CARES Act Regulatory Exams – Are You Ready?

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) introduced several programs to support small business, amended provisions to the Fair Credit Reporting Act (FCRA) and established protections for consumers including homeowners and student loan borrowers. Since confirmation as CFPB Director, Rohit Chopra has led a resurgence in regulatory oversight.

To assist our clients in assessing preparedness for a CARES Act exam, Bridgeforce assembled a checklist to gauge readiness. Answer the following questions to determine your exposure to potential risk depending on how you’ve handled customer accounts under CARES.

CARES Act Checklist

After the CARES Act went live in 2020, did you…

Consumer Reporting – Update automated processes, such as consumer reporting, to ensure that customers who received accommodations did not advance in delinquency?

Complaints – Conduct root cause analysis on complaints tied to CARES Act accommodations and requests?

Program Selection – Ensure that all hardship programs were reviewed with the consumer and that the most consumer-friendly program was chosen?

Automation – Use automation to process accommodation requests and resulting account charges?

Controls – Maintain and monitor controls during the pandemic response for new accommodations; and recently, exists from these programs?

Compliance

• Adjust your compliance management system in response to the pandemic and CARES Act implementation?
• Conduct first and second line audits for potential consumer harm and complete necessary remediation (including review of supporting systems)?
• Incorporate state laws into process modifications to ensure adherence at federal and state levels?
• Define how to handle post-forbearance accounts with treatments geared to help borrowers stay in their home?

Consumer Communication and Education

• Ensure that consumers who received an accommodation clearly understand the terms and impact?
• Regularly monitor staff to confirm they are handling calls appropriately?

Policy, Procedures, Training

• Update and incorporate all relevant policies and procedures into training and monitoring?
• Effectively train your consumer-facing staff on how to address consumer inquiries about accommodations?

Ok, so how did you do?

There are many actions you could take if you answered “no” to any of the questions in the checklist. Here’s a non-exhaustive list of actions that should be prioritized to accelerate the closing of adherence gaps. Also, taking these actions will establish evidence of how you implemented CARES Act accommodations, which may need to be shared with regulatory examiners.

Consumer Reporting

• Review consumer reporting dispute volume pre-pandemic and post to evaluate increased volumes and confirm a well-documented action plan exists to address any trends identified through root cause analysis.
• Confirm detailed reviews were completed for all trade lines subject to CARES Act accommodations to evaluate furnishing accuracy.

Complaints

• Review any complaints tied to the CARES Act, which should by now be a unique category in your reporting and identify whether or not a violation of consumer financial laws or entity policies and procedures have occurred.
• Confirm any remediations, tied to the above complaints, were completed satisfactorily.

Program Selection

• Leverage reporting to identify customer percentages that are participating in each accommodation/hardship program as a pulse check that the results you find make sense based on your portfolio risk segments.
• Review QA listening forms and confirm there has been language added to listen for accommodation program selection effectiveness.
• Prepare now for the expected wave of post-forbearance loan reviews and treatments for mortgage and student loans.

Automation

• Evaluate where automation was introduced and confirm that appropriate testing was performed, and controls executed to ensure that the new automation operated as intended.
• If you automated your process to allow customers to self-initiate an accommodation, understand what non-automated decision points you have, if any, to graduate the loan into the performing loan bucket.

Controls

• Prioritize manual CARES Act related processes to determine areas of risk and define new or existing controls that care for these risks.
• Document controls in process maps and procedures to show the link between the process, the regulation, and the control.

Compliance

• Create/refine CARES Act regulatory applicability matrix at the state and federal level to clearly demonstrate adherence.
• Review previous updates to the Board of Directors that discuss specific action plans for CARES Act adherence and/or initiatives to confirm progress and status to resolution.

Consumer Communication and Education

• Review all forms of relevant customer communication (letters, emails, agent scripts) for clear, direct language around the details of customer accommodations.
• Increase targeted call listening activities to monitor effectiveness and thoroughness of presenting hardship programs to customers and handling post-accommodation account changes.

Policy, Procedures, Training

• Update all relevant procedures to include any process additions or changes related to CARES Act.
• Conduct training on CARES Act accommodations and test agents to ensure comprehension. Perform follow up training as needed based on monitoring activities.