Pub. 6 2011-2012 Issue 1

May/June 2011 13 Extraordinary Service for Extraordinary Members. The EFT You can TRUST NetWorks is the Electronic Funds Transfer (EFT) service provider that Nebraskans have used and learned to trust like family for over 30 years. Our highly experienced staff is extremely knowledgeable and resourceful when it comes to assisting your institution. Give us a call to learn more about our services, you’ll have the opportunity to talk to someone who truly cares about and understands your EFT service needs. www.netseft.com Toll Free 800-735-6833 Local 402-434-8202 Q Outsourcing Management — continued on page 14 that the financial institutions rely- ing on third-party service providers maintain UDAP compliance by pay- ing close attention to the vendors’ card program promotional materi- als, advertisements, claims, and representations that could mislead a target audience regarding the cost, availability, or terms of the product or service. the institution could be cited by its regulator and subject to civil money penalties if this results in violations of Regulation H. • Legal Risk The primary legal risk is that a vendor’s operation does not comply with consumer protection laws and regulations. Because of the number of complex laws and regulations, the risk of noncompliance has increased significantly. Because of this, banks should be especially vigilant in iden- tifying, assessing, monitoring, and mitigating this risk. For example, in 2010 the FDIC filed separate enforcement actions against several banks for marketing credit cards (and using a third-party vendor) through solicitations that had mis- representations about credit limits or available credit and inadequately disclosing fees and restrictions on initial available credit. The FDIC has stated that “[t]hese FDIC ac- tions underscore that banks must ensure that they actively supervise their third-party partners and ad- equately assess and address the risks posed to consumers by certain credit card products.” In recent years, the FDIC and the Board of Governors of the Fed- eral Reserve System released joint guidance (“Unfair or Deceptive Acts or Practices by State-Chartered Banks,” FDIC and Federal Reserve Board, March 2004, http://www. federalreserve.gov/boarddocs/press/ bcreg/2004/20040311/attachment. pdf) on the need for banks to as- sess Unfair and Deceptive Acts and Practices (UDAP) risks with regard to third-party service providers. Some key components the guidance identifies are maintaining awareness of the risks associated with outsourc- ing, establishing controls over such relationships, exercising proper due diligence when identifying, select- ing, and maintaining a third party, and creating comprehensive written contracts. The guidance recommends Another legal risk involves legally binding contracts of a fixed duration. Outsourcing arrangements are bind- ing contractual relationships with another legal entity, typically an un- affiliated third party. The duration of contracts may be fairly lengthy, during