While all camps praise the Consumer Financial Protection Bureau's efforts to get off the ground in its inaugural year, there is one sore point: exams.
Lenders complain that some of the CFPB's examiners are too green and the agency's practice of sending enforcement lawyers on exams has made the process too confrontational.
Agency officials dispute both claims, but all sides agree the concerns stem from a conscious effort by top CFPB leaders to avoid the criticism that has long dogged traditional bank regulators—that they sometimes go soft on the banks they oversee because they become too close to them.
"People talk to me from time to time and ask an important question: How do you build a culture and a DNA that is enduring over time?" CFPB Director Richard Cordray said in a wide-ranging interview to discuss the agency's first year. "How do you prevent yourself from becoming one of the captured regulatory agencies?"
After the financial crisis, many critics accused the banking agencies—fairly or not—of regulatory capture. As the newest banking regulator—one tasked with a fundamentally different mission than the others—the CFPB has taken pains to avoid that label since it opened its doors on July 21, 2011.
For starters, although it has hundreds of jobs to fill, the CFPB has sought to limit its hiring of existing federal bank regulators.
As of June 2, 28% of the CFPB's 920-person staff had come from the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Department of Housing and Urban Development or the former Office of Thrift Supervision.
In interviews with both Cordray and Steve Antonakes, the CFPB's enforcement chief, it is clear they have sought to keep that percentage relatively low. Part of it, Cordray said, is because the agency has a different job than the banking agencies, which are focused on safety and soundness issues.
"We have a somewhat different approach here," Cordray said. "We are now examining institutions for how they treat consumers. It's not about the institution itself. It's about the impact on consumers."
But one of the motivations is more philosophical: the desire to create a new culture for the CFPB.
"We hired a significant number of examiners from federal agencies, but by the same token, we didn't want to fill our entire allotment with those," said Antonakes. "We weren't trying to replicate another agency's culture—we wanted to create our own."
The situation has given rise to one of the few complaints leveled at the CFPB in its first year: that some on its exam teams are inexperienced.
"It's very mixed," said Jo Ann Barefoot, co-chair of Treliant Risk Advisors. "I know some banks that have had very good experiences and some that have been concerned and frustrated."
Barefoot, in addition to others who did not want to speak on the record, point to the agency's hiring practices as the cause.
"They made a decision—a conscious choice—to avoid importing large chunks of the other agencies, because they didn't want to import their cultures," Barefoot said. "Therefore, they've had more start-up challenges than they would if they brought in existing examiners."
