In response to a series of complaints lodged by the banks supervised by the Consumer Financial Protection Bureau (CFPB), the Officer of Inspector General (OIG) recently issued a 40-page report taking the CFPB to task for inconsistent and inefficient supervisory activities. Complaints ranged from an excessively slow examination process to the CFPB’s failure to adhere to its own mandate of a 110-day deadline for completing reports. OIG completed its fieldwork in October 2013, based on data as of July 31, 2013.
The full report, titled “The CFPB Can Improve the Efficiency and Effectiveness of its Supervisory Activities,” cites eight specific areas requiring improvement. Among other things, the OIG found that nearly 60 percent of CFPB report drafts submitted to headquarters during the investigation and 90 percent of drafts that received headquarters approval failed to meet CFPB’s own timeliness requirements. According to the OIG, this “inability to provide examination reports to institutions in a timely manner creates uncertainty for supervised institutions.”
OIG also cited deviations from examination manual templates as not supportive of consistency in the examination process. Furthermore, it found that CFPB failed to consistently record completion of examination milestones in a timely manner. In the absence of an established requirement for timely recording examination data, OIG used a seven-day standard and found untimely documentation in at least one-quarter of the instances for each of the key milestones reviewed. In eight cases, milestones were recorded more than 200 days after their occurrence. Other issues related to CFPB’s communication with prudential regulators, its inability to determine the most effective processes for reviewing examination reports, inconsistent scheduling practices and failure to track examiners’ completion of training. Finally, OIG cited room for improvement in the way CFPB coordinated the exchange of information with prudential regulators.
In its executive summary, the OIG lists 12 recommendations designed to strengthen the overall supervision program, focusing on creating and updating relevant policies and procedures, tracking/monitoring examination processes for staffing examinations, producing examination products and finalizing the CFPB examiner commissioning program. OIG also gave CFPB management an opportunity to respond to the report, and noted that management agreed with the recommendations and outlined actions that have addressed or will address them. There is no indication that the recommendations will be addressed by any certain date. Notwithstanding, OIG reports that it plans to follow up to ensure that each recommendation is “fully addressed.”
