Introduction
The CFPB released updated Compliance Management Review for Information Technology (CMR-IT) exam procedures in September 2021. While these requirements received less attention than Regulation F, they significantly impact how financial institutions must manage IT controls and compliance. Organizations that overlook these updates risk falling short during examinations.
Module 1: Board and Management Oversight
Boards must demonstrate genuine commitment to compliance management systems by ensuring adequate resources, maintaining knowledgeable staff, conducting due diligence on service providers, responding to regulatory changes, identifying compliance risks, and addressing issues proactively.
Examiners request extensive documentation including board minutes, organizational structures, security programs, risk assessments, strategic plans, and business continuity plans. Preparation for this module requires organizations to maintain a well-documented governance trail.
Module 2: Compliance Program
This formal written program, administered by the chief compliance officer, encompasses four critical components:
- Policies & Procedures: Must follow board-approved policies, cover the full IT product lifecycle, and remain current. Examiners review creation dates, maintenance records, and consistency across locations.
- Training: Must be comprehensive and tailored to individual responsibilities. Educating the entire staff, from the board on down, is essential to maintaining an effective CMS. Training should address Federal consumer financial laws and UDAAP.
- Monitoring and Audit: Essential for identifying weaknesses. Examiners verify independence, expertise, board reporting, and coverage of IT system capabilities and access restrictions.
- Consumer Complaint Response: Companies must have formal processes for recording, categorizing, and resolving complaints promptly. Consumer complaints and inquiries should be an integral part of an institution's compliance management system.
Module 3: Service Provider Oversight
Engaging with a service provider does not negate the institution's responsibility to comply with Federal consumer financial laws. Institutions must conduct initial and ongoing due diligence, include clear compliance expectations in contracts, establish internal controls, and take prompt action on identified problems.
Creditors may be held liable for the actions of their service providers � making robust vendor management not just best practice, but a regulatory necessity.
Module 4: Violations of Law and Consumer Harm
Examiners assess root causes, severity of consumer harm, violation duration, and pervasiveness. Self-identification and correction of violations reflect strengths in an institution's CMS. Organizations that demonstrate proactive detection and remediation fare significantly better during examinations.
Module 5: Examiner Conclusions and Wrap-Up
The examiner summarizes findings, identifies needed corrective actions, and discusses conclusions with management. This final module underscores the importance of maintaining comprehensive documentation and demonstrable compliance throughout all prior modules.
Conclusion
Following these guidelines represents best practice for financial services companies, particularly those using service providers. Preparation through comprehensive compliance management systems addresses potential consumer harm risks and positions organizations for successful examinations. The time to update your risk management framework is now � before examiners arrive.
