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An ongoing court case in Ohio, dealing with a claim of wrongful termination, offers some insights into a couple of important lessons a lender may learn.
A processor working for Lenders Processing Services, Inc., (LPS) reported what she believed to be contract violations on how LPS is handling loans for JP Morgan Chase. Subsequently, she was fired for other reasons (Firing). This provides a lesson plan for lenders.
The issues I want to discuss here do not deal with the legality of the firing; that is up to the courts. But, I want to discuss what transpired and the end results. Let’s first look at the reporting of a violation by an employee. This is covered under the False Claims Act. In essence, every employee has the potential to report wrongdoing by their employer. This is encouraged by the DOJ and the employee is rewarded by sharing in a percentage of the recovery of any losses sustained by the government.
The lesson here is to make sure everyone is aware of their responsibilities and that you ensure they are performing them in accordance with company policy and the law. Essentially, every employee becomes a partner. Anyone in your organization may be a watchdog and, in the event of wrongdoing, become a whistleblower. Pay attention to the details.
Second lesson; know your vendors. It is a lender’s responsibility to vet each vendor and ensure they perform in accordance with all laws governing lending and consumer protection. Lender’s must have systems and audits in place to perform due diligence on their vendors. It’s not enough to do an annual audit of policies and procedures. A lender must check to ensure the vendor is doing what they should be doing, the right way. No shortcuts! As I’ve said before these usually get you lost. “Follow the rules; stay out of trouble,” is a good lesson for anyone.
Should the processor (whistleblower) be fired? I don’t know, but I believe not strictly because she blew the whistle. What I do know is that it may not have come to that if LSI heeded her warnings and corrected their processes. That would have saved them and the courts a lot of time, effort, and money.
In addition, JPMorgan Chase should have known that LSI was violating the terms of their agreement for services. Both LSI and Chase were asleep at the switch. Stay awake and stay diligent. Another good lesson for everyone.
Are you confident that your employees and vendors are performing their duties in compliance with policies and laws? Do you allow shortcuts like sharing passwords? This may not seem like a big deal, but passwords exist for a reason, and it’s not so they may be shared.
Take the time to train all employees in what is expected of them and in how to perform their jobs. Have a process for employees to voice concerns and questions about their processes and responsibilities. Stop, look and listen for the warning signs. Then, do something about it, but don’t shoot the messenger.
Avoid learning lessons the hard way.
