Compliance Blog

Written by JiJi Bahhur, Regulatory Compliance Counsel

In case you’re looking for something juicy to read, I thought I’d point you to an interesting topic (okay, okay…it’s interesting, but not interesting enough to call it juicy): highly problematic areas that financial institutions are struggling to stay compliant in.  As part of the supervisory authority given to the CFPB through the Dodd-Frank Act, the CFPB released its first issue of Supervisory Highlights, which highlights supervisory actions found between July 21, 2011, and September 30, 2012.  The CFPB’s Supervisory Highlights serve as a means to communicate to the public and financial services industry about its examination process and the kinds of problems CFPB examiners discovered through that process. 

This report can serve as a useful tool for credit unions, as it points to items that the CFPB carefully scrutinized during its supervisory process.  Further, credit unions can see the seriousness of noncompliance for those particular problem areas since the CFPB also goes into the corrective actions and remedies financial institutions had
to take to correct their deficiencies. 

I’ll leave the reading to you.  The report is short and sweet and very well-organized.  But just as a taste, the CFPB broke the deficiencies down into two main categories: (1) Compliance Management Systems and (2) Significant Violations Detected. 

• The CFPB deems a robust and effective compliance management system (CMS) as a critical component of a well-run financial institution.  The CFPB found financial institutions to be lacking across its entire consumer financial portfolio in instances where it failed to adopt and follow comprehensive internal policies and procedures, resulting in a breakdown in compliance and numerous violations of Federal consumer financial law.  Further, it found a CMS to be deficient in situations where there was failure to oversee affiliate and third-party service providers. 

• The CFPB found violations involving credit card, credit reporting, and mortgage origination activities to be significant violations.  Some of these violations resulted in public enforcement actions while others resulted in nonpublic supervisory actions.  At any rate, the discovered violations were of a broad spectrum and financial institutions were required to take corrective action, including but not limited to stopping the illegal practices, adopting effective policies and procedures, implementing robust compliance management programs, and paying out large sums of relief and civil money penalties.

The CFPB also released an appeals policy for supervised institutions as well as an updated version of the CFPB Supervision and Examination Manual, the guide used by examiners during the supervision process.  The appeals policy provides a means for financial service providers to request a review of any adverse findings set forth in its examination report.  The Manual serves as a great indicator of what the CFPB has authority to supervise and what it will be looking for during the examination process.  Even those credit unions under $10 Billion can use this Manual to ensure that it is compliant with Federal consumer financial laws. 

For those of you that are members of NAFCU, you can find a more detailed article on this topic in NAFCU’s January 2013 Compliance Monitor. 

***

On an even more interesting note (or at least I’d like to think so), my husband and I made an attempt this past weekend to take a professional family photo with the kiddies.  We decided to go professional when we realized we couldn’t seem to get a good picture where all four of us are actually looking at the camera.  I’m hoping to share the “good” picture with you all once I have access to it, but in the meantime, here is our “nonprofessional” attempt at getting us all in one picture…of course the boys aren’t looking the right way.