Consumer Lending Audit Program

1/31/12
Audit Procedure By: Reference/Comments
AUDIT B!"CTI#"$
The scope of the Consumer Lending Audit will be
the following:
Direct Consumer Loans, and related
regulatory compliance;
Loan Servicing;
Collections
%ote: !esidential "ortgages # $ome %&uity
Loans are covered in separate audits'
AUDIT PRC"DUR"$
Pre&iminary
( !eview and update )A* as necessary'
+' *ollow up on prior audit findings ,from -AD,
e.ternal and regulatory e.ams/ for proper
management follow up'
Interna& Contro&s
(' 0btain and read 1ob descriptions, written
policies # procedures, regulatory updates, etc;
update audit program as needed'
a' Determine ade&uacy of written lending
policies, and answer &uestions ( # + of the
Consumer Credit ICQ and Consumer
Lending ICQs'
+' Through testwor2 and discussions with
management, complete Consumer Credit ICQ and
Consumer Lending ICQ'
3' 4ote any control wea2nesses
5' 6ia test wor2 throughout the audit, determine if
there is a written )#) for each process, and that
written )#)s are being adhered to'
'enera& Ledger
(' 0btain direct loan 78L reconciliations as of the
audit date'
a' !eview selected reconciliations of
detailed loan subsidiary records and agree
to the general ledger' %nsure that signatures
of preparer and approver are present'
98(8+:(5 )age ( of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
Documentation Re(ie)
(' <sing system reports, select a sample of +=
loans that were opened since the prior audit date'
The sample should encompass all types of direct
loans including personal, autos, boats, mobile
homes, unsecured loans, recreational vehicles,
motorcycles, stoc2s # bonds, single payment, etc'
+' *or each loan selected, perform the following:
a' %nsure that the application was completed
and signed by the borrower' The purpose of
the loan should be clearly stated on the app'
b' %nsure that information on the system
agrees to that on the loan documents'
c' Determine the security agreement, note,
and disclosure statement have been properly
signed and dated by the borrower' Compare
the description of the secured property to the
title'
d' Determine there is evidence of loan
approval within policy, including lending
limits'
e' Determine how the loan proceeds were
disbursed to the member' Trace the
transaction'
f' -f the loan was made to a business,
determine the proper resolutions or
agreements are on file' 4ote and investigate
any discrepancies between the note and the
resolution'
g' Determine that the loan was approved
before the loan was closed and funded'
h' Determine if C< is listed as the first lien
holder to the secured property'
i' Determine if the title has been recorded
with the proper government agency'
98(8+:(5 )age + of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
1' %nsure that the rate is within policy and
regulatory guidelines'
2' !ecalculate the A)! to ensure it is within
!eg > accuracy guidelines'
l' Determine the insurance policy is current,
coverage is ade&uate, and that C< is listed in
the loss payable clause'
m' %nsure there is a current credit report'
3' Determine if there is an ade&uate
documentation &uality control review performed'
4ote what type of review is being performed to
ensure A)! accuracy; spot test for adherence'
5' %nsure that C< Loan )olicy was adhered to in
all loans reviewed above'
Regu&atory Com*&iance
(' Through discussion and testwor2, determine if
loan staff has ade&uate 2nowledge of applicable
regulations, and has received sufficient training'
+' !eview training documentation of applicable
personnel to ensure that they have been trained in
!egs' >, ?, etc '
3' Document compliance program in place, and
opine if it ade&uately provides controls for
adherence to applicable regs'
5' *or loans in doc review above, complete
applicable compliance &uestionnaire from -C@
drive'
=' Document controls over stoc2 secured loans;
ensure compliance with !egulation <, using !eg'
< wor2sheet'
=' Select a sample of +: denied loans and complete
Adverse Action Worksheet'
A' Complete Loan Servicing Compliance ICQs.

