CFPB ready to be ‘cop on the beat’

“Starting on July 21, we will be a cop on the beat — examining banks and protecting consumers,” said Elizabeth Warren, Harvard professor and special adviser to the Treasury Secretary, in a July 12 Treasury Department press release.

As acting head of the Consumer Financial Protection Bureau, Warren outlined the agency’s big bank supervision approach beginning July 21.

“Starting on July 21, we will be a cop on the beat — examining banks and protecting consumers,” said Elizabeth Warren, Harvard professor and special adviser to the Treasury Secretary, in a July 12 Treasury Department press release.

As acting head of the Consumer Financial Protection Bureau, Warren outlined the agency’s big bank supervision approach beginning July 21.

The supervision program oversees the 111 depository institutions with assets over $10 billion, plus their subsidiaries and other affiliates. Collectively, these banks and credit unions hold more than 80 percent of the financial service industry’s assets.

The CFPB’s team of more than 100 examiners will be based out of satellite offices in Chicago, New York, San Francisco and Washington, D.C. “The examiners working in those regions will spend much of their time on-site at depository institutions and at other consumer financial services companies,” according to the release. According to an American Banker webinar on the CFPB, many examiners will work remotely with no “office.”

The Bureau expects to eventually have several hundred examiners on board, “coming from a variety of backgrounds, including state regulatory agencies and industry.” The current lot of examiners transferred from the FDIC, the Federal Reserve, OCC and OTS. All examiners will go through training in technical and professional skills, according to the CFPB. (A listing of positions can be found on the CFPB’s jobs listing.)

“We are all engines ready to go,” said Steve Antonakes, assistant director for large bank supervision at the CFPB, at an American Bankers Association conference in Washington, D.C., on June 15.

At the conference, he said the Bureau will conduct “point-in-time examinations” that will last four to 12 weeks. “Presuming that the exam is clean, we’re out of your hair for two years’ time,” he told the audience. Exams will be more frequent for those with issues to address.

Antonakes, former banking commissioner of Massachusetts, said that he and the head of non-bank supervision, Peggy Twohig, will establish a single pool of examiners to supervise banks and non-bank financial service companies. The CFPB bureau has also concluded information-sharing agreements with federal and state regulators to help the Bureau gather data and prioritize examinations, Bloomberg reported.

The CFPB’s supervision process will include the following steps:

  • Pre-examination scoping and review of information
  • Data analysis
  • On-site examinations
  • Regular communication with regulated entities and prudential regulators
  • Follow-up monitoring

Some of the largest and most complex banks – the 13 institutions with more than $100 billion in assets – will have examiners in-house year round.

The CFPB described their approach as a process of examining risk to the consumer. They will look at products and services, lending activities, fee structures, marketing practices, and internal procedures. They will review fair lending practices as part of an overall review of an institution’s policies and practices under all consumer financial protection laws and regulations.

By early August, the CFPB will have reached out to all 111 institutions and invite them to informational roundtables. The agency will also make available its Examination Manual online, soliciting feedback not only from those institutions but the industry and consumers as well.

Fredrikson & Byron Law