“Last year, Lender Processing Services Inc. which handles technology and other outside services for banks and other mortgage-servicing companies, was one of two nonbank entities that had to sign consent agreements with federal banking regulators over foreclosure-process deficiencies. Also, state officials last year issued subpoenas to the firm as part of their investigation of questionable foreclosure practices.”
New consumer bureau warns banks on outsourcing
WASHINGTON (MarketWatch) — A new U.S. financial regulator is putting banks on notice that they can and will be penalized for their outside vendors’ misdeeds.
In a bulletin Friday, the Consumer Financial Protection Bureau warned the financial industry to make sure third-party vendors–such as foreclosure-law firms, technology firms, appraisal companies and default-service companies–are following the nation’s consumer-protection laws.
“Consumers are at a real disadvantage because they do not get to choose the service providers they deal with–the financial institution does,” said Richard Cordray, the bureau’s director.
Most banks hire outside service providers to carry out a range of duties such as processing credit cards, handling mortgage and student-loan payments, maintaining call centers or taking care of billing issues. The agency’s notice emphasizes financial institutions can be held responsible if these contractors engage in practices that hurt consumers.
Copy of bulletin below…