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Stay educated, stay up to date: Best practices for managing regulatory changes


Despite regulatory requirements continuously evolving, many financial services leaders are still trying to identify what their organization’s implementation best practices should be. Regardless, as customer needs and expectations continue to evolve, the requirements for accurately managing compliance often require workflow modification.

To avoid becoming overwhelmed by our nation’s regularly changing regulatory landscape, leaders should implement key best practices to proactively protect their organization, employees and customers from any potential disruption as new regulatory updates occur.

Potential regulatory changes to watch now: HUD rule change proposal

The latest example of today’s ever-fluctuating regulatory environment can be seen in the newly proposed rule changes to Fair Lending. 

Under HUD’s previous rule, lenders, landlords and other housing providers could be held liable for discrimination against protected classes even if it was not their intent to discriminate. The use of disparate impact was challenged all the way up to the Supreme Court, which ultimately ruled in favor of disparate impact in 2015. 

The proposed rule change, if approved, will create a strict five-factor process to determine if disparate impact is significant enough to be used in Fair Lending suits. What does this mean for lenders? While the proposed change does not eliminate disparate impact, it does provide a specific set of definitions to assist lenders in better evaluating how policies and procedures adhere to Fair Lending requirements. 

If the rule is approved, leaders will need to evaluate their own internal policies and procedures to ensure the organization and its employees are aligned to the new regulations. At a minimum, this should include dedicated training for your staff directly impacted by the modifications. 

Remedying negative perspectives in an ever-changing regulatory environment

Any time a new requirement is implemented, it often takes valuable resources, such as time and money, to train or retrain staff in preparation for the mandated compliance deadline. Financial services leaders should be mindful of your organization’s cultural view on compliance, especially while executing changes. If your organization’s leadership has a negative outlook on compliance management and responsibility, that attitude can permeate the entire organization, unintentionally creating a risky environment. 

Rather than viewing compliance as burdensome, try to identify and leverage the opportunity regulatory shifts present. For example, as new regulation requirements are implemented, ensuring your organization is prepared on the front end can lead to an ethically stronger workforce and protected customer base. Tackling compliance head-on with a positive attitude is one of the most crucial steps leaders can take to ensure success and compliance, and in turn, build a trustworthy reputation.

Tactics to prepare for any regulatory changes, not just HUD

There are a few tactical approaches that your organization, regardless of size, can implement to ensure a successful adoption of new regulatory requirements. 

First and foremost, having access to timely, relevant and impactful training is vital to successfully navigating compliance management. One way to ensure this is by asking your training provider how quickly educational materials and courses are updated after a final ruling is announced. Your organization’s leaders should work with training providers to ensure employees have the most up-to-date course content and design. 

Regardless of tenure, employees at every level of experience will benefit from quick regulatory refreshers. There are options available to help streamline the training process too, such as microlearning, which can save employees a significant amount of time while still ensuring they are well-versed on the current regulatory situation. 

Role-based courses are another way to ensure you are providing more efficient and effective training to employees. Role-based training provides a tailored curriculum for specific job functions and only highlights information relevant to that role. BAI research has shown that exchanging subject-based training for role-based training may result in up to 30% less time required to complete the required regulatory training.

Lastly, financial services leaders need to understand what ROI for compliance means within the organization. This includes defining goals and metrics to track, as well as putting processes in place to ensure success among all employees. By setting these specific targets, you can easily identify staff who need extra support and provide the help they need to be successful. 

As new regulatory updates are announced and the specific changes are released, it is important to set the tone at the top about the impending changes and the opportunities to serve your customers better. It is also important to have the most up-to-date, relevant training and information available for your employees. It is crucial to ensure are educated on what new regulations or changes mean and understand their role in maintaining compliance. 

Fortunately, there is usually a reasonable amount of time between when a rule change or new regulation is announced and the mandated deadline for implementation. The Fair Lending rule change proposal was under commentary through October, and a final ruling is expected in early to mid-2020. If approved, it will likely not be enforced until late 2020 or even 2021. 

Regardless of the outcome for this rule change, leaders who proactively leverage the extensive lead time between approvals and implementation deadlines are most likely to ensure a fully prepared workforce, seamless transition and successful organization.

Edward Marcheselli is managing director at BAI.
BAI gives financial services leaders confidence in managing compliance and a passion for professional development by providing powerful tools and subject matter expertise you can rely on. Learn more.