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ABA BRIEFING | PARTICIPANT’S GUIDE Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 Eastern Time 2:00 p.m.–3:30 p.m. Central Time 1:00 p.m.–2:30 p.m. Mountain Time 12:00 p.m.–1:30p.m. Pacific Time 11:00 a.m.–12:30 p.m.

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ABA BRIEFING | PARTICIPANT’S GUIDE

Best Risk Management Practices for

Marketing and Sales UDAAP Compliance

Thursday, October 27, 2016 Eastern Time

2:00 p.m.–3:30 p.m. Central Time

1:00 p.m.–2:30 p.m. Mountain Time

12:00 p.m.–1:30p.m. Pacific Time

11:00 a.m.–12:30 p.m.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

DISCLAIMER This Briefing will be recorded with permission and is furnished for informational use only. Neither the speakers, contributors nor ABA is engaged in rendering legal nor other expert professional services, for which outside competent professionals should be sought. All statements and opinions contained herein are the sole opinion of the speakers and subject to change without notice. Receipt of this information constitutes your acceptance of these terms and conditions.

COPYRIGHT NOTICE – USE OF ACCESS CREDENTIALS © 2016 by American Bankers Association. All rights reserved. Each registration entitles one registrant a single connection to the Briefing by Internet and/or telephone from one room where an unlimited number of participants can be present. Providing access credentials to another for their use, using access credentials more than once, or any simultaneous or delayed transmission, broadcast, re-transmission or re-broadcast of this event to additional sites/rooms by any means (including but not limited to the use of telephone conference services or a conference bridge, whether external or owned by the registrant) or recording is a violation of U.S. copyright law and is strictly prohibited.

Please call 1-800-BANKERS if you have any questions about this resource or ABA membership.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

II

Table of Contents

TABLE OF CONTENTS ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II

SPEAKER & ABA STAFF LISTING ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III

SPEAKER BIOGRAPHY ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-V

PROGRAM OUTLINE ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI

CONTINUING EDUCATION CREDITS INFORMATION ... . . . . . . . . . . . . . . . . . . . . . . . VII

CPA SIGN-IN/SIGN-OUT SHEET ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII

INSTRUCTIONS FOR RECEIVING CERTIFICATES OF ATTENDANCE ... . . IX

PROGRAM INFORMATION ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENCLOSED

PLEASE READ ALL ENCLOSED MATERIAL PRIOR TO BRIEFING. THANK YOU.

The Evaluation Survey Questionnaire is available online.

Please complete and submit the questionnaire at:

https://aba.qualtrics.com/SE/?SID=SV_3y12EKsNXa3MuGN

Thank you for your feedback.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

III

Speaker and ABA Staff Listing

Moderator/Speaker LYN FARRELL, CRCM, CAMS, AMLP Managing Director Treliant Risk Advisors LLC 1255 23rd Street, NW, Suite 500 Washington, DC 20037 (202) 249-7980 [email protected] Speakers CARL G. PRY, CRCM, CRP Managing Director Treliant Risk Advisors LLC 1255 23rd Street, NW, Suite 500 Washington, DC 20037 (202) 249-7957 [email protected] B. SCOTT FISHER Managing Director Treliant Risk Advisors LLC 1255 23rd Street, NW, Suite 500 Washington, DC 20037 (202) 627-6445 [email protected]

ABA Briefing Staff CARI HEARN Senior Manager (202) 663-5393 [email protected] LINDA M. SHEPARD Senior Manager (202) 663-5499 [email protected]

American Bankers Association 1120 Connecticut Avenue, NW Washington, DC 20036 www.aba.com

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

IV

Speaker Biographies

Kathlyn L. Farrell, CRCM (Moderator) Lyn Farrell is a managing director at Treliant Risk Advisors LLC where she co-manages the Regulatory Compliance practice. Lyn specializes in strategic compliance initiatives and UDAAP and fairness work. She has also been active in consulting with Fin-Tech companies on regulatory compliance issues. She has worked in the field of Regulatory Compliance for financial institutions for over 35 years and is a licensed attorney in the State of Texas. She has functioned as in-house counsel and compliance officer to medium and large financial institutions. She has been in the field of consulting for the past 25 years and was previously the Managing Director of Risk Management Services for Sheshunoff Consulting + Solutions; an Austin, Texas-based financial services consulting company that provides services globally. At Sheshunoff she had oversight responsibility for the regulatory compliance, internal audit and loan review practices. These practices included more than 60 risk management professionals. Her experience includes all areas of regulatory compliance, BSA/AML work, handling lending and real estate transactions, managing loans in litigation and bankruptcy, supervising enforcement action compliance and drafting and negotiating contracts. She was the 2012 recipient of the ABA’s Distinguished Service Award. She is a frequent speaker at banking events and regularly publishes articles on a variety of banking-related topics. Her publications include: Reference Guide to Regulatory Compliance, published by the American Bankers Association, the official

study guide to the CRCM examination Law and Banking textbook published by the American Bankers Association Consumer Lending textbook published by the American Bankers Association ABA Compliance Audit Manual co-author of the original edition

