BROOKFIELD, Wis. -

Fiserv’s Craig Carrow has a list of five keys to successful remarketing, four of which deal with topics like lower turn time, increased returns, lower operational costs and streamlined operational processing — all of which are fairly timeless in terms of their importance.

But this fifth one has picked up steam of late, given the Consumer Financial Protection Bureau’s enhanced focus on auto lenders. With this in mind, Carrow explained to Auto Remarketing why this key area — vendor management — has become “the hottest topic” in the remarketing business and how financial institutions should adapt.

“With a lot of the CFPB requirements that are coming out, particularly around the audits that they’re going to do with the banks, vendor management is the hottest topic going right now in the industry,” said Carrow, Fiserv’s vice president of automotive solutions

Carrow’s company does a great deal of remarketing with banks and other clients, in addition to servicing outside of remarketing. And much of what Fiserv works on with the auctions ties back into what the CFPB will be examining when it comes to auto lenders’ vendor management programs, Carrow said.

When it comes to the CFPB and vendor management, here’s the bottom line Carrow gave for any auto lender that outsources any type of function (in this case, the vehicle remarketing that lenders conduct via auctions):

When the CFPB comes it to conduct an audit, it is going to examine — in addition to everything else it monitors — how you manage your outsourced third parties.

 “And they’re really looking for, in many different ways, a lot of formal documentation, he said. “It starts literally from what the contract is that you have with your vendors.”

And by vendors, in this case, he means auctions or remarketing partners.

The bureau, Carrow explained, wants to have an understanding of your contract with these vendors.

“Have you set forth with (the auctions) what your expectations are, and your service levels that are required? Then after that, do you monitor those service levels? So, do you understand and have reports to measure how they’re performing?” he asked, giving examples of what the CFPB might be looking for.

“And based on the variances, do you have discussions on the topics of how they’re performing and what they can do to improve, or what the steps are going to be (for improvement)?” Carrow continued. “That whole process sounds fairly simple, but there are also a lot of procedures where they’re looking for documentation. Like, how do you monitor them? How do you inform them of what your expectations are? What is the process, if they’re missing your expectations, on how you look for corrective action?”

Fiserv has a program that’s been out for about 15 years, Carrow said. Any time it works with an auction, the company has a “start-up guide” of sorts in which it explains to the auction what Fiserv’s expectations are and how it will measure the auction’s performance. Fiserv also conducts face-to-face meetings at the auction to explain what it’s looking for, and has regular monthly reports/scorecards to see how they’re performing internally and compared to the competition.

“One of the things that is very important, as far as trying to meet some of the guidelines, is that almost every company industry will have regularly scheduled meetings to decide what auction partners they want to use, ” he noted.

Something that Fiserv recently implemented was to publish the meeting minutes (which they had actually been taking on a regular basis).

This is valuable, Carrow said, in the sense that ,“if the CFPB does come out and they do an audit, you can turn around and you can give them the full scale (of information): ‘here’s what we’re looking for from the contract side; here’s what we’re looking at for expectations to start out; here’s how we’re going to measure (the auctions). We’re going to do regularly scheduled site visits to go through and do audits. We’re going to publish the results back to you; we’re going to give you your scorecard grading.'

“And then all the internal meetings are handled with meeting minutes in a much more formal status than it ever used to be,” he continued. “Those are all kept on regular records so that if an audit does come up, we can turn around and produce those right away, and show that the vendor management program is in place and it’s covered A to Z.”

He added that the challenge with a lot of the CFPB requirements is that the bureau explains the vendor management expectations on a “very high level.” But Carrow said Fiserv’s method has proven to be an effective approach to documentation and providing information to the CFPB.

It boils down to this: it’s one thing to explain your expectations and all the aforementioned metrics to vendors, but you’ve also got to keep record of it.

In other words: “Everybody does it. But is it documented? If you have a government regulator or auditor coming in, can you prove you did that? I think that, by far, is the No. 1 piece. ”

Another recommendation Carrow had for lenders is to “keep it organized.”

The documentation of your vendor management program needs to be more akin to a formal presentation. It needs to be ready for audit, rather than “bits and pieces” scattered through emails, filing cabinets and such.

The importance of being organized and audit-ready applies to any other industry, not just the scope of the CFPB,
Carrow said. When an audit asks for your vendor management program and you have a professionally formatted program readily at hand, it makes a great impression, he said.

“That first impression is everything,” Carrow said. “The formality of having it all centralized is very useful.”

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.