Expert's Advice: Read The CFPB Exam Manual
ATLANTIC CITY, NJ—The best way to prepare for an examination from the Consumer Financial Protection Bureau is to read its examination manual, which is available on the agency’s website, an expert on compliance told attendees at the Northeast Conference of Mortgage Brokers here.
Jack Konyk, the executive director of government affairs for Weiner Brodsky Sidman Kider, said after that, licensees need to read their own compliance manuals; if they do not have a compliance manual, they need to create one.
Next is to see how much your manual matches the CFPB’s and to make certain what you say in your manual is what you actually do.
Finally, in examining one’s own operation, he said “you need to be honest with yourself about yourself.”
As to what to expect from a CFPB exam, Konyk said nobody really knows. This is because even though there is the manual, the agency’s regional offices conduct the exams and the process varies from region to region.
Some areas want the information upfront, while others want their examiners to visit the shop first. And, he noted, there is a wide range of expertise among those examiners.
One issue that is worrying the industry is that in some examinations, CFPB attorneys are accompanying the examiners in visiting the shops.
Konyk said the CFPB’s position has been to tell the industry to relax and these attorneys are just present to move the process along.
However, those being looked at are asking why can’t they have their own attorney present if the CFPB’s is.
E. Robert Levy, the executive director of the Mortgage Bankers Association of New Jersey/New Jersey Association of Mortgage Brokers, said he recently spoke with a representative of the CFPB regarding the presence of its attorneys during the examination process. Having them there is one thing; the problem is that these attorneys are questioning mortgage licensee employees.
Levy said this was not proper as far as the industry is concerned. The industry is looking to establish a protocol with the CFPB on how the examination process works, a request he said was well received by the CFPB representative. He added the CFPB has indicated the size of the company being examined will not change the examination process.
In a session on how small businesses can manage compliance, Bonnie Nachamie, a partner in First National Compliance Solutions, noted that the CFPB mission statement is a “road map” licensees can follow in term of what the agency is looking for.
As to examinations, the department’s statement said, “We will focus on an institution’s ability to detect, prevent and correct practices that present a significant risk of violating the law and causing consumers harm,” she pointed out.
In preparing for an examination, executives need to access their own organization by preparing, reviewing and tweaking the company’s business plan.
There must be internal controls, policies and procedures and Nachamie said those need to “be appropriate for your organization.”
Among the areas which policies and procedures should be created for include the application process; loan processing and closing; employment and training; operations and accounting; quality control, including internal and/or external audits; technology security; FACTA (or red flag) compliance; fair lending; consumer information privacy; advertising and marketing; loan officer compensation; and anti-money laundering.
Policies should be looked at to make sure they are still working as intended.
The whole situation, Nachamie said, is “as easy as A, B, C.”
This breaks down to access your needs; build your infrastructure; craft protocols, polices and procedures; delegate responsibilities and reporting requirements; examine the organization regularly to ensure compliance; and fix things or modify them as needed