The CFPB's recently released Financial Report for fiscal year 2012 (Report) contains some troubling information regarding the CFPB's focus on supervision and enforcement. The Report confirms that the CFPB has already begun "on-site supervision activities at the largest depository institutions," and commenced examinations of other depository institutions, mortgage originators, mortgage servicers and payday lenders. The report also confirms that the Bureau is actively pursuing enforcement actions against a number of institutions for violations of Federal consumer financial laws. While none of this is particularly surprising, what is concerning is the rapid and anticipated further growth of the CFPB's Supervision, Enforcement & Fair Lending Division. The Report strongly suggests that the CFPB not only plans to ramp up its enforcement efforts, but that the Bureau maybe using its enforcement authority as a substitute for rulemaking.
According to the Report, the CFPB currently has over 970 employees, a significant increase from the 663 employees it had at this same time last year. The CFPB's Supervision, Enforcement, and Fair Lending Division comprises 46.9 percent of the CFPB's workforce, which makes it by far the largest division within the CFPB. By comparison, the CFPB's Division of Research, Markets and Regulations, which is responsible for developing regulations, comprises only 9.0 percent, which may explain why the CFPB has not kept up with the rulewriting requirements under the Dodd-Frank Act. The Report also discloses that, during fiscal year 2012, the CFPB received more than double the funds it received in fiscal year 2011--$343.3 million, up from $161.8 million. Despite this growth, the CFPB wants more, stating that it is "below the full employment levels and funding it estimates for its steady state in future years."
Given the CFPB's focus on enforcement over rulemaking, there can be little question that the CFPB intends to use its supervision/enforcement authority as a substitute for rulemaking. Moreover, based on the Bureau’s expressed intent to continue its rapid growth, it is clear that financial institutions will face an increased number of examinations, on-site supervisions and enforcement actions. Check back with the CFPB-Lawblog for updates, as we continue to monitor the CFPB's actions.