One of the realities faced by all regulated businesses is the codependent relationship that exists between the regulated industry and the regulator. Nowhere is that relationship more important than for the consumer finance industry. The fact is that both the industry and the regulators need one another's expertise, cooperation and support.
Over the years, I have had many opportunities to interact with state and federal regulators on behalf of clients, often addressing problems or pereceived problems that the regulator has called to the client's attention. More times than not, the regulator is correct, and the obligation of the finance company is to acknowledge the error, remediate and correct internal processes and procedures to prevent reoccurrence. Sometimes, the regulator is wrong, and we state our position as to the matter at issue, and get the regulator to reverse the findings. Of course, this goes a lot more smoothly when there is a good relationship between the finance company and the regulator. And, then occasionally, we cannot convince the regulator of the validity of our position, and we may have to agree to disagree. In all of these scenarios, a relationship of trust and respect goes a long way to reducing the intensity of the matter at issue.
I share the following concepts in establishing and maintaining a relationship of trust and respect with one's regulator:
- Thoroughly review the substance of any alleged violation.
- Respond to problems or issues raised in a report of examination in a timely manner. Even if your response is a non-substantive response—for example, that you are taking the issue to legal counsel, and will report back soon.
- Engage your regulator in discussion about issues over which you disagree. Regulators are not infallible. And, they will admit when they have made a mistake.
- Always, always be truthful in your response to the regulator and follow through with the commitments that you make.
- Do not allow disagreements to become adversarial or personal. When you must challenge the regulator, always be respectful in stating your position. Clearly articulate your points of disagreement, and why you are right and the regulator is wrong. Do this in a factual and respectful manner.
Practice Pointer: Always apply the LAFF principle in engaging with your regulator:
L = listen. A = admit when you are wrong. F = fix the problem. F = follow-through.