Steven L. Antonakes, Acting Deputy Director at the Consumer Financial Protection Bureau, spoke to a group of bankers on Thursday, April 18 in Des Moines, Iowa. In his 45-minute presentation, he explained how the bureau decides which institutions to examine. The agency has about 1,100 employees, and expects to staff up to full strength of about 1,500 employees. Antonakes said even though that is a sizeable staff, the bureau needs to be highly selective about where it sends its examiners.
Antonakes explained that the bureau has supervisory responsibility for banks with $10 billion or more in assets. That accounts for about 100 institutions, he said. In addition, the bureau has a significant non-bank mandate, he said.
“With the president’s appointment of Director Cordray in January of 2012, we were able to work in a few areas immediately per Dodd-Frank,” Antonakes said. “We were able to start exams in non-bank mortgage companies, both lenders and servicers. We were able to start exams at payday lenders, and private student lenders.”
The CFPB is able to examine other kinds of businesses but it needs to create rules prior to initiating those efforts. So far, the bureau has written rules to examine non-bank debt collectors and consumer reporting agencies.
“To our knowledge, we are the first agency in the country at either the state, federal or local level to actually be examining the consumer reporting agencies, your Equifax, TransUnion and the like,” he said. “And we have started a third rulemaking which will extend our supervisory reach to student loan servicers as well and will continue to roll out more rulemakings as we continue to grow our supervisory capacity.”
Antonakes said the bureau does not have the staff to regularly examine all the companies that fall under its jurisdiction, so it has a serious decision to make about deploying its examining staff. He said the bureau has developed a model for determining the best way to utilize its resources.
“There are four elements to this model,” he explained. “The first is looking at the size of a particular product market. The second element is an entity’s marketshare. And third, is our belief of the inherent risk of that product. We have risk-rated different products, for example, making an argument that debt collection is inherently riskier than deposit gathering. And then after we think about the product market, the size of the market, and inherent risk, we layer over that what we refer to as field market intelligence. This is our sense of a variety of factors — the strength of the management team, the existence of other forms of enforcement actions from other agencies, default rates, consumer complaints, or especially in the non-bank context, the extent to which they have been absent a supervisor in the past. These are all factors that we will help us determine where we will focus our supervisory work.”
Antonakes said he is frequently asked about the bureau’s priorities. He said currently, the bureau is focused on mortgage serving, especially non-bank mortgage servicers. He said payday lenders and credit card add-on products are a priority.
The host of the event asked Antonakes about rumors regarding CFPB examiners accompanying prudential regulators on exams at small banks. Antonakes said the rumors are false, declaring: “We have not set foot in a bank with less than $10 billion in assets that is not an affiliate of a larger bank under our jurisdiction.”