CARL G. PRY, CRCM, CRP Carl Pry, Managing Director of Treliant Risk Advisors, is a seasoned executive with banking law, corporate finance, and regulatory compliance experience in Fortune 500 institutions, regional banks and industry consulting firms. Carl advises clients on commercial compliance, fair lending, corporate treasury and risk management. Over the last 18 years, Carl has held senior leadership positions including Senior Vice President and Compliance Manager for the Compliance and Control Division at KeyBank, Manager of Finance and Performance Management Service Line at Accenture, and Vice President of Regulatory Services at Kirchman Corporation. With strong knowledge and experience as a banking attorney and officer, Carl is a frequent contributor to and currently serves on the Editorial Advisory Board for the ABA Bank Compliance magazine. As a featured speaker for numerous banking, compliance, and state bar associations, he has led training sessions across the country. Carl has served as an instructor at FDIC examiner school and back-up instructor for NCUA examiner school. He has authored training programs covering consumer and commercial compliance, audit, quality control, tax, privacy and risk management.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

V

C. Pry (cont.) Carl is a columnist for ABA Bank Compliance and ABA Bank Marketing magazines. He has authored scores of articles on financial issues and developed testing and support materials for BAI’s Anti-Money Laundering Professional certification and served as subject matter expert for web-based compliance and audit educational testing programs for banking training firms. He is the author of “Internet Banking Manual”, a comprehensive guide to business planning, risk analysis and maintaining a presence for financial institutions on the Internet. For LexisNexis, he also authored “The New RESPA Rule: Navigating New Disclosures” and “The Evolution of Reg. Z: Increased Duties and Responsibilities for Lenders.” Carl holds a JD and an MBA from the University of Toledo and a BSBA from Bowling Green State University. He is also a Certified Regulatory Compliance Manager and Certified Risk Professional. B. SCOTT FISHER Scott Fisher, Managing Director of Treliant Risk Advisors, directs strategy, business development, and supports Senior Advisory Board relations. Scott also coordinates the firm’s business with affiliated organizations such as Treliant Solutions. He is a member of Treliant’s Executive Leadership Team, based in Washington, DC. Scott is a senior financial services executive with a 30-year career in banking, including responsibility for mortgage, retail banking, consumer credit, product management, investments, private banking, commercial banking, network planning, e-commerce, call centers, and operations. He has overseen large scale mortgage originations, fulfillment, and servicing at major US banks. He has also led multiple mergers and acquisitions from due diligence through integration, as well as variable compensation design and administration, credit policy, and balance sheet/liquidity management. Prior to joining Treliant, Scott held senior leadership positions with First Niagara Financial Group and Wachovia National Bank. Scott has been active in financial services trade associations including the Consumer Bankers Association. He is a graduate of the University of North Carolina at Chapel Hill with a BS in Business Administration.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

VI

PROGRAM OUTLINE

TIMES SESSION AND SPEAKERS 1:45 – 2:00 p.m. ET

Pre-Seminar Countdown

2:00 – 2:02 p.m.

Welcome and Introduction Speaker Introductions 1Source International

2:02 – 2:07 p.m.

Overview Lyn Farrell, CRCM Treliant Risk Advisors

2:07 – 2:30 p.m.

Regulatory Environment Carl Pry, CRCM, CRP, Treliant Risk Advisors

2:30 – 2:50 p.m.

Finding UDAAP Issues in Sales Incentives and Practices Lyn Farrell, CRCM, Treliant Risk Advisors

2:50 – 3:00 p.m.

Questions and Answers

3:00 – 3:20 p.m.

Balancing Messages and Expectations in the Sales Environment Scott Fisher, Treliant Risk Advisors

3:20 – 3:30 p.m.

Wrap-up and Final Questions & Answers

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

VII

Continuing Education Credits Information

The Institute of Certified Bankers™ (ICB) is dedicated to promoting the highest standards of performance and ethics within the financial services industry.

