Tracking Vendor Due Diligence Material

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How does your financial institution manage the tracking of vendors’ due diligence materials? Is there a centralized repository for these documents, or are they merely stored in folders on your computer? It’s important to note that Strunk’s Vendor Manager software offers a hosted solution designed to help financial institutions consolidate vendor due diligence materials into a single, central location.

Vendor due diligence materials include essential information about a vendor’s corporate history, financial status, legal structure, compliance record, operational capabilities, and potential risks of the partnership. A centralized repository for these materials removes the need to consult multiple sources, ensuring the information remains accurate, up-to-date, and easily accessible.

Key benefits of having a centralized repository:

  • Enhancing data accuracy and consistency: By keeping all due diligence documents in one location, the risk of conflicting or outdated information is reduced, ensuring that everyone utilizes the most reliable details for each vendor. This approach allows departments involved in vendor selection to share information effortlessly and collaborate on materials, ensuring everything stays current.
  • Streamlined review process: With all due diligence materials in one accessible location, reviewing vendor information is more straightforward, saving time and effort. This arrangement also simplifies the provision of necessary documentation during audits for your vendor management program.

Strunk’s Vendor Manager software establishes a centralized repository for your financial institution’s due diligence materials, granting swift access to all pertinent vendor information and significantly speeding up the decision-making process. Check out our site to learn more: https://strunkaccess.com/compliance-software/#vendors.

Reporting on Charge-Off Items and Recoveries

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ODP Manager generates the Account Closed letters necessary to notify customers when accounts are closed and charged off due to unpaid and outstanding overdrafts or due to a default on a Fresh Start Repayment Plan for outstanding overdrafts. Closed accounts typically no longer appear in the daily extract file imported into ODP Manager; however, users are still able to manually track charged-off accounts and recoveries in the hosted software.

Once the account is charged off, a user can create a charge-off item that includes the date, charge-off principal, charge-off fees, charge-off reason, and item status. Notes can be added to the item at the time of charge-off and notes can continue to be updated throughout the recovery process. As recoveries are made, they can be entered in ODP Manager. This will reduce the charge-off balance remaining.

The C/O Items and Recoveries summary page can be accessed under the Account Inquiry menu. This page, by default, displays the charge-off items for the last year. If a different timeframe should be displayed, institutions can request a customized default timeframe. The start and end date for the charge-off items can also be changed by the user at any time.

The summary reporting displays basic account and charge-off information and can be exported as an Excel file or as a PDF. The PDF format also includes overall totals and totals by branch.

If you have any questions about using the Charge-off Items and Recoveries feature in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

Working with a vendor like Strunk is the key to establishing a successful vendor management program

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Increasingly, financial institutions are outsourcing to benefit from reduced costs, enhanced flexibility, and improved efficiency while optimizing their resources and expertise. When a financial institution opts to outsource a task, its board of directors must ensure effective oversight and implement adequate controls. To create a robust vendor management program, the board should take into account the following activities.

Initially, the board of directors must define clear goals and objectives for their vendor management program. This includes determining the organization’s specific needs and requirements, assessing potential vendors, negotiating contracts, and overseeing vendor performance. Once established, the financial institution can formulate policies and procedures for the vendor management program. It’s crucial to devise a thorough plan that encompasses the entire vendor management process, from vendor selection to contract termination. Strunk’s Policy Manager software serves as a structured, centralized source of truth for your financial institution’s vendor management policies. Additionally, Policy Manager can document all procedures related to vendor management, encompassing links to policies, assigned responsibilities, automated change logging, and multiple file attachments.

After outlining the goals and objectives for a financial institution’s vendor management program, it is beneficial to employ vendor management software to enhance operations. Strunk’s vendor management software simplifies the automation of vendor management processes. This tool helps you organize your reviews and offers insights into the products and services provided by vendors. Furthermore, it acts as a contract repository and issues reminders for contract renewals. Our software also aids in conducting gap analyses of vendor contracts to identify any discrepancies.

Next, it’s crucial to carry out risk assessments to determine the risks associated with each vendor. Strunk’s vendor manager software will help you proactively manage vendor risk through assessments and tiering. This approach allows your financial institution to prioritize higher-risk vendors, enabling more frequent and thorough monitoring of these vendors. Once your financial institution identifies the risks linked to a vendor, it is crucial to be aware of the controls the vendor has implemented to manage those risks. Strunk’s vendor survey facilitates this process and helps you comprehend the vendor’s potential residual risks.

