In an October 9 speech to the FDIC's Advisory Committee on
Economic Inclusion, Steve Antonakes, the Deputy Director of the
CFPB and also the Associate Director of the CFPB's Supervision,
Enforcement and Fair Lending (SEFL) Unit, discussed the CFPB's
supervisory and enforcement tools.
Antonakes noted that the Bureau has "the opportunity to
oversee consumer financial products and services across charters
and business models," and that for this reason, "charter
or license type is becoming less relevant in determining how [the
Bureau] will prioritize and schedule [its] examinations and
investigations." Instead, as Antonakes explained, the
CFPB has "begun to implement a prioritization framework that
allocates [its] examination, investigation, and fair lending
resources across product types." In a rare public
assessment of Bureau Supervision priorities, Antonakes then
outlined the "qualitative and quantitative factors" used
to determine – in part, at least – supervision
priorities. "These factors include: (1) the size of a
product market; (2) a regulated entity's market share in that
product market; (3) the potential for consumer harm related to a
particular product market; and (4) field and market intelligence
that encompasses a range of issues including, but not limited to,
the quality of a regulated entity's management, the existence
of other regulatory actions, default rates, and consumer
complaints."
This list provides useful guidance to banks and nonbanks subject
to the Bureau's supervision authority, and if nothing else,
provides at least a tentative roadmap of how the Bureau might
prioritize its deployment of supervisory resources. In
addition, this guidance also provides some insight into the
Bureau's interest in crafting policies that concern a
particular market or industry, regardless of whether that market or
industry's participants are comprised of banks, nonbanks or
both.
Also in this October 9 speech, Antonakes stressed that although
the Offices of Supervision and Enforcement operate under the same
SEFL unit umbrella, the Bureau's Office of Enforcement has
"tools" that operate independently from the Bureau's
Supervisory function. He noted that instead of relying on
information gathered through the Bureau's examination process,
the Office of Enforcement can rely on information it gathers
through its investigative function, as well as information gathered
from "listening to and analyzing consumer complaints, industry
whistleblower tips, and information from government agencies,
industry, and consumer groups." Antonakes further described
some of the ways in which the Office of Enforcement acts
independently. He also discussed an unusual aspect of
the Bureau's enforcement jurisdiction, that the Bureau can seek
the same remedies in either district court or in the agency's
administrative forum. The availability of the same remedies
in either forum means that the Bureau's decision to bring a
case in one forum instead of another forum is not driven by the
availability of certain remedies but by other circumstances
specific to a case. Finally, in emphasizing the independence
of the Bureau's enforcement function, Antonakes reminded his
audience that the Bureau has independent litigating authority,
meaning that it can bring cases in its own name in district court,
without referring a case to the Department of Justice for
prosecution.
The Dodd-Frank Act and the Bureau's rules of investigation
provide for a Bureau Enforcement function that is robust and
independent. But notwithstanding this independence and
Antonakes' description of the Bureau's specific enforcement
"tools" that are not dependent on the Bureau's
supervision authority, it would be wrong to assume that the Offices
of Supervision and Enforcement are not inter-connected in their
work. It seems likely that the two offices are increasingly
working closely together.
Indeed, on October 8, one day earlier before Antonakes'
speech, the CFPB announced two enforcement actions that had derived
from the Bureau's examination of a mortgage broker and of a
bank's mortgage lending operations. The Bureau's two
enforcement actions, In the Matter of Washington Federal,
File No. 2013-CFPB-0005 and In the Matter of Mortgage
Masters, File No. 2013-CFPB-0006, each allege violations of
the Home Mortgage Disclosure Act (HMDA), a statute which requires
that lending institutions report and disclose certain loan
information. The consent orders in each of these matters
allege "violations of law and deficiencies in the applicable
compliance systems with respect to [each] Respondent's
compliance with the Home Mortgage Disclosure Act
(HMDA)." Both of these actions, as noted in each order,
derive from the Bureau's authority to examine an entity's
implementation of "processes for managing compliance with the
Federal consumer financial laws," and to identify
"violations of law and deficiencies in the applicable
compliance systems." Thus, the predicate facts giving
rise to these enforcement actions derive largely, if not
exclusively, from the Bureau's examination of Washington
Federal and Mortgage Masters.
These two actions are a powerful reminder that the Bureau's
Office of Supervision has already prioritized mortgage market
participants. These actions also are an important reminder
that although the Office of Enforcement has tools that operate
independently from the Bureau's Supervisory function, the
Offices of Enforcement and Supervision also work closely
together. Any bank or nonbank that is the subject of a Bureau
examination should be cognizant that although each office acts
through independent functions, both offices also operate in an
interconnected environment that shares priorities and
information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.