The Benefits of Compliance Programs to Alternative Lenders
A key but often overlooked value-add for consumers and lenders alike are optional programs or products offered ancillary to loans.
As lending rates are subject to macroeconomic volatility and more lending companies compete for market share, these programs take on new importance as a way for lenders to offset defaults and retain marginal gains.
Optional credit insurance programs can be an asset to alternative lenders, since they provide direct financial support for consumers who are having difficulty making their payments due to unforeseen but insurable events such as injury, illness, or loss of employment. While insurers are regulated by provincial bodies and develop initiatives through the guidance and direction of industry associations such as the CLHIA and CCIR; it is equally important that each lender develop their own compliance initiatives founded on the principles of treating customers fairly. Working with insurance partners that can assist in building these programs, and then utilizing best practices and managing education around them is key to maintaining their longevity and sustainability.
The following are some guidelines of the optional fundamentals for these programs:
- Promote the optional nature of programs.
- Eliminate processes that might foster aggressive promotion or selling, and minimize direct incentives for promotion (specifically on an individual consumer loan basis).
- Provide full disclosure of costs separate from loan costs.
- Ensure output documents are separate from loan documents.
- Provide clear and concise communications and marketing materials to support consumer education.
- Offer free “look periods” where consumers can change their decision without implication or cost.
- Ensure all documents are correct and fully executed.
- Call centre messaging should be followed.
- In-branch practices should be followed
- Compensation models must align.
- Be certain that system workflows or on-line processes are fulfilling objectives.
- Any gaps should be dealt with immediately and followed up on.
- Consumer complaints should be fully addressed and logged.
- Provide comprehensive employee training, and offer this on an annual basis.
- Ensure that all training is fully completed.
To conclude, optional programs such as insurance can be invaluable to both lenders and borrowers, and incorporating compliance programs is the essential foundation for robust growth. The above mentioned guidelines offer a road map for companies looking to build out their internal strategies and ensure continued successes.