The CFPB announced earlier this week that it has established a “framework” with the Conference of State Bank Supervisors (CSBS) for coordination among the CFPB and state regulators on supervision and enforcement matters. The framework states that it is “intended to establish a process for coordinated federal/state consumer protection supervision and enforcement of entities providing consumer products or services that are subject to concurrent jurisdiction of the CFPB and one or more [state financial regulatory authorities].” It further states that it is “not a binding agreement” and instead is “a guide for effective and efficient coordination and collaboration of supervisory and enforcement activities.”
The framework implements a provision of the 2011 memorandum of understanding (MOU) between the CFPB and CSBS regarding information sharing in which the parties agreed to work together to efficiently use federal and state resources, “including through the development of a framework for coordinating supervisory activities.” The MOU was supplemented by a 2012 Statement of Intent detailing the types of information the CFPB planned to share with state regulators and the cooperative actions the CFPB planned to take. According to the CFPB’s press release, in agreeing to the framework, the CSBS was “acting on behalf of state financial regulatory authorities.” However, as the CSBS notes in its press release on the framework, the CFPB’s non-bank jurisdiction “spans an array of industries that fall outside of the jurisdiction of CSBS members.” It is presumably for that reason that the framework contemplates that it, in addition to the CSBS, it will be signed by “State Banking Commissioners or Other Appropriate State Officials.”
The framework includes the following:
State regulators are to form a “State Coordinating Committee” that is responsible for state coordination with the CFPB with regard to supervision of non-bank entities.
The process for examinations of depository institutions (meaning insured state-chartered depository institutions or credit unions with more than $10 billion in assets or their affiliates) and non-banks includes provisions dealing with coordination of examination scheduling and development of a comprehensive supervisory plan for coordinated supervision that includes an examination plan. Examination plans are to include a “single entry or information request letter, where appropriate.”
The CFPB and state regulators are to “share information and consult one another” regarding corrective action “in all cases where permitted by applicable law,” with such sharing or consultation to occur when possible “in a reasonable time” before corrective action is taken. However, the framework expressly provides that the CFPB and a state regulator do not need to have the other’s approval before initiating an enforcement action.
Despite the CFPB’s statements in its press release about its “strong partnership” with state regulators and the framework representing an expansion of its efforts to coordinate with state regulators, Bloomberg reports that the uncertainty surrounding Director Cordray’s recess appointment may be slowing the CFPB’s interactions with state regulators. The report discusses comments by Greg Zoeller, the Indiana Attorney General, that the CFPB’s plans to coordinate enforcement with state AGs have stalled as a result of the uncertainty. Mr. Zoeller is also reported to have said that such uncertainty is deterring state AGs from exercising their authority under the Dodd-Frank Act to enforce federal consumer financial laws.