Examiners also tell us they sometimes see increased consumer compliance risk at community banks that are expanding beyond their traditional product offerings, often using outside vendors to introduce new products such as prepaid cards or credit card add-ons. These products are often complex, and community banks may not always be familiar with the risks the products pose.
Banks may not have sufficient expertise to thoroughly check out a vendor and monitor its performance. Beyond consumer compliance supervision, the Federal Reserve has expanded our ability to conduct more of the work of bank examinations off site. If banks have electronic loan records, it is possible for examiners to assess loan quality and underwriting practices remotely, spending much less time on site.