dealers. The ID Theft Red Flag Statement should be a requirement for each dealer, and yes, complaints monitoring is essential. Without knowing how many dealers you are working with, it is hard to estimate what kind of work effort will be necessary to make this happen. The good news is that you can get started now, so when the guidance becomes effective, you will have a head start complying with the new expectations.

    I hope that information is helpful as you prepare for the new guidance. Still, I would like to hear what other members are currently doing with their dealers.




  • 3.  RE: Indirect Lending Program Dealer Relationships

    This message was posted by a user wishing to remain anonymous
    Posted 09-15-2021 02:20 PM
    This message was posted by a user wishing to remain anonymous

    Hi Hilary,
    I have been scanning this doc and only found some broad references, but are there specific locations in the doc that bring automotive dealers into scope?  Thanks in advance!


  • 4.  RE: Indirect Lending Program Dealer Relationships

    Posted 09-16-2021 10:33 AM

    While auto dealers are not explicitly mentioned in the guidance, the section on Scope does contain the following:

    As noted above, a third-party relationship is "any business arrangement between a banking organization and another entity, by contract or otherwise."

    There is more that can be found in the Q&A section "A bank's relationships with vendors or entities to which banks
    outsource bank functions, or activities do not represent the only types of business arrangements. Since the publication of OCC Bulletin 2013-29, business arrangements have expanded and become more varied and, in some cases, more complex."

    The only exclusions the guidance mentions are customers.

    I hope that helps.

    Thanks,

    Hilary