On April 13, 2012, the CFPB released the above referenced Bulletin notifying financial institutions under CFBP supervision that, depending on the circumstances, the CFPB may hold these financial institutions legally responsible for violations of Federal consumer financial law by the service providers with whom they have a business relationship. This memorandum attempts to summarize the Bulletin’s main provisions, but you are advised to read the Bulletin, which may be found at the following web site:http://files.consumerfinance.gov/f/201204_cfpb_bulletin_service-providers.pdf. In the Bulletin the CFPB recommends that CFPB supervised financial institutions take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers. These steps include, but are not limited to: • Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law; • Requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities; • Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities; • Establishing internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law; and • Taking prompt action to address fully any problems identified through the monitoring process.

Complete Memorandum