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The CFPB - Early Impressions

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Randall L. Harbour
Foster Swift Banking, Finance & Real Estate E-News
December 3, 2012

After its first year of start-up operations, we are beginning to see what the Consumer Financial Protection Bureau (CFPB) will really be like.  Its growth and activity have almost exploded in that time.  The CFPB is tasked with regulating and enforcing a list of consumer protection laws including: RESPA, TILA, HOEPA, SAFE Act, HMDA, Fair Credit Reporting, Truth-in-Savings, the Consumer Financial Protection Act and Mortgage reforms, among others.

The authority of the CFPB is wide and deep.  Banks with $10B+ in assets are subject to supervision, enforcement and regulation.  Financial institutions with less than $10B in assets are subject only to regulation - their respective regulatory agencies must supervise and enforce.  (This is a slightly different approach than the widely-held belief that the CFPB will only affect institutions with assets greater than $10B.)  As of 12/31/2011, the CFPB had more than 750 employees, with the intent of hiring at least 1,500 more in the next year or two.  The CFPB has already created its own examiner university.  CFPB examiners have accompanied examiners of the other regulatory agencies into their respective institutions.  These CFPB examiners are asking for additional information and reacting to any complaints that may have been filed against the institution.

The CFPB has been forthright in stating its intentions to be proactive in all cases that may have an impact on its purview.  It is already filing amicus briefs in existing cases where it believes its goals may be affected.  Its intent is to "make sure that consumer finance markets work for American families."  The CFPB will use all its tools, which are considerable, to accomplish its goals including complaint gathering, supervision, rulemaking, financial literacy and enforcement.

There is an MOU between the CFPB and the State Regulatory Agencies.  The overarching goal of this MOU appears to be to silo compliance exams, regardless of the jurisdiction of the regulator.  Though the MOU sets a bright line between compliance and safety and soundness, this does not prevent the CFPB from reviewing safety and soundness exams.

There is an increased focus on “fair and responsible” lending and the extension of these concepts to deposit products and non-traditional loan products.  Their aggressive examination findings have resulted in downgrades in compliance and management ratings.  The CFPB has stated that its priorities will also include mortgages from "cradle to grave," credit cards, UDAAP violations, and expanded protection of service members, older Americans and students.

Foster Swift will be keeping track of the CFPB's rulemaking and working with our clients regarding the supervision and enforcement actions of the CFPB and the regulatory agencies.  If you have questions or concerns regarding your institutions policies and procedures, and how they may be viewed and affected by CFPB policies and examiners, or if you are having issues with an examination, contact us for assistance.