In a vendor management program, conducting due diligence on each vendor is crucial. You should evaluate aspects such as their financial stability, reputation, understanding of banking regulations, and overall performance. Strunk Vendor Management can streamline this process through our monitoring system and document retention for due diligence.

If it’s vital for your financial institution to collaborate with a skilled vendor who delivers dependable service and comprehends regulatory requirements for your automated vendor management process, reaching out to Strunk is key. We are here to offer consulting and the necessary tools to establish a successful vendor management program.

Save Consumer Reg E Opt-In and Opt-Out Documentation

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In order to provide evidence that consumers have provided confirmation to opt in for ATM and everyday debit card transactions, Strunk recommends that financial institutions have consumers sign or initial the A-9 form (Consent for Overdraft Services) for opt-ins by mail or in person, record and retain consumer opt-ins by phone, and store opt-in transactions and electronic signatures for consumers who opt in online or by mobile device.

ODP Manager has added the capability to help institutions attach and organize this information in the hosted software. Each account will now have an Attachments tab in the account view which will allow users to manually upload or link the proof of a consumer’s Reg E election. For each attachment, users will select the Type of attachment (Opt In / Opt Out / Other), the attachment Source (Scan / Recording / Other), and the Attachment Date. PDF, image file, and audio file formats can be attached and saved. Once saved, these files can be viewed or listened to when viewing an account’s attachments.

For institutions that use Strunk’s online opt-in process, ODP Manager now will display open accounts that match the consumer’s submitted partial account number(s). Users can use the displayed name, address, phone, and email information to identify the correct account number to update the Reg E election in the core accordingly. Once the ODP Manager user has identified the matching account number, the transaction and electronic signature record can also be linked to the account in the hosted software and the verification will display on the Attachments tab.

Strunk has added these new options in ODP Manager to provide financial institutions with additional methods to organize and track their Reg E-related documentation. If you have any questions about using the new Attachments feature in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

How Strunk’s Vendor Manager software can improve contract process efficiency

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Due to business risks and regulatory concerns, managing vendor contracts has become increasingly important. Many financial institutions outsource a wide variety of activities, from professional services to actual products, which exposes them to potential risks and possible income loss. Managing the vendor’s contract from creation through execution and contract renewal is a crucial process in a vendor manager’s lifecycle. With numerous vendor partnerships, it’s easy to lose track of contracts. A robust approach to vendor contract management is essential in today’s regulatory environment. This is where Strunk Vendor Management software can help you improve your processes.

A vendor contract is not just an invoice; it is a business contract between two parties that covers the exchange of goods or services in return for compensation. Vendor contracts outline the terms of the business relationship and specify each party’s responsibilities. This is why managing vendor contracts properly with continuous improvement cannot be understated.

It’s important to have vendor management software that can perform gap analysis on your contracts. This includes providing details on each party’s obligations under the contract, which can help to eliminate potential risks in your relationship with the vendor. Strunk’s vendor contract review ensures that your financial institution meets your organization’s business goals and risk management needs. With Strunk, you can customize the level of detail and comprehensiveness of your contract provisions based on the complexity of the vendor relationship. The gap analysis approach helps your financial institution ensure that the existing provisions continue to address relevant risk controls and legal protections during periodic reviews. Strunk’s software covers every provision listed in the Interagency Guidance on Third-Party Relationships: Risk Management. This helps your financial institution consider the factors and controls that need to be added during contract negotiations.

Strunk’s Vendor Manager can assist your financial institution in managing the entire contract process. It offers a centralized location to store contracts and due diligence material, simplifying access to crucial information for your organization. Additionally, it provides notifications for upcoming contract due dates, enhancing compliance and reducing potential risks, while also streamlining the process for greater efficiency and effectiveness. Visit our site to learn more.

Important Regulatory Announcement

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As you may know, on September 17, 2024 the CFPB issued a circular regarding ‘Improper Overdraft Opt-In Practices’. This circular outlines the CFPB’s guidance related to obtaining Reg E opt-in from consumers. In short, it represents a significant change to the interpretation of Reg E Opt-In requirements.

Since Reg E requirements took effect on July 1, 2010, the practice for obtaining opt-in outlined by Strunk has passed muster with every regulatory authority including the FDIC, OCC, Fed, and NCUA. Over that entire period of time – over 14 years – we have never had a client cited for not properly obtaining Reg E opt-in. The foundation of this practice was essentially twofold – FIs were to provide the consumer with the Reg E A-9 form and then follow up with a notice produced from ODP Manager sent to the consumer confirming their opt-in and once again telling them they have the option to opt back out. The A-9 was to be provided to every consumer upon account opening or request to opt-in. The confirmation notice history is maintained in ODP Manager.

