A Practical Guide to CFPB Compliance Examination Management

CFPB compliance examinations tend to be more adversarial and yield more severe consequences for supervised entities than the banking industry has experienced with the prudential banking regulators. The authors describe what to expect and suggest practical steps — before, during, and after the examination — to help navigate the process.

As on-site examinations of depository institutions and non-depository consumer financial service companies become more contentious and escalate more frequently to investigations and enforcement actions than ever before, it is imperative that supervised institutions invest the time and resources necessary to prepare for and manage their examination.

Prior to the enactment of the Dodd-Frank Act, prudential regulators performed compliance exams that were largely predictable and generally did not result in public or broad-reaching enforcement actions. Following the collapse of the housing market and enactment of the Dodd-Frank Act, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) was created and authorized to enforce most federal consumer financial laws by several means, including through compliance examinations. These are now being conducted from a more adversarial posture, yielding more severe consequences for supervised entities than the banking industry experienced in the past under the supervision of the prudential banking regulators. The CFPB’s examination authority not only changes the game for depository institutions that were accustomed to the traditional, though typically more routine prudential regulatory examinations, it also affects non-depository financial service entities that were not previously subject to federal supervision. In an increasingly regulated business environment with new and evolving examination procedures, all of these entities are navigating uncharted territory.

Originally published in the Review of Banking & Financial Services. Reprinted with permission.