Community National Bank (“CNB”) issues credit cards for retail stores. The relationship with CNB and each retail store is memorialized in an agreement wherein roles and responsibilities of both CNB and the retail store are delineated. Additionally, for some of the roles and responsibilities, service-level agreements are defined. When certain service levels are missed more than two months in a row, a financial penalty can be assessed and is payable within 30 days of written notification by either party.
One of the service levels, Service Level 24, is that the retail store must send (by mail) original copies of written credit card applications completed by customers in any given month by the 15th day of the following month. CNB is obligated by law to maintain copies of loan applications for at least 25 months from the date of the application. Because customers can apply for the credit card in the store, the store is required to retain and then deliver the credit card applications to the bank monthly. A penalty of $15,000 for failure to meet Service Level 24 can be assessed by CNB to the retail store after more than two consecutive misses of Service Level 24.
The agreements state the following:
Service Level 24. Retail Store will submit to CNB by mail all paper credit card applications completed by customers in any given calendar month by the 15th calendar day of the following month. The mailing address is: 5389 South Main Street, Anytown, UT 84000. A penalty of $15,000 U.S. may be assessed by CNB to Retail Store if Retail Store has more than two consecutive months of non-compliance with this service level. Refer to Section IV of this Agreement for procedures on service level penalty assessments.
In the months of August and September 2016, one of the retail stores, Fashionista Galore!, did not meet its obligations under Service Level 24. Credit card applications completed in August were not sent until September 25, and credit card applications completed in September were not sent until October 18. Additionally, the chief operations officer of Fashionista Galore!, Alicia Fleers, notified CNB via telephone on October 18 that one of its retail locations was burglarized in September, and the store cannot confirm that all of the completed applications were included in the October 18 delivery.
On October 20, CNB’s executives met to discuss the situation with Fashionista Galore! CNB’s General Counsel noted that Fashionista Galore! missed Service Level 24 for two consecutive months. The compliance officer expressed concerns that all of the applications may not have been sent to the bank as a result of the burglary. The bank president is concerned that recent changes in management at Fashionista Galore! may be the root cause for the store not meetings its contractual obligations, but expressed the importance of supporting the store and maintaining the relationship. The executive team determined that the bank should send a letter to the chief operations officer of Fashionista Galore! to address the recent events and remind Fashionista Galore! of its contractual obligations.
Case written by
Judith Belluomini, CRCM, CAMS, CIPP, CIPP/US
Compliance Officer, Director CRA, BSA, Privacy Officer
Comenity Capital Bank
As the chief compliance officer of CNB, write a well-formatted, routine business letter to Alicia Fleers, chief operations officer of Fashionista Galore!. Use only relevant information from the case to address the recent events and remind her of her contractual obligations.
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