If the world were Facebook, nobody would “like” regulatory compliance. It is one of those costs of doing business that most prefer to spend as little time as possible thinking about. Kind of like keeping stocked up on kitchen supplies.
What makes regulatory compliance so unpopular isn’t just the burden and complexity. It’s that it can make or break your company. Being in the financial sector, we have close, personal relationships with regulators. To see how damaging the failure to comply with regulations can be, visit the enforcement orders page at the FDIC and read through some entries. Could you afford a $250,000 penalty for failing a paperwork requirement? Jail time for doing something you thought was OK but isn’t? (Thankfully, you won’t find Medallion Bank in a search because we are committed to regulatory compliance. Nobody says we enjoy it, though.)
Banks aren’t the only industry subject to this kind of scrutiny. Before we built the home improvement program at Medallion Bank, several of us worked for a lender headquartered in Washington State. In Washington, the Attorney General decided to tackle unsubstantiated sales claims made by big home improvement contractors. When a state AG tackles you, you feel it. Most of those contractors aren’t in business anymore. Check out the Washington State AG’s blog post on the effort.
We’ve seen first hand what happens when regulators find that you aren’t doing everything exactly right. And compared to today, those were the good old days, filled with good cheer and friendly nudges. Today, we have the Consumer Financial Protection Bureau and its aggressive view of consumer protection. The Federal Trade Commission still carries a big stick and isn’t afraid to use it. The danger is getting bigger, not smaller, associated with regulatory and legal compliance.
But wait…we haven’t yet scared you into a major breakdown. Are you familiar with the FTC Cooling Off Rule, better known as the Right to Cancel (RTC) requirements that apply to contractors? The gist is that, if you sell in the customer’s home, you must provide the customer with two things:
- A copy of your contract with the federal Right to Cancel disclosure in it;
- Two copies of a cancellation form for the customer’s use.
I’ve had many, many conversations about this requirement over the years. The typical contractor is aware and compliant, but occasionally we hear a story about how an attorney said that state law doesn’t require anything more than the contractor already does. I’m no attorney and can’t speak to each state’s laws, but the FTC’s Right to Cancel requirements are federal law. The FTC regulations trump state law except for those state law requirements that ensure greater consumer protection.
Some of you may be thinking that, well, the FTC isn’t going to pay attention to little ol’ me. Guess again. If you didn’t click the link to the Washington State AG’s blog post above, check it out now. See who’s prominently featured in the text? The FTC. They are already watching the home improvement industry. There’s nothing to like about regulatory compliance, but trust us…it’s important.