Examinations

On March 31, 2021, the Consumer Financial Protection Bureau (“CFPB”) rescinded a range of policy statements issued under the leadership of former Director Kathleen L. Kraninger.  These rescissions concerned one policy statement governing communications between institutions subject to CFPB supervision and their examiners, and seven policy statements issued during the COVID-19 pandemic to provide regulatory…

On January 19, 2021, the FDIC’s Board of Directors approved revised Guidelines for Appeals of Material Supervisory Determinations (the “Guidelines”), which are applicable to insured depository institutions (“IDIs”) the FDIC supervises as well as other IDIs for which the FDIC makes material supervisory determinations. The FDIC stated that the amendments are intended to: (1) improve the independence of appeals decisions via the implementation of an independent, standalone office—the Office of Supervisory Appeals (the “Office”)—that will replace the existing Supervision Appeals Review Committee (the “SARC”); and (2) clarify the procedures and timeframes applicable to appeals, including those relating to formal enforcement actions.
Continue Reading FDIC Adopts Revised Guidelines for Appeals of Material Supervisory Determinations

On October 17, 2019, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and National Credit Union Administration released for public comment a proposed interagency policy statement on allowances for credit losses (“ACLs”).  The proposed policy statement reflects the Financial Accounting Standards Board’s adoption of the current expected credit losses (“CECL”) methodology.
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Continue Reading Agencies Propose CECL Policy Statement

On February 12, 2019, for the first time in its history, the Commodity Futures Trading Commission (“CFTC”) announced the release of 2019 examination priorities for each of its regulatory Divisions.  CFTC Chairman J. Christopher Giancarlo stated that “[t]his first-ever publication of division examination priorities is in line with Project KISS and other agency initiatives to improve the relationship between the agency and the entities it regulates, while promoting a culture of compliance at our registrants.”  Other regulatory agencies, such as the U.S. Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”), traditionally publish annual examination priorities.  The CFTC 2019 examination priorities focus on ensuring that CFTC registrants have sufficient compliance mechanisms in place to effectively self-regulate in accordance with the CFTC’s regulatory priorities.  Registrants should consider this announcement as signaling an increase in the CFTC’s attention to its supervisory efforts and as a potential precursor to increased enforcement activity.
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Continue Reading CFTC Announces 2019 Examination Priorities for the First Time

On June 22, 2017, the CFPB announced a series of actions based on consumer complaints it has received about the manner in which student loan servicers handle the Public Service Loan Forgiveness (“PSLF”) program.

PSLF is a federal student loan forgiveness program that provides borrowers in public service jobs, such as teachers, nurses, first responders,…

On April 15, 2017, the CFPB issued its fifth annual Fair Lending Report (“Report”). The Report describes the CFPB’s 2016 fair lending supervisory, enforcement, and rulemaking activities, interagency collaboration, and outreach to stakeholders.

Most importantly, the Report outlines the CFPB’s fair lending priorities for 2017, indicating that the CFPB will increase its focus on redlining, mortgage and student loan servicing, and small business lending. The Report suggests that the CFPB’s focus is shifting its attention away from indirect auto lending.

Student loan servicing and small business lending are two areas, like indirect auto lending, where creditors are prohibited from collecting applicant characteristic data. To determine race and ethnicity in indirect auto lending actions, the CFPB has used the controversial Bayesian Improved Surname Geocoding (“BISG”) proxy methodology, which combines geography-based and surname-based information into a single proxy probability for race and ethnicity. The Report gives no indication whether the CFPB would rely on the same BISG proxy methodology in any future supervisory or enforcement actions against student loan servicers or small business lenders. Any effort by the CFPB to extend this proxy methodology to these areas, particularly small business lending, could ignite further controversy because Section 1071 of the Dodd-Frank Act requires the CFPB to promulgate a data collection rule for small business lending, a rule the CFPB has yet to propose.…

Continue Reading CFPB Announces Fair Lending Priorities in Fifth Annual Fair Lending Report

The Office of the Comptroller of the Currency (the “OCC”) has released supplemental examination procedures on third party risk management.  The procedures apply to national banks and federal savings associations of all sizes.  They supplement OCC Bulletin 2013-29, which governs the risk management frameworks maintained by OCC-regulated banks in establishing, monitoring and concluding third party relationships (including relationships with bank affiliates).

While more detailed and specific than Bulletin 2013-29, the examination procedures reflect many concepts that will be familiar to banks.  However, the procedures also emphasize new points.  Of particular interest, the procedures include new language targeting specific types of third parties, including financial market utilities and marketplace lenders.…

Continue Reading OCC Supplements Guidance on Third Party Oversight; Emphasizes Oversight of Lending Relationships

Yesterday, the Federal banking agencies issued final rules that permanently extend the examination cycle, from 12 months to 18 months, for well-capitalized and well-managed banks, savings associations, and Federal agencies and branches of foreign banks with less than $1.0 billion in total assets.

The final rules, which implement a Congressional mandate under a 2015 statute, are identical to interim final rules issued on February 29, 2016.  Prior to February, only firms with less than $500 million in total assets were eligible for the extended examination cycle.

To qualify for the extended 18-month cycle for full-scope on-site examinations, institutions must:

  • have total assets of less than $1.0 billion;
  • not have been subject to a recent change in control;
  • be “well capitalized,” which generally means, among other things, maintaining total risk-based capital of at least 10.0%, tier 1 risk-based capital of at least 6.0%, and a leverage ratio of at least 5.0%; and
  • be well managed, which generally means having a CAMELS management and composite rating of 1 or 2 and not being subject to a formal enforcement proceeding or order.

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Continue Reading FDIC Approves Extended Exam Cycles for Small Banks

Important changes to the regulatory and supervisory framework governing loans to service members and their families have recently come into effect.  On October 3, 2016, Department of Defense (“DoD”) revisions to its Military Lending Act (“MLA”) rule became effective for most types of credit products covered by the rule (the revised rule will go into effect for credit cards on October 3, 2017).  Relatedly, on September 30, 2016, the Consumer Financial Protection Bureau (“CFPB”) released updated MLA compliance examination procedures to evaluate financial institutions’ compliance with the requirements of the revised DoD rule.  …
Continue Reading CFPB Announces Updated Examination Procedures for Military Lending Act Compliance