The ABA Briefing, “Best Risk Management Practices for

Marketing and Sales UDAAP Compliance” has been approved for 2.0 continuing education credits towards the CRCM designation.

To claim these continuing education credits, ICB members should visit the Member Services page of the ICB

Website at http://www.icbmembers.org/login.aspx. You will need your member ID and password to access your personal information. If you have difficulty accessing the Website and/or do not recall your member ID and

password, please contact ICB at [email protected] or 202-663-5092.

American Bankers Association is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.

1.5 CPE credit hours (Management Advisory Services) will be

awarded for attending this group-live Briefing.

Participants eligible to receive CPE credits must sign in and out of the group-live Briefing on the CPA Required Sign-in/Sign-out Sheet included in these handout materials. A CPA/CPE Certificate of

Completion Request Form also must be completed online. See enclosed instructions.

Continuing Legal Education Credits This ABA Briefing is not pre-approved for continuing legal education (CLE) credits. However, it may be possible to work with your state bar to obtain these credits. Many states will approve telephone/ audio programs for CLE credits; some states require proof of attendance and some require application fees. Please contact your state bar for specific requirements and submission instructions.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

VIII

CPA Required Sign-in/Sign-out Sheet

CPAs may receive up to 1.5 hours of Continuing Professional Education (CPE) credit for participating in this group-live Briefing.

INSTRUCTIONS: 1. Each participating CPA must sign-in when he/she enters the room and sign-out when he/she

leaves the room. 2. Name and signature must be legible for validation of attendance purposes as required by NASBA. 3. Unscheduled breaks must be noted in the space provided. 4. Each participating CPA must complete an online CPA/CPE Certificate of Completion Request

Form (instructions found on next page). 5. Individuals who do not complete both forms and submit them to ABA will not receive their

Certificate of Completion.

This CPE Sign In/Out Sheet must be uploaded with the CPE / CPA Request for

Certificate of Completion form in order for the CPA to receive his/her Certificate of Completion.

FULL NAME

(PLEASE PRINT LEGIBLY) SIGNATURE TIME

IN TIME OUT

UNSCHEDULED BREAKS

American Bankers Association is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.

Please note: CPE credits are ONLY awarded to those who have listened to the live broadcast of this Briefing.

American Bankers Association Best Risk Management Practices for Marketing and Sales UDAAP Compliance Thursday, October 27, 2016 ▪ 2:00 – 3:30 p.m. ET

IX

Instructions for Receiving Certificates of Completion

CPA/CPE Certificate of Completion

Submission of a sign-in/sign-out sheet AND request for a Certificate of Completion are required for the validation process to be completed.

NASBA requires ABA to validate your attendance in order for

you to receive your Certificate of Completion.

1. COMPLETE a CPA / CPE Certificate of Completion Request Form online at: https://aba.desk.com/customer/portal/emails/new?t=546545

2. SCAN AND UPLOAD the completed CPE / CPA Required Sign-in/Sign-out Sheet (enclosed) and attach it to the REQUEST for CPE/CPA Certificate of Completion form found in Step 1.

3. SUBMIT completed Request Form and Sign-in/out Sheet

4. VALIDATION ABA will VALIDATE your attendance within 10 business days from receipt of Request Form and Sign-in/out Sheet

5. A personalized certificate of completion will be emailed to you once your attendance is validated

6. QUESTIONS about your certificate of completion? Contact us at [email protected].

General / Participant’s Certificate of Completion 1. REQUEST a General Certificate of Completion at:

https://aba.desk.com/customer/portal/emails/new?t=546530

2. A personalized certificate of completion will be emailed to you within 10 business days of your request.

3. QUESTIONS about your certificate of completion? Contact us at [email protected].

10/25/2016

1

treliant.com

Best Risk Management Practices for Marketing and Sales UDAAP Compliance

October 27th, 2016

Carl Pry, Managing DirectorLyn Farrell, Managing Director

Scott Fisher, Managing Director

aba.com 1-800-BANKERS

Disclaimer

This Briefing will be recorded with permission and isfurnished for informational use only. Neither the speakers,contributors nor ABA is engaged in rendering legal norother expert professional services, for which outsidecompetent professionals should be sought.

All statements and opinions contained herein are the soleopinion of the speakers and subject to change withoutnotice. Receipt of this information constitutes youracceptance of these terms and conditions.