98(8+:(5 )age 3 of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
Loan Acti(ity
(' !eview summary of loan activity during the
period' %.amine activity with respect to very large
loans or loans made with unusual interest rates,
repayment periods, or fees'
+' Select a sample of loan payoffs made during the
audit period:
a' 6erify the correct application of proceeds to
principal, interest, prepayment penalties, etc'
b' 6erify that all pertinent legal documents
were returned to the member'
Past Dues and C+arge ffs
(' Select delin&uent loans using the monthly pastB
due report as a source; review the loan
reference8collections report' Discuss with the
collections supervisor the status of the accounts'
+' *or loans listed as being repossessed, determine
disposition of each item'
a' Cere uncollected deficiencies properly
approved and charged offD
b' Cere e.cess funds, if any, resulting in
the disposal of the collateral returned to the
borrower, less fees, interest, and costD
3' 0btain loan e.ception reports, noting any
uncollected late fees and inspect proper
documentation for subse&uent payment or waived
late fees' All waived fees should indicate why they
are being waived and also should be approved by a
supervisor'
5' !eview delin&uency reports to determine
e.istence of uncollectible loans' *rom collectors
and8or loan officers determine why loans have not
been charged off'
98(8+:(5 )age 5 of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
=' *or loan chargeBoffs:
a' Determine that loans charged off during
the period were properly approved'
b' 6erify that subse&uent collection efforts
are in accordance with policy'
c' Determine that designated employees
control subse&uent payments on loans
charged off'
d' 0btain the chargeBoff report dated as of
the audit date, and agree to the amount
charged off per general ledger' Ascertain
that discrepancies are e.plained and
approved'
e' %nsure that charge offs are being
reported to the ?oard in sufficient detail'
A' Complete Collections ICQ.
E' Compare delin&uency and charge percentages to
those of past periods; discuss material fluctuations
with management'
Board Re*orts
(' !eview most recent ?oard report pac2age'
+' Compare to system reports and review for
evidence of suppressed information'
3' 0pine as to whether there are any items which
should be included in the pac2age'
$,i*-A-Pay
(' Document controls over s2ipBaBpay program'
+' !eview a sample of such transactions, to ensure
adherence to written )#)s'
3' Determine effect, if any, on delin&uencies and8or
charge offs'
98(8+:(5 )age = of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
Co&&atera& Contro&s
(' Through observation and in&uiry, document
controls over loan files and negotiable collateral'
+' 4ote whether or not these items are sufficiently
loc2ed and 2ept in a fireproof area'
3' *or negotiable collateral, ensure that:
a' Dual control access is in place;
b' A log is 2ept documenting access to the
collateral;
c' "embers are re&uired to ac2nowledge
in writing receipt of released collateral'
Credit Cards
(' Document and evaluate C<s procedures for
members re&uesting credit cards'
+' 0btain and read the contract between C< and
credit card vendor'
3' ?ased on C<s role, compliance test as needed'
5' Complete Credit Card Lending ICQ.
.air and Accurate Credit Transactions Act of
2//3 0.ACTA1
(' 6ia discussion with management and8or review
of written policies # procedures, determine how
management has implemented controls to comply
with *ACTA'
+' Determine if staff has ade&uate 2nowledge of
*ACTA'
3' Complete the FACTA ICQ, Error esolution
FCA Checklist ! Account Servicing" FCA
Checklist.
98(8+:(5 )age A of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
$er(icemem2ers Ci(i& Re&ief Act 0$CRA1
(' 6ia discussion with management and8or review
of written policies # procedures, determine how
management has implemented controls to comply
with SC!A'
+' Determine if staff has ade&uate 2nowledge of
SC!A'
3' Complete the SCA Checklist.
$u2-Prime Lending
(' 6ia discussion with management and8or review
of written policies # procedures, determine how
management has implemented controls for subB
prime lending'
+' Complete Su#$%rime Lending ICQ.
Consumer Leasing
(' Document Controls over Consumer Leasing'
+' !e&uest and receive general ledger accounts for
all leasing programs'
a' Ascertain that the accounts have been
reconciled'
b' Trace any outstanding items and report'
3' !eview the trial balance account of lease
payments and balance to the general ledger' Trace
any discrepancies'
5' !eview delin&uent leases and select a sample of
these accounts' !econcile these accounts to source
documents'
=' !eview chargedBoff accounts for proper
collection efforts'
A' 6erify closed ,paidBoff/ leases for accuracy'
Trace to source documents'
E' !eview all lease e.tensions for propriety and
trace to source documents for proper approval'
98(8+:(5 )age E of ;
Consumer Lending Audit Program
1/31/12
Audit Procedure By: Reference/Comments
;' -f re&uired in your state, verify that a notice to
cosigner is given to each person who will be liable
on the lease contract, unless the persons are
married to each other'
9' -f re&uired in your state, provide the notice in
%nglish and Spanish'
(:' *or a sample of leases, complete Consumer
Leasing Worksheet.
((' Assess compliance by completing eg & ICQ.
$er(icemem2ers Ci(i& Re&ief Act 0$CRA1
(' 6ia discussion with management and8or review
of written policies # procedures, determine how
management has implemented controls to comply
with SC!A'
+' Determine if staff has ade&uate 2nowledge of
SC!A'
3' Complete the SCA Checklist.
User Access
(' 0btain user access for all staff'
+' %nsure that access is consistent from position to
position'
3' %nsure that access is appropriate for position
level
5' %nsure that access provides ade&uate separation
of duties'
98(8+:(5 )age ; of ;