Examiners from the Consumer Financial Protection Bureau may look the same, but they won't necessarily see the same. The bureau is employing many of the same examiners — and similar methods — that the banking regulators have used for years to conduct exams, according to the CFPB's supervision and examination manual released last week.
But the manual will require examiners to look at the information they gather in new ways, revealing a key difference in approach that places the consumer squarely in the middle of the exam process for the first time.
"It gets to the main focus of the agency," Steve Antonakes, the bureau's associate director for large bank supervision, said in an interview Monday. "Our primary concern is risk to consumers and if information is being provided to them up front in a transparent fashion."
While critics of the bureau have worried that it may focus on consumers at the expense of safety and soundness, the industry has so far had few complaints about the new guidelines.
Antonakes said the agency was careful to analyze the processes that other regulators had previously used, and relied on expertise from staff that—when combined—had hundreds of years of federal bank regulatory experience.
The manual incorporated many of the same procedures used by the Federal Financial Institutions Examination Council — of which the CFPB is now a member — for many of the laws now enforced by the bureau, including the Truth in Lending Act, Real Estate Settlement Procedures Act and Fair Credit Reporting Act.
"At the end of the day, I think about 75% of the manual was based on existing guidance," Antonakes said. "We tried to frame it a little bit differently, and then there is some specific CFPB-related work in there as well."
The bureau obtained the authority to supervise large banks with more than $10 billion in assets beginning July 21, along with the authority to enforce existing consumer financial laws. The law also authorized the CFPB to supervise nonbanks – including mortgage firms – but only after a permanent director is in place.
In addition to focusing on the risk to consumers, the manual outlines two other principals for CFPB exams: they should be data driven and applied similarly between banks and nonbanks.
"I think the other point we've tried to make numerous times is, 'This is version one,'" Antonakes said. "And we will refine it over time based upon feedback from our examination staff, based upon feedback from industry, consumer advocates, the public, whatever the case may be."
The manual will evolve with procedures organized by different products and lines of business, such as mortgage servicing, that are much more detailed than those of the previous regulators.
In addition to regular exams, the bureau also plans to conduct targeted reviews, focusing on a particular situation at an institution, as well as horizontal reviews, which will look across multiple institutions to examine issues relating to a particular product.
"It's just having the capacity at different times, if we saw an issue that we thought was warranted, rather than focusing on an institution, focus on a market," he said.
Examiners are also instructed to follow up with consumers — an entirely new practice — if the data or other information indicates that the bank may have violated the law. It will also conduct more transactional testing to review a broader sample of loan applications, for example, for potential violations.
