What new supervised institutions need to know about working with the CFPB

Under the Consumer Financial Protection Act of 2010, the CFPB conducts supervisory activities for the purposes of: (A) assessing compliance with Federal consumer financial law; (B) obtaining information about a supervised institution’s activities and compliance systems and procedures; and (C) detecting and assessing risks to consumers and to markets for consumer financial products and services.

Supervisory activities may help entities identify issues before they become systemic or cause significant harm. Effective supervision depends on the cooperation of company staff with the examiner’s requests for information, a collaborative relationship and clear communication on both sides. CFPB supervisory activities are confidential, promoting candid communication between supervised entities and the CFPB.

The CFPB implements risk-based supervision through a “prioritization” approach to allocating our supervisory resources, which is described further in the Overview section of our exam manual. The prioritization process is how Supervision determines which consumer financial markets, and which entities in them, to include in our supervisory work based on an analysis of relevant risk to consumers.

When conducting an examination, CFPB’s examiners generally do the following:

• Collect and review available information from within the CFPB, other Federal and state agencies, and public sources, consistent with statutory requirements;
• Review documents and information obtained through information requests sent to supervised entities;
• Conduct onsite (or virtual) portions of exams to observe, conduct interviews, review additional documents and information, transaction test, and assess compliance management;
• Consult within the CFPB on legal issues arising from an examination, including legal violations;
• Draw preliminary conclusions about the regulated entity’s compliance management and its statutory and regulatory compliance after internal consultation;¹
• Consult within the CFPB about examination work product and any corrective actions that the institution should take;
• Send the supervisory communication to the supervised entity.

Examiners use the Supervision and Examination Manual as a resource in conducting exams and other supervisory activities. While supervised institutions are bound by statutes and regulations, not by the Supervision and Examination manual, the CFPB makes them publicly available as a resource. Among other topics, it includes background information about relevant statutes and regulations. Readers should keep in mind the disclaimerattached to the manual, which notes that it “should not be relied on as a legal reference.” Legal discussions in the exam manual are not binding on examiners or other CFPB staff. A supervisory finding that an institution has violated the law is based on an application of the governing statute and regulations to that institution, so the manual is only a starting point for identifying a potential violation.

At the end of an exam or other supervisory activities, examiners will provide the supervised institution with their findings in a supervisory communication, such as an exam report or supervisory letter . Exam findings may include “matters requiring attention” (MRA). Examiners use MRAs to communicate specific goals to accomplish to address violations of law, risk of such violations, or compliance management deficiencies.

Just as we have established strong relationships with many existing supervised institutions, we look forward to establishing new productive supervisory relationships with institutions that we examine for the first time.

To learn more about the CFPB’s Supervision program, please visit https://www.consumerfinance.gov/compliance/supervision-examinations/ and read An Introduction to CFPB’s Exams of Financial Companies .

Footnotes

1. Examiners typically communicate preliminary conclusions to supervised entities during the examination or other supervisory activity.