The Consumer Financial Protection Bureau, or CFPB, has outlined the agency’s approach to supervising large depository institutions to ensure compliance with federal consumer financial protection laws.  The supervisory process that will begin on July 21, 2011.

The consumer agency will conduct examinations to help ensure that consumer financial practices at large banks conform with consumer financial protection legal requirements. The CFPB’s bank supervision program will oversee the 111 depository institutions that have total assets over $10 billion.  Subsidiaries and all other affiliates of these institutions also fall under the CFPB’s authority.  These institutions collectively hold more than 80 percent of the banking industry’s assets.

The examiners will be managed out of satellite offices in Chicago, New York, San Francisco, and Washington, D.C.  A large part of the CFPB’s supervision staff will be made up of experienced examiners:  By the end of July, the CFPB supervision team will include more than 100 staff members transferring directly from the Federal Deposit Insurance Corporation, the Federal Reserve System, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The CFPB expects eventually to have several hundred examiners on board, coming from a variety of backgrounds, including state regulatory agencies and industry.

CFPB supervision will be an on-going process of pre-examination scoping and review of information, data analysis, on-site examinations, and regular communication with regulated entities, prudential regulators, and as well as follow-up monitoring. For most depository institutions supervised by the CFPB, periodic examinations will be conducted.  For the largest and most complex banks in the country, the agency will implement a year-round supervision program that will be customized to reflect the consumer protection and fair lending risk profile of the organization. 

During an examination, the CFPB will assess each institution’s internal ability to detect, prevent, and remedy violations that may harm consumers by reviewing the institution’s internal procedures and conducting interviews with personnel. Examiners will look at the products and services the institution offers, with a focus on risk to consumers. The institution’s compliance with requirements during the entire life cycle of the product or service will be reviewed, including how a product is developed, marketed, sold and managed.  Fair lending reviews will be conducted to detect and address potential discriminatory practices, and, more generally, the institution’s policies and practices will be evaluated to ensure compliance with consumer financial protection laws and regulations. 

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