The creative minds that typically convene on product development and marketing teams are often reluctant to include representation in their working groups from the staid compliance department.

In the past, this was nothing more than a well-known source of frustration among compliance professionals. Now, such exclusionary behavior can lead to significant reputation risk and, quite possibly, regulatory actions.

Many of today’s product development efforts are focused on technological innovation and improvement. From seeking a greater presence in social media, to utilizing alternative and emerging delivery channels, banks continue to stretch the boundary of imagination and innovation. Unfortunately, regulatory guidance often lags far behind industry innovation, resulting in a “Wild, Wild West,” where there are far more creative thinkers than there are regulatory “sheriffs” striving to maintain law and order. That role must be filled by the compliance officer, and the job can be daunting.

Given the current rate environment, enhancements to products and services typically focus on improving their ease of use and access. Developers often look to streamline customer use of Web access to their accounts by reducing “clicks.” They seek to improve the look and feel of their Web delivery by minimizing its clutter. Unfortunately, many of these “distractions” are necessary regulatory disclosure obligations. The compliance officer needs to be involved in these early discussions and decisions in order to preserve the compliance integrity of the product and service delivery. Reducing even one click could remove a required disclosure from the delivery experience. Just as a contractor would be foolish to remove supports from a building without first consulting a structural engineer, so too must financial product and service changes be vetted by compliance.

Critical Evaluation Crucial

While lagging behind today’s technological capability, the Truth in Savings Act, Truth in Lending Act and other regulatory requirements still remain quite clear in the disclosure obligations that product and service enhancement teams must consider. Before even reaching that point, the E-SIGN Act mandates very specific steps that must be followed before banks can even interact with consumers electronically. It’s the role of the compliance officer to ensure that these and other critical requirements are embedded in the product and service experience.

The Dodd-Frank Act adds another element to this already complicated process. The Federal Trade Commission’s UDAP acronym (Unfair and Deceptive Acts and Practices) will soon be lengthened to UDAAP by the Consumer Financial Protection Bureau, in order to accommodate the additional “abusive” element as mandated by Dodd-Frank.

Now, products, services, advertisements, and promotions that comply fully with each of the applicable regulations can nonetheless still violate UDAAP if they are not fair, transparent and appropriate for even the least vulnerable consumers. Reviewing for “fairness” is not something that can be accomplished using a simple “check the box” audit sheet. It requires a thorough review of all aspects of the customer interaction, from initial engagement to fulfillment and delivery, by someone qualified to critically evaluate – from a consumer’s perspective – how fair, transparent and prevalent product terms and conditions are conveyed.

Question Early, Often

Questions must be asked such as, “Does this comply with all regulations? Is it fair? What potential bad experiences could occur and how can we mitigate them?”

This role is best filled by the compliance officer, and this level of involvement must take place early and often. To do anything less places the bank at risk of going to market with a troublesome product or service, or having to disassemble and rebuild due to noncompliance. Both can be costly financially and in terms of the bank’s reputation.

Ultimately, everyone involved in the process should ask, “Is this something that I’d be comfortable selling to my mother? Do these marketing materials clearly convey all critical elements of the product or service?” Only when everyone can answer in the affirmative should the product or service be deemed ready for market.

Successful banks have talented and creative individuals throughout their organization. When working collaboratively, they are capable of designing products and services that are profitable and embraced by their customers. When those banks have the foresight to include compliance in the early stages of development, there’s a far better likelihood that those products and services will also be embraced by their regulators.

That’s the definition of a successful launch.

Leonard J. Bolton is senior vice president and director of compliance at Rockland Trust Co.