WASHINGTON, D.C. -

On Wednesday, the Consumer Financial Protection Bureau updated its compliance bulletin on service providers, which can include skip-tracers, repossession agents and other firms that provide assistance during the recovery process.

According to what the CFPB published through the Federal Register, an amendment was needed to clarify that supervised entities have flexibility, allowing for appropriate risk management of service providers.

“The bureau is re-issuing its guidance on service providers to clarify that the depth and formality of the risk management program for service providers may vary depending upon the service being performed — its size, scope, complexity, importance and potential for consumer harm — and the performance of the service provider in carrying out its activities in compliance with federal consumer financial laws and regulations,” CFPB officials said.

“This amendment is needed to clarify that supervised entities have flexibility and to allow appropriate risk management,” they continued.

Also in the update, the CFPB reiterated how to limit the potential for statutory or regulatory violations and related consumer harm. The agency stated supervised banks and nonbanks can take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers.

Officials insisted these steps should include, but are not limited to:

• Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law.

• Requesting and reviewing the service provider’s policies, procedures, internal controls and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities.

• Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices.

• Establishing internal controls and ongoing monitoring to determine whether the service provider is complying with federal consumer financial law.

• Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate.

The complete update in the Federal Register can be reviewed here.