Over two years ago, the CFPB and the Conference of State Bank Supervisors (CSBS) signed a memorandum of understanding to “establish a foundation of state and federal coordination and cooperation for supervision of providers of consumer financial products and services.” Now, the parties have an official “framework” for coordinating their supervisory and enforcement efforts “in situations where the CFPB and state regulators share concurrent supervisory jurisdiction.” CFPB Director Cordray announced that “[b]y working together, we are streamlining our processes, making the most of our joint resources, and ensuring evenhanded oversight of federal consumer financial laws.” This coordination of supervisory activities was mandated by the Dodd-Frank Act and, according to the CFPB, the announced framework “facilitates the implementation of this statutory requirement by providing a guide for flexible and dynamic regulatory coordination that both protects consumers and reduces regulatory burden on industry.”
The Framework applies to all non-depository institutions and to those depository institutions with over $10 billion in assets, and provides processes for:
- coordinating exam schedules;
- developing comprehensive supervisory plans for particular institutions;
- coordinating information requests;
- streamlining information sharing; and
- providing advance notice of corrective actions.
The Framework also encourages the CFPB and state regulators to: (i) designate a Single Point of Contact for each Covered Depository Institution; (ii) have one examiner-in-charge (EIC) to manage examinations; and (iii) provide financial institutions a “single entry or information request letter, where appropriate.”
It is difficult to predict just how the Framework will be carried out by state and federal regulators. The Framework is “not a binding agreement,” but rather “a guide for effective and efficient coordination and collaboration of supervisory and enforcement activities.” As a practical matter, the Framework should be viewed as a continuation of the Bureau’s overall efforts to follow Congress’ directives in the Dodd-Frank Act regarding state and federal cooperation. It is important to remember that state and federal regulatory jurisdiction is not co-extensive, particularly when it comes to enforcement matters. For example, the Framework permits state regulators to initiate enforcement actions without the consent of the CFPB and vice versa. As CSBS President John Ryan stated, “CFPB’s jurisdiction spans an array of industries that fall outside of the jurisdiction of CSBS members.” Finally, the Framework is a reminder on the importance of covered entities’ assessment and management of information flow as between state regulators and the CFPB. In this regard, the Framework reinforces the position that sensitive or confidential examination-related correspondence and materials submitted to the CFPB or the states will be shared among the CFPB and state regulators.