July 13, 2011

CFPB outlines supervisory process

July 13, 2011 – The Consumer Financial Protection Bureau on Tuesday released an overview of its planned approach to financial institution supervision as of July 21, when it receives examination and enforcement authority over federally regulated consumer financial services providers.

The bureau's examination and enforcement authorities will extend to the nation's three largest credit unions since they each have assets exceeding $10 billion. In all, 111 federally regulated depository institutions, plus their subsidiaries and affiliates, will come under those authorities. That covers more than 80 percent of industry assets, the bureau reported.

"The new consumer agency is here to make sure that markets work for American families, and our bank supervision program is a big part of that," said Elizabeth Warren, the Treasury secretary's special advisor on the CFPB. "Starting on July 21, we will be a cop on the beat – examining banks and protecting consumers."

The CFPB's examiners will be managed out of satellite offices in Chicago, New York, San Francisco and Washington. They will spend "much of their time" on site at depository institutions and other consumer financial services companies, the bureau notes. The CFPB supervisory process will include regular communication with regulated entities and prudential regulators (such as NCUA), and follow-up monitoring.

Most institutions will be subject to periodic examinations, but the largest, most complex ones will be included in a year-round supervision program customized to reflect their consumer protection and fair lending risk profile.

Examinations, the bureau says, will assess each institution's internal ability to detect, prevent and remedy violations that may harm consumers. Examiners will look at the products and services the institution offers, with a focus on risk to consumers.

Compliance with requirements during the entire life cycle of the product or service will be reviewed. Fair lending reviews will be conducted. Where warranted, corrective action will be sought.

The bureau says that, by the end of July, the CFPB supervision contingent will include more than 100 staff members transferring directly from the FDIC, the Federal Reserve System, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. It expects to eventually have several hundred examiners on staff, some drawn from state regulatory agencies and industry.
On July 21, the CFPB plans to begin contacting institutions and their affiliates to discuss the supervision and examination process. It already has information from federal and state regulatory agencies about those it will supervise. In the following weeks, CFPB examiners and managers will learn more about affected institutions, coordinate with federal and state regulators, finalize their own supervisory and examination plans and begin the first round of on-site examinations.

According to the CFPB's supervision overview, the bureau also plans to post the initial phase of its Examination Manual online and to seek input from all stakeholders, including the general public.