Master Your Next Regulatory Lookback
November 25, 2019
Create a Well-Planned Lookback that Verifies Comprehensive and Correct Findings
Planning, process and governance result in successful regulatory assessments
You may have a lookback in your future due to increased regulator requests to resolve violations and provide customer restitution. As part of this regulatory assessment, regulators mandate well-planned processes in order to verify comprehensive and correct findings from the lookback. Use these building blocks for a successful lookback, regardless of scope.
6 Building Blocks to Master a Lookback
1. Establish strong governance for customer remediation to reduce risk.
Not every lookback involves customer remediation, however, when it does, a strong governance process will validate your decisions and eliminate any ethical, financial or reputational risk.
- Establish an approval hierarchy
- Institute dollar amount thresholds for QA and accuracy validation
- Share remediation recommendations with your regulatory partner throughout the process
2. Identify the correct population to focus your effort.
While this may seem elementary, getting this right the first time is essential for a regulatory assessment. Not doing so can have a series of unintended consequences, such as:
a. Too broad–causes the lookback to be significantly longer and more costly
b. Too narrow–creates “false negatives” by missing accounts that need resolution, resulting in additional regulatory scrutiny and financial penalties
- First, identify the total universe population
- Second, apply very specific criteria to narrow the total population down for your lookback activity
- Understand the potential range of customer remediation to determine your investment in identifying the right population. For example, an SCRA lookback can be less than $50 for driving the Effective APR over the required 6%. Or the restitution can reach tens of thousands of dollars for an errant foreclosure.
3. Assess the review process for each item in your eligible population.
As a substantial part of the planning process, this step identifies potential roadblocks, risks or enhancement solutions to discuss before beginning to perform the lookback as part of your regulatory assessment.
Areas to assess:
- What is the complexity (data in one field vs data in 50 fields)?
- Where is the information (on a system of record or paper and scans)?
- How long will it take to perform one review?
- Is there existing or needed automation to perform the review (custom code vs manual human review)?
- How long do I have to perform the lookback?
- Is there appropriate internal capacity and expertise to conduct the lookback, or do I need external support?
- Review the current operating and desktop procedures that support the scope of the lookback review to identify root causes.
- Once identified, fix the issue(s) and then determine if the fix retroactively corrects the impacted population.
- Fully document a detailed, end-to-end lookback procedure.
4. Provide full transparency to avoid unwanted misunderstandings.
Gain buy-in upfront on your lookback methodology, internally and with your regulator partner. By doing so, you’ll avoid wasting time and resources only to have the work challenged and the risk of repeating the lookback effort.
- Share the lookback plan and procedures with regulators and internal approvers, to gain buy-in prior to performing the lookback.
- Establish a regular meeting cadence with these stakeholders to review the plan and milestones.
5. Implement strong QA/QC activities to support your lookback review to double-check your process and results.
Having effective Quality Assurance and Quality Control steps in the process are critical because they check your work. QC (after the fact) resources should be independent of the lookback execution team. Internal Audit or external providers are ideal.
- Employ QA for second sign-off and validation, at a minimum.
- Use QC to test inclusion and dollar restitution amounts on a statistically significant sample size.
- After the lookback, assign QC resources who weren’t part of the lookback execution team, such as internal audit or external providers.
6. Establish dashboard reporting for easy grasp of findings.
Create and socialize performance reporting as it relates to your lookback throughout the process.
Dashboard should include the following:
- Progress of eligible population penetration
- QA/QC results
- Volume of population escalated for remediation
- Remediation completion status
Master Your Lookback Process with Help from Bridgeforce
A lookback review can be very complex, a drain on resources and very expensive. Bridgeforce has supported clients’ lookbacks related to HMDA LAR submissions, MLA, SCRA and TRID. We have covered all aspects of the lookback from establishing organizational structure to providing credible challenge to assessing coverage of applicable regulatory requirements. Let us help you as you embark on your lookback journey.