On June 4, the CFPB, jointly with the Fed, FDIC, NCUA and OCC, announced that the agencies were releasing a “Memorandum of Understanding on Supervisory Coordination” (MOU). The MOU was signed by the CFPB on May 3 and by the other agencies on various dates in May, with the Fed and NCUA signing last on May 16. The MOU not only addresses various requirements of the Dodd-Frank Act, such as the requirements for the agencies to coordinate exam scheduling and share draft exam reports, but also includes provisions on sharing other information.
The MOU requires the CFPB, before issuing a final exam report or taking supervisory action based on exam results, to “take into consideration concerns” raised by a depository institution’s prudential regulator in its comments on the CFPB’s draft exam report. We think one of the most interesting issues to watch will be to what extent prudential regulators try to temper CFPB directives in draft exam reports or discourage CFPB supervisory actions because of concerns about how those directives or actions may impact a depository institution’s safety and soundness, and how responsive the CFPB will actually be to those concerns.
The MOU covers exams of and information related to a supervised entity’s (1) compliance with federal consumer financial laws (e.g. TILA, ECOA, FCRA, RESPA), (2) compliance with Section 5 of the FTC Act, the Servicemembers Civil Relief Act, the Talent Amendment and other federal laws that are not “federal consumer financial laws” but regulate consumer financial products or services, (3) consumer compliance risk management programs and systems, (4) other activities related to consumer financial products or services, and (5) other related matters upon which the CFPB and a prudential regulator mutually agree.
The supervised entities covered by the MOU are (1) depository institutions with more than $10 billion in total assets (large banks), (2) affiliates of large banks that are depository institutions with $10 billion or less in total assets, and (3) other affiliates of large banks. The MOU states that the agencies are considering entering into a separate agreement to address the CFPB’s authority to include its examiners on a sampling basis in a prudential regulator’s exam of a depository institution with less than $10 billion in total assets (although the MOU does speak to the CFPB’s authority to examine nonbank subsidiaries of such entities.) In addition, the MOU states that the CFPB and Fed plan to enter into a separate agreement to coordinate their supervisory activities related to holding companies and their subsidiaries.
The general rule established by the MOU is for the agencies to carry out exams simultaneously. However, the MOU includes a process for dealing with a supervised entity’s request (as permitted by Dodd-Frank) for separate exams. In addition to describing the process for sharing draft exam reports, the MOU lists other categories of information the agencies intend to share, which include supervisory information (such as final versions of supervisory letters, supervisory actions and exam reports) as well as “information in areas of common supervisory interests.” The MOU also allows a supervised entity’s prudential regulator and the CFPB to agree that a CFPB exam and a CRA exam by the prudential regulator will be conducted simultaneously and provides that the prudential regulator will share with the CFPB information reported by the supervised entity on small business loans.