Evidently, after 14 years, the CFPB has determined that in order to provide evidence that the confirmation was obtained from the consumer, the A-9 form must be signed or initialed. They also outline that opt-ins provided over the telephone must be recorded and opt-ins obtained online or via mobile app must be stored and signed with an electronic signature. The specific language in the CFPB circular is as follows:

  • For consumers who opt into covered overdraft services in person or by postal mail, a copy of a form signed or initialed by the consumer indicating the consumer’s affirmative consent to opting into covered overdraft services would constitute evidence of consumer consent to enrollment.
  • For consumers who opt into covered overdraft services over the phone, a recording of the phone call in which the consumer elected to opt into covered overdraft services would constitute evidence of consumer consent to enrollment.
  • For consumers who opt into covered overdraft services online or through a mobile app, a securely stored and unalterable “electronic signature” as defined in the E-Sign Act (15 U.S.C. 7006(5)) conclusively demonstrating the specific consumer’s action to affirmatively opt in and the date that the consumer opted in would constitute evidence of consumer consent to enrollment.

Although the CFPB technically only has supervisory authority over FIs with assets in excess of $10B, and no regulator has the authority to issue new regulations, in the current environment it is our view that it is highly likely that each of the respective regulatory authorities for financial institutions will adopt this same ‘guidance’ and administer their examinations accordingly. That being the case, we urge you to adopt the approach outlined in the three bullets above when obtaining consumer opt-in for Reg E. Specifically, what this means is:

  • For consumers who opt in via postal mail or in person – have them sign or initial the A-9 form:
  • For consumers who opt in via telephone, make sure your calls are recorded, and those recordings are retained.
  • For consumers who opt in online or via mobile device, store the transaction along with electronic signature. Strunk supports an online opt-in process, which can be tracked within ODP Manager. Please contact us if you would like us to configure that capability for your institution.

With respect to existing consumer account holders, the same rules all apply. So, if you do not have the physical evidence outlined above for consumers who currently are coded as opted in for Reg E, you must contact those consumers to obtain the affirmative consent outlined above. If those consumers do not provide the necessary confirmation, we would recommend removing their Reg E opt in from your system and discontinue approving their Reg E overdraft transactions and charging fees.

Today’s Overdraft Environment

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In today’s financial environment, having access to emergency funds is more crucial than ever. Many individuals are struggling to cover everyday expenses, and overdraft privilege can offer reassurance to customers who require fast access to short-term funds. Consumers, especially those who use overdraft services, continue to show a strong understanding of overdrafts and the options available to them. Consumers would much rather have their transactions paid for than returned. In either case, the financial institution will charge a fee. In the last two years, just over half of consumers have needed immediate access to funds to pay their bills. Political leaders tend to believe that overdraft privilege only affects lower-income consumers, but consumers earning between $100,000 and $150,000 also need access to short-term emergency funds. This is not a matter of wealth, but rather of having access to available cash. For consumers with accounts at financial institutions, having access to cash when needed is crucial. The benefit of not paying a fee unless they use the service is the type of access they are looking for.

Half of all account holders will need help with liquidity at some point. Consumers can’t predict when they will need access to emergency funds, but they want to be certain that if a crisis arises, it will not have a long-term effect on them or their credit. More than 60% of overdrafts come from consumers who intend to use the service and appreciate the value it adds to their checking account. Consumers are looking for a solution without a long-term commitment, such as credit card debt or a personal loan, and overdraft privilege provides that to them. Having access to additional funds when a consumer is in need is highly beneficial, and they do not want to experience any reductions in their ability to use the service. Approximately 30% of consumers use overdraft services, indicating a sustained demand for this offering. It is crucial for financial institutions to provide alternatives within their framework, such as Overdraft Privilege, Line of Credit, and a transfer from another account so that consumers can manage their fees and protect their income. Additionally, a repayment program is available to assist consumers who are having difficulty with their budgets, providing them with extra time to repay their overdraft limit. Strunk offers Overdraft Privilege consulting services and the best software to ensure your Overdraft Privilege program is an ongoing success.

