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Friending Your Program and Challenges

Joel S. Mayer, Esq., CCEPChief Compliance OfficerNJ Higher Education Student Assistance Authority

Strengthen compliance programs by ‘listening out of the box’

Trick or Tweet! Finding hidden treasure in the tools and mentality of social media

Promote positive interaction with regulators, prosecutors, investigators and monitors to reduce the likelihood or severity of findings

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You have the right to an honest answer

“I have no … I don’t know” (but I’ll find out)

You have the right to interrupt, heckle, protest (non-violently), and disagree

You have the absolute right to pester me for additional or more complete information after the session and after the conference

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INCREASED PRESSURES OR INCENTIVES TO INCREASE BUSINESS (ENROLMENT)

+AGGRESSIVE REGULATORY, INVESTIGATIVE,

PROSECUTORIAL, CONGRESSIONAL AND PUBLIC SCRUTINY

=COMLPLIANCE CHALLENGES

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What you do know may hurt you but what you don’t know may kill you

Your most valuable information is:AccurateTimelyVoluntaryAttributableActionable

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Some Key Questions:

1. What did you know and when did you know it?2. Who knew what and when did they know it?3. What did you do with the information?4. What did they do with the information?5. Why did you take/not take specific actions

6. Why didn’t you know?

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Traditional or Standard tools:

Anonymous Hotlineso Often Mandatoryo Effective but with limitations

Auditing & Monitoring System ReportsComplaint Review/Management

All useful and necessary but not necessarily effective at supplying complete and timely information

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Increasingly aggressive and hostile regulatory environment requires a fresh look at compliance programs, structures and

methods for acquiring actionable information

Standard methods no longer practical (increasing staff) or as effective as they need to be (additional policies & procedures)

Today’s managers/supervisors were in the trenches during compliance’s Medieval Age resulting in “tone at the middle”

challenges.

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Medieval Compliance Program

Today’s hostile regulatory environment in the social media vortex of instant, ongoing, abundant and often ill-informed public

commentary and criticism demands compliance programs and information gathering methods that are:

DYNAMIC FLEXIBLE AGILE PROMOTE TRANSPARENCY SOCIAL (MEDIA SAVVY)

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Ps (pre script): Does your institution have social media policies. If so, how are they enforced?

Benefits of Social Media:

◦ Real time information◦ Unfiltered information◦ Diverse contributors◦ Feedback from internal & external participants◦ Wiretap Orders or Search Warrants not required

Take advantage of this free, unfiltered and potentially abundant river of information (confessions, observations, criticisms & compliments)

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Twitter◦ Anonymous viewing/monitoring (you can follow anyone –

usually)◦ Most users aren’t anonymous ◦ You can engage if you choose or remain in ‘surveillance

mode’◦ “Tickling The Wire”◦ Free

Facebook◦ Greater wealth of information◦ Less anonymity◦ Following (“friending”) requires permission Some info available on public wall

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Opening in Google Chrome provides additional search options

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a.k.a. “Compliance’s Alliances”

A compliance program is most effective when it has access to an abundance of actionable information and a structure

capable of processing and responding to it swiftly, consistently and transparently.

GOAL: Improve Communication

SOLUTION: Improve Communication

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The best way to respond to an enforcement inquiry/action is to prevent them by getting there first and the best way to get there first is through access to actionable information gained through

internal and external partnerships

CAVEAT: Reporting structures need to compliment the information network

Inherent conflicts are presented where the CCO reports to GC or University Counsel

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All successful partnerships on built on trust

Partnerships built on necessity will be dysfunctional at best and ineffective at worst

without a fundamentally trusting basis

NOBEL Laureate Conundrum:The smartest people in your institution are probably your most

stubborn 5 year olds

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We spend so much time auditing, monitoring, analyzing, and training that we’ve forgotten

how to listen

More importantly, we’ve forgotten WHY we listen

The best listeners build the strongest trust and get the best information

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1. Listen

2. Empathize

3. Accommodate

4. Respect

5. Articulate

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1. Listen◦ Verbal and non-verbal communication◦ Comfortable environment (off site?)◦ Individual but occasional larger groups

2. Empathize◦ “I get that” = “I don’t care” or “not my problem”

3. Accommodate◦ Drill down to underlying issue◦ Identify common ground through creativity

4. Respect◦ Silence the cell phone◦ Title neutral

5. Articulate◦ Clear explanation of issue/project/concern/solution◦ Mind your ‘x’, ‘WHY’s & ‘z’s

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Effective use of the LEARA Model will add credibility to the CCO and compliance staff

Credibility leads to trust which leads to:

Stronger partnerships Better actionable information Multi-level buy-in More dynamic, proactive compliance program

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Compliance Calculus dictates that regulatory/congressional scrutiny,

investigations and enforcement actions will increase…

TAKE ADVANTAGE OF THE OPPORTUNITY

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Where’s the Devil?

Not necessarily in the details (that’s where the angels are probably hiding)

Because the initial focus of any complaint, inquiry or investigation leading to an enforcement action will be directed at the appearance of impropriety (conflict of

interest/data privacy breach), details which might otherwise prove the absence of impropriety may become irrelevant or

may be too costly to prove

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Calculus for Regulators & Prosecutors 101:o Delay = Suspiciono Suspicion = Negative Perception

Negative perception generates additional attention and the prospect of a wider inquiry

Avoid negative perception by encouraging transparency and showing that you and the institution have nothing to hideo What they see through is less likely to hurt you

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Don’t confuse respect with intimidationWelcome them with open arm (and open

books) Learn how they take their coffeeMake yourself indispensible Show pride in your work, your integrity, your

program and the work of your staff Beware of lawyers – be very aware of

perception

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Consumer Finance Protection Bureau (CFPB)

Director, Richard Cordray, Esq.◦ Made his mark as a career prosecutor investigating and prosecuting financial

institutions for unfair/deceptive practices on behalf of borrowers Created by Dodd-Frank Objectives◦ Conduct rule-making, supervision, and enforcement for Federal consumer

financial protection laws◦ Restrict unfair, deceptive, or abusive acts or practices◦ Take consumer complaints◦ Promote financial education◦ Research consumer behavior◦ Monitor financial markets for new risks to consumers◦ Enforce laws that outlaw discrimination and other unfair treatment in

consumer finance

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Why should we care?

◦ Student Loan Debt just topped $1 Billion◦ Largest consumer debt category◦ Tremendous public scrutiny on Higher Ed◦ Congressional & State AG Investigations For-Profit Schools Recruiting/Lending Practices (Title IV Compliance)

◦ Newest kids on the block Turf (justify agency, make a big splash) Aggressive/Subjective/Unpredictable

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Developing a strong focus upon the Higher Education space◦ www.consumerfinance.gov◦ www.consumerfinance.gov/students/knowbeforeyouowe

(student loan cost calculator)◦ Encourages whistleblower complaints◦ Beta testing additional student-facing applications to

facilitate direct cost comparisons between institutions and to solicit student complaints Enforcement activity Inform future rulemaking and regulations

◦ CFPB Ombuds Office

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BENEFITS OF AN INQUIRY OR INVESTIGATION

Presence of regulators, investigators and prosecutors reminds everyone of the importance of compliance efforts

Permits compliance professionals to focus on compliance and improve programs

Encourages investment in compliance related systems, consulting services and third party solutions

Enhances the value of dedicated compliance professionals in the eyes of institutional leadership

Encourages the development of valuable contacts Can provide a reputational boost to your institution

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