10/25/2016

2

aba.com1-800-BANKERS

Presenters

• Carl Pry, Managing Director

• Lyn Farrell, Managing Director

• Scott Fisher, Managing Director

• Heightened regulatory scrutiny – Carl Pry

• UDAAP Risks in Sales and Incentive Practices –Lyn Farrell

• Q & A Session

• Balanced messages and expectations– Scott Fisher

• Q & A Session

Topics for this session

4

10/25/2016

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The increase in regulatory and congressional scrutiny on sales and incentive practices should cause every retail banker and compliance manager alike to review their institutions' sales practices and incentive programs for potential Unfair, Deceptive or Abusive Acts or Practices (UDAAP) issues.

5

Regulatory Environment

What to Expect

Reactions from Regulatory Agencies…what should you expect in the coming quarters from your regulatorReactions from Risk Committees of BoardsReactions from General CounselsHow to best prepare for scrutiny you can expect

• Be proactive with your internal evaluations• Prioritize a retail performance management internal audit• Independent review is a must that you should consider

(and that is not a sales line)

6

10/25/2016

4

UDAAP is the Bureau’s Focus

• “Our supervision and enforcement teams are not interested simply in assuring that all the

right boxes have been checked, but are asking more fundamental questions about whether

consumers are being treated in a fair and honest manner.”

Richard CordrayDirector CFPBSeptember, 2014

8

UDAAP creates danger 

“between the cracks”

10/25/2016

5

Sales and Incentives Risk Practices

1. Formal governance structure, policies, practices, and processes.

2. Strong statement of fair consumer treatment within the institution’s written sales practices program.

3. Easily understood and auditable incentive goals with clear performance targets.

4. Periodic reviews to determine that the actual sales culture matches the written program.

9

Sales and Incentives Risk Practices

5. Institution’s risk management programs include the sales and incentive programs and there are satisfactory safeguards against UDAAP risks in these practices (e.g., monitoring, testing, whistle-blower provisions, etc.)

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Specific Best Practices for Sales and Incentive Programs

1. Incentive program requires a waiting period and active account activity before payment is made.

2. Two step call back process to determine if there is actual authorization to open accounts (or similar process).

3. Monitor complaint trends to determine if there are red flags by channel, branch, or associate.

4. Monitor credit bureau disputes for trends of claims that accounts are “not mine”.

11

Specific Best Practices for Sales and Incentive Programs

5. Review reports of incentive compensation paid to individuals to determine if red flags exist (e.g., extraordinary payments, uneven payments, payments related to only certain products, etc.)

6. Review the records of employees terminated for failure to meet sales goals to determine if anyunauthorized activity occurred. Monitor exit interview notes for voluntary employment terminations to determine if sales practices played a part.

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Specific Best Practices for Sales and Incentive Programs

7. Compare the institution’s formal program to theunderstanding and culture of engaged employees through interviews of branch employees and sales representatives and through call listening.

8. Review reports of early cancellations of products by branch and sales representatives to determine if red flags exist.

9. Monitor “empty accounts” or unused products for potential unauthorized account opening.

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Primary Steps in a Sales Practices Review

10. Effective controls designed to prevent the opening of unauthorized accounts or otherwise “gaming” of the incentive programs.

11. Strong first line of defense quality control reports and second line of defense monitoring and auditing reports of sales practices that determine the strength of the bank’s controls.

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Balance Goals and Messaging

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Ask yourself the tough questions Monitoring your high performers… if someone’s numbers

are too good to be true, they probably are. Disciplinary standards…do they create motivation or

compliance. Emails

Bank culture impacts sales, service, and safety and soundness risk management Tone from the top is critical The importance of a balanced messages

Balance Goals and Messaging

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Cross-selling should have a needs assessment lens

Balanced goal and Incentive plan basics• Aligning performance objectives, incentives, strategy and

compliance• Vetted and approved by cross functional teams

(appropriate parties given a voice in the establishment of goals)

• Sales goals and goal groupings can impact practices• Appropriate level for the geography and teammate• Product Neutrality

10/25/2016

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treliant.comtreliant.com

aba.com l 1-800-BANKERS

Reference Guide to Regulatory Compliance, 26th Edition The Reference Guide to Regulatory Compliance has been the premier resource for compliance practitioners since for over 25 years. Detailed information on federal regulations and consumer legislation supports daily research needs and preparation for the Certified Regulatory Compliance Manager (CRCM) exam. The 26th Edition of the Guide contains updates regarding:

• New HMDA requirements• Military Lending Act changes• Expanded IRS chapter• OFAC updates• Updated UDAAP chapter

Order online at www.aba.com/RGRC