Excessive ODP Use and Alternatives to ODP

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The hosted ODP Manager software includes a letter template that allows financial institutions to inform customers of alternatives to fee-based overdraft coverage. These letters are sent to customers that have demonstrated excessive consumer Overdraft Privilege activity.

FDIC regulated institutions are expected to give customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling twelve-month period a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage. Strunk also recommends that institutions not regulated by the FDIC also communicate available alternatives to ODP on an annual basis to accounts with insufficient funds items.

Alternatives to ODP could include an Overdraft Protection credit line or an Overdraft Protection transfer from another account with the financial institution. The letter template includes details related to line amounts, charges, and fees so customers can make an informed decision about how best to cover overdrafts.

Letters can be generated based on information included in the extract file. If the file includes data that indicates when an account has met the qualifications for the letter, hosted ODP Manager can automatically show when the letter is due. If the data cannot be added to the extract file but accounts that qualify can be identified by an existing core report or other method, the letter can be generated as needed by account number as an Ad Hoc letter. Once generated, the letter is tracked and retained within ODP Manager.

If you have any questions about sending Excessive Use Notification letters in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

ODP Manager: Import Events and User Events

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The information displayed in ODP Manager is provided by an extract file from an institution’s core system. This file is updated after close of business and is imported daily into ODP Manager. Once the import has occurred successfully, the letters due and reports are updated with the information for the current as of date.

A benefit of the hosted ODP Manager software is the advanced history tracking. This feature allows users to view and search for recorded events by account number or date. There are three main types of events that are stored within ODP Manager: import events, letter events, and user created events.

Import events are recorded at the time an import of the extract file is successfully processed. Events are identified by comparison of the current as of date’s file to the last file imported. Accounts are updated to note if accounts are now closed, are overdrawn, or now in good standing. If an overdraft limit is assigned or removed or if an account opts in or opts out for Regulation E, an event is also created in the account history.

As part of the daily tasks in ODP Manager, users will generate letters that are due. As letters are generated, a PDF of the letter is retained in the event history. The letter type, template name, and date are also recorded.

Users also can create events as needed. Comments allow users to make account notes that can be viewed by all hosted software users. Reminders allow not only notes to be added, but also allow a due date to be assigned to the item for future follow-up. Both notes and reminders can include attachments. Repayment plans can be added to generate Fresh Start agreements and to track payments made towards the repayment schedule. For accounts that have charged off, users can create a charge-off item to track recoveries and to streamline charge-off reporting. All user-created events can be viewed and updated by all users with access to ODP Manager.

Once events are tracked in ODP Manager, they can be searched by account number or by date or date range. Individual account information can be exported to PDF and events that occur in a specified date range can be exported to Excel.

If you have any questions about event information accessible in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

A Loan Pricing Solution that will help banks make more money

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Loan pricing solutions were popular twenty years ago but they were too expensive for a lot of community banks. With banks looking for ways to make more money now might be the time to look at an affordable, easy to implement loan, relationship and deposit pricing tool.

Many banks don’t take the size of the loan into consideration when pricing commercial or commercial real estate loans. Size of the loan is one of the biggest contributing factors to the profitability to the bank. Most banks over price their biggest most profitable customers and under price their smallest least profitable customers.

Do you know which customers are the most profitable and which ones your lenders think are most profitable? A pricing tool that takes the loan and deposit relationship into consideration will give you a precise look at customer profitability. It will also tell you when to price up and when you can provide a better deal for the borrower…to win or keep the deal.

Some loan customers are fee averse. Although we never recommend not charging a fee for a loan, what rate provides the same return to the bank if there was no fee? Fees on all loans matter, but they really don’t contribute to the overall profitability of a customer on larger loans with a longer expected life of the loan.

Do you factor in deposits when pricing commercial loans? Are the deposits in interest bearing accounts or non–interest bearing? Does a large depositor necessarily warrant giving a lower rate on a commercial loan? The short answer is “no” but a pricing tool will help your lenders with that decision.

Do you price consumer loans based on the term of the loan? Do you consider the size of the loan when determining the rate? Do you collect fees on consumer loans and is it a driving factor to overall profitability?

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn about how our loan pricing tool will increase net interest income by at least 25bp. For a $200M loan portfolio that is $500K per year.

 

An independent certified public accountant has examined Strunk’s operations and found them to be in compliance with the AICPA’s Trust Service Principles. It was determined that Strunk meets the Security, Availability, Processing Integrity, Confidentiality, and Privacy criteria for SOC 2 established by the AICPA.