Vendor management compliance: Free checklist

This checklist helps financial institutions create a vendor management program for consumer-facing vendors and their compliance with federal consumer financial laws. It outlines the main responsibilities involved in selecting, onboarding, and overseeing vendors to ensure they follow federal consumer financial laws. Covering everything from assessing regulatory risks to ongoing monitoring, this checklist offers a clear process for managing vendor relationships and protecting consumer interests.

By following this checklist, institutions can set up effective vendor management practices that promote accountability, reduce regulatory risks, and keep consumer protections in place.

How to use this vendor management compliance checklist

To build and maintain an effective vendor management program, follow these steps to get the most out of the checklist:

Checklist

Risk assessment

Determine the purpose of using a service provider. Common reasons may include expanding product offerings or market efforts, accessing specialized expertise, and conducting services that require external resources, such as call centers or telemarketing. Assess the potential risks involved in outsourcing specific functions. Key considerations include whether the function is consumer-facing, and if the function involves handling or storing confidential consumer information. Identify higher-risk outsourced functions that may attract regulatory scrutiny, including:

Marketing and solicitation activities, such as telemarketing. Selling ancillary products that might be subject to heightened consumer protection regulations. Engaging in debt collection activities, which are closely monitored for regulatory compliance.

Evaluate the service provider’s compliance with fair lending laws, especially if they handle consumer financing tasks (e.g., mortgage brokers or auto dealerships).

Due diligence in onboarding

Confirm that the service provider holds the necessary licenses or registrations for the services they will perform. Check the service provider’s understanding of applicable consumer laws and regulations. Assess their regulatory compliance history, including any past involvement in enforcement actions. Ensure the service provider has strong oversight policies for their employees and agents, especially in consumer interactions. Review their internal policies, procedures, controls, and training materials for compliance standards.

Contract requirements

Clearly outline each party’s role in protecting consumer data, including documented policies for data security and privacy. Require the service provider to perform background checks on all employees handling consumer data. Specify that the service provider must train employees on:

Relevant state and federal consumer financial laws; Compliance procedures and policies; and Information security best practices.

Ensure the service provider seeks approval before sharing any consumer data. Require immediate notification in the event of a suspected data breach. Include a clause that allows your institution to end the contract with reasonable notice and without penalties if necessary.

Policies and procedures

Ensure the Board of Directors and management actively oversee vendor compliance with federal consumer financial laws. Develop clear policies covering data security and consumer privacy, especially regarding the sharing of consumer eligibility information for marketing between affiliates, as per the Fair Credit Reporting Act (FCRA) and Regulation V. Verify that service provider compensation does not unintentionally incentivize actions that could lead to violations of consumer financial laws, such as:

Unfair, deceptive, or abusive acts or practices (UDAAP); and Violations of the Equal Credit Opportunity Act (ECOA) anti-discrimination provisions.

Maintain policies for regular audits and monitoring of service providers, including clear procedures for contract termination and secure data destruction when necessary.

Monitoring and corrective action

Benefits of using a vendor management compliance checklist

Using this checklist brings several benefits for managing your consumer-facing vendors effectively:

Frequently asked questions (FAQs)

Q: Why do I need a vendor management compliance checklist?

A: A checklist like this helps you ensure that vendors meet regulatory standards and protects both your institution and consumers from risks tied to non-compliant vendor practices.

Q: How often should I update my vendor management checklist?

A: Review it at least once a year, or whenever there are significant regulatory changes, to keep your compliance standards up to date.

Q: What areas of vendor compliance does this checklist cover?

A: This checklist guides you through everything from initial risk assessment and onboarding to contract requirements, policy reviews, and ongoing monitoring.

Q: Who should be using this checklist?

A: Compliance officers, risk managers, and any team members involved in vendor selection and oversight within your institution will find this checklist valuable.

Q: How does this checklist support consumer protection?

A: By helping you enforce privacy, security, and fair treatment practices, the checklist can prevent consumer harm and strengthen trust with your customers.

Q: What should I do if a vendor isn’t meeting compliance standards?

A: This checklist includes steps for taking corrective action, which may mean working with the vendor to resolve issues—or, if needed, ending the relationship to protect your institution.

This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.