Navigating Regulatory Risk Across Jurisdictions: A Guide for Asset-Based Equipment Lenders and Lease Finance Companies

Executives at equipment lending or lease finance companies know that regulatory compliance is crucial for their business’s success. Noncompliance can be extraordinarily costly – affecting not only overall financial performance, but your organization’s reputation and ability to generate new business. 

Aggravating the situation, regulatory variability across federal, state, and local jurisdictions makes keeping up challenging at best. However, by examining the policies and practices of lenders who have navigated regulatory challenges well, it’s possible to identify some steps that any lender can take to mitigate regulatory risk and its impacts on your financials and reputation.

  • Maintain strong centralized oversight and control. Appoint a senior compliance officer who establishes policies applied company wide. They should monitor regulatory changes, update procedures accordingly, and enforce adherence. Retain outside counsel to advise on jurisdiction-specific nuances. 
  • Know your borrowers and lease customers. Scrutinize their credentials, capabilities, references, and intended equipment use. Screen for any red flags that could indicate issues down the road. Make sure you sufficiently understand their business needs to structure compliant financing terms.
  • Train frontline staff thoroughly. Employees interfacing with customers should have solid knowledge of pertinent regulations and licensing requirements. Provide clear procedures for onboarding borrowers and mitigating risk. Monitor staff activities to ensure regulatory adherence and quickly address any lapses.
  • Conduct rigorous audits and self-assessments. Regularly review documentation, policies, training records, and transactions to catch any compliance oversights. Perform random spot checks of accounts. Self-report any infractions identified before regulators do.
  • Build open relationships with regulators. Maintain ongoing dialogue to understand areas of concern. Cooperate fully during examinations and address any issues raised. Push for consistent enforcement so your company isn’t singled out unfairly.

Not surprisingly, many of these steps are little more than solid business practices. What seems to vary from lender to lender, however, is the company’s capacity to consistently execute. That can be especially difficult these days when staff levels or skills assessments are coming up short. When and if that happens, you may want to explore a partnership with a trusted advisor to fill gaps. 

Rigorous attention to regulatory compliance across all applicable jurisdictions can seem like an insurmountable problem. But with the right people, practices and processes in place your reputation for consistently conforming to the regs can and should be a business building asset. 

Rick Borosky is VP, Strategic Operations for ACS overseeing the day-to-day analysis and optimization of ACS business processes to ensure high performance and adherence to ACS’s Culture of Compliance. An exceptional leader and innovator, Rick serves on a variety of industry boards dedicated to promoting ethical business practices that protect lenders and their customers. Rick has an MBA in Business, Management and Marketing from Temple University.