Thu, Oct 27, 2022

Tasked with Regulatory Remediation? Consider These Factors

Turbulent economic times often bring increased regulatory scrutiny to large companies, particularly those focused on consumer products, packaged goods, food, financial services and insurance. The diversity of customer bases can present complexities in regulatory investigations which may prompt voluntary remediation programs or consent orders. It is important to have a roadmap to manage risks and efficiently execute remediation programs, both to avoid undue disruption and reputational damage and to navigate the relationship with the regulatory agency.

Preliminary Investigation

Should a company face the need for remediation, whether voluntary or as a result of consent orders, conciliation agreements, assurances of discontinuance, or deferred prosecution agreements, it is critical to conduct an early investigation with an eye toward bringing the scope of the problem and identification of affected individuals into focus. These concerns are particularly acute in instances where the remediating party maintains or hopes to maintain an ongoing business relationship with the injured parties, as well as maintain a relationship of trust with its regulators.

In some instances, it may become apparent that the scope of the potential issue is both unclear and much broader than believed during a company’s initial investigation. In these situations, working with a firm like Kroll that has a multidisciplinary team, including former regulators and prosecutors, governmental officials, economists, tax specialists and accountants with deep experience in investigations and disputes and cyber risk, can be extremely beneficial. These initial investigations provide both the company and regulators with assurance that a thorough assessment has been conducted, from compliance review and remediation through exposure and response, prior to effectuating relief through a voluntary remediation or in compliance with a consent order.

Once the scope of the problem and affected parties are fully understood, the path of remediation for the affected individuals becomes the key concern. At this stage, having a consultative plan that can scale up or down based on the size of the affected population and its unique needs is critical. Having a plan also reduces potential risks, including those related to language variation, information collection challenges and fraud prevention. A well-designed plan also ensures efficient communication, scalable customer or stakeholder correspondence solutions and simple and user-friendly payment options. To ensure a smooth process that will be met with satisfaction from all stakeholders, it’s critical to work with an experienced partner like Kroll that can map out these potential pitfalls and offer timely insights to avoid issues before they arise.

Seeing Around the Corner

While perfect foresight is elusive, vulnerable entities can prepare for remediation by being mindful of certain components that are key to ensuring that a complex organization capably complies with all remediation benchmarks as well as both the letter and spirit of any regulatory consent order. After all, doing so may be critical to the prospects of the business.

1. Communication Solutions

A key focus for regulators in remediation programs is reaching as many affected individuals as possible with both notice and payment. While the standard for each has historically been postal mail, that is no longer the case. Beyond standard USPS mail, regulators may insist upon the use of more premium commercial services such as UPS, DHL or FedEx for delivery of sensitive communications. It is paramount that those contemplating, initiating or complying with broad remediation parameters consider as many outreach mediums at their disposal as possible. In terms of communications to affected individuals, it is increasingly common to utilize email, outbound calling and text messaging. Each of these comes with its own unique deliverability challenges. A seasoned partner can provide expert guidance on the appropriate usage and combination of these methods, along with key insights into aspects of each that may affect timing.

2. External Noise

Developing an administration plan and delivering relief to affected individuals are far from the only challenges that can arise during a remediation. Immediately upon the announcement of remediation, external pressures can arise that impact a carefully designed plan. These often arrive in the form of unwanted media attention, investigations or inquiries from other government agencies, viral social media trends, internal scrutiny from adjacent or affiliate companies or business partners, private litigation or unaffected customer complaints. Giving careful thought to securing resources to manage these potential pressures, whether through customer support response via call center or other means, will minimize the disruption and ensure that the focus of the effort remains on remediation and compliance. In some organizations, a problem discovered in one division may lead to further widespread investigations that subsequently expose the need for additional remediation in other affected groups. Performing advanced testing of any secure escalation protocols used to route certain inquiries to relevant departments internally can help prevent these issues from becoming full-blown crises.

3. Non-Monetary Relief

Many remediation scenarios involve complex processes beyond monetary relief. For instance, perhaps the underlying issue giving rise to the remediation program created future risks for the client, in the form of potential identity theft, mortgage or tax liability issues. With that in mind, it is incumbent upon an organization to be mindful of potential complexities and ensure that an applicable plan—even if that plan is knowing who to call for consultative expertise on the subject—is in place. Often these additional considerations require a remediator to develop an eligibility framework, intake documentation, qualify or validate claimants and preside over disputes to decisions. At times, a special master may be necessary. Kroll has deep experience in each of these facets and can provide invaluable insights.

4. Payment and Tax Reporting

Before payments are issued, many remediations take into account tax considerations. The administrative burden on a remediating party choosing to handle these issues in-house can be substantial. The communication of taxability concerns and attention to the nuance of the purpose behind the payment become paramount. It is critical to plan for these possibilities before payment is issued.

Most remediation programs of the past relied heavily on traditional paper checks. However, allowing affected individuals to choose methods of payment with which they are already familiar can be key to a smooth and complaint-free remediation program. Aside from traditional checks, Kroll can deploy payment selection protocols that enable affected individuals to choose widely used digital payment platforms like PayPal, Venmo, Zelle or ACH, or an array of pre-paid cards. This is especially salient in the context of consumer financial matters involving debt collection or low-balance bank accounts, where many affected individuals may be essentially unbanked. At the same time, certain demographics still prefer and trust paper checks. Here, as in the ever more complex payments ecosystem, providing options is key.

5. Heirs

Another often-unanticipated remediation issue relates to affected individuals who have since become deceased. Regulators may insist that a remediating party issue payments to the deceased’s heirs. This can present many nuanced challenges, including the collection of information demonstrating a familial relationship or the legal right to payment to an estate, as well as related taxability issues. In some instances, the organization subject to remediation may have no information beyond the basic fact that the payee is deceased. In other instances, the fact that the payee is deceased may only become known after payment is issued, potentially triggering obligations to identify and locate potential heirs and distribute the benefits owed to the deceased to the rightful heir. Kroll has extensive experience working through this process and can advise on best practices as well as timing considerations.

In Summary

Remediation, whether voluntary or resulting from a consent order, can quickly spin out of control in the absence of effective planning and expert guidance. Having the right partner in place to assist well in advance is critical. Ultimately, putting the issue behind the company is the end goal of all involved. Preserving the customer relationship, as well as the relationship of trust with the regulatory agency, are both achievable and desirable. Balancing these goals against cost control and challenging deadlines can be daunting. Kroll has a proven track record of delivering on each of these mandates. 

Kroll’s regulatory remediation and government claims administration solutions are tailored by industry experts with extensive experience meeting and exceeding the expectations of corporations and government agencies. Contact us today to learn more or for a consultation on your matter. 

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