CFPB Announces Plans to Directly Supervise Service Providers
As previously discussed in InfoBytes, the CFPB released its Spring 2017 Supervisory Highlights, which outlined its supervisory and oversight actions in areas such as mortgage servicing and student loan servicing. The Supervisory Highlights also announced the CFPB’s plans to develop and implement a program to directly monitor key service providers to institutions it supervises to “potentially reduce risks to consumers at their source.” Section 1002(26)(A) of Dodd-Frank defines a “service provider” as “any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service, including a person that: (i) participates in designing, operating, or maintaining the consumer financial product or service; or (ii) processes transactions relating to the consumer financial product or service….” Sections 1024(e) and 1025(d) of Dodd-Frank authorize the CFPB to supervise service providers to banks or non-banks that are already supervised by the CFPB such as depository institutions having more than $10 billion in assets as well as the following: mortgage originators, brokers or servicers; payday lenders; private student lenders; and other providers of consumer financial products or services in areas such as auto finance, debt collection, student loan servicing, consumer reporting, and international money transfers.
The Bureau stated that its initial work involves conducting baseline reviews of some service providers to learn about their structure, operations, compliance systems, and compliance management systems. “In more targeted work, the CFPB is focusing on service providers that directly affect the mortgage origination and servicing markets,” the Bureau noted. The CFPB plans to shape future service provider supervisory activities based on what it learns through its findings.