The New Normal: Third-Party Vendors Under The Microscope

As the financial services industry continues to strive for efficiency, financial institutions, both deposit and nondeposit taking, are increasingly relying on third parties to perform banking or product functions that are either new to the industry or had traditionally been performed by the institutions themselves. This increased reliance on vendors is driven in many cases by legitimate business reasons, most notably cost considerations as vendors are able to provide economies of scale, expertise or additional products that the institutions often could not otherwise achieve or develop on their own. Along with the benefits of vendor relationships, however, comes an enhanced responsibility to monitor these relationships to ensure that vendors comply with both federal and state consumer financial laws. Most importantly, the use of vendors does not shield financial institutions from responsibility for vendors' actions. To the contrary, financial institutions are solely