CFPB Deputy Director Discusses Supervisory Framework

CFPB Examination Enforcement

As reported last week, the CFPB has decided to stop sending enforcement attorneys to routine examinations of financial institutions effective November 1.  In a recent interview, CFPB Deputy Director Steven Antonakes said that the decision followed an “assess[ment of] the effectiveness and efficiency of the operation” over the past two years.  He clarified that the presence of enforcement attorneys was “absolutely not” intended to intimidate supervised institutions but rather reflected the CFPB’s ongoing efforts to ensure “strong communication” between supervision and enforcement teams throughout the examination process.

Going forward, Antonakes explained that enforcement attorneys will continue to have a “line of sight throughout the beginning, middle, and end of the exam process,” in addition to serving other important functions, like conducting independent investigations.  He noted the recent action targeting a debt settlement payment processor as “just one example of an independent investigation [the] enforcement team conducted completely outside of the supervisory process”.  Antonakes further explained that “charter or license type is becoming less relevant in determining how we will prioritize and schedule our examinations.”  Rather, the CFPB has “begun to implement a prioritization framework” that allocates resources based on potential consumer risk, assessed through consideration of several qualitative and quantitative factors, including:

• the size of a product market;
• a regulated entity’s market share in that product market;
• the potential for consumer harm related to a particular product market; and
• field and market intelligence that encompasses a range of issues including, but not limited to, the quality of a regulated entity's management, the existence of other regulatory actions, default rates, and consumer complaints.

Antonakes also noted that, although the Bureau has “sacrificed some timeliness” in issuing examination reports to date in exchange for “strong quality control [] [that] ensure[s] consistency in [] findings across the country and across banks and non-banks,” the Bureau is “now positioned to ensure consistency while also improving timeliness.”  Specifically, he stated that, while “[t]here will always be some variance,” he would like exam reports to be issued “within 90-120 days from the time the examiner leaves the institution.”

In terms of staffing, Antonakes noted the Office of Enforcement currently has approximately 150 employees, including more than 100 attorneys.  He said that the targeted staffing level for the supervision offices is about 600.  The offices are currently 75-80% staffed, but the CFPB hopes to have them fully staffed by the end of the year.