The 2012 CFPB Ombudsman's Report, released last week, contains a section that suggests the Bureau is rethinking having enforcement attorneys participate in the examination process. This is an apparent sign that the CFPB is responding to the industry's discomfort with the issue.
The report identified "the presence of enforcement attorneys at supervisory exams" as one of two systemic issues reviewed by the Ombudsman in FY 2012. Last February, in a Q&A following a teleconference at which Wendy Kamenshine, the Ombudsman, was a speaker, we raised concerns about the CFPB's policy to include enforcement attorneys in examinations and information-gathering meetings with a supervised entity's representatives. In particular, we described the policy's chilling effect on the attorney-client relationship resulting from the fear that enforcement attorneys will have access to attorney-client communications. At that time, Ms. Kamenshine indicated that she would share our concerns with others in the CFPB.
From the outset, supervised entities have been concerned that the participation of enforcement attorneys in examinations would inhibit free and open communication, and that the attorneys' presence was a signal that the examination process was intended to be a development ground for enforcement actions. Those fears have been heightened by the fact that the Bureau's three enforcement actions against credit card issuers all arose from examinations, and this connection was highlighted in remarks by Director Cordray.
The Ombudsman's Report includes a section near the end on enforcement lawyers' participation in examinations, and it concludes with this passage:
To reflect on the success and challenges of the new policy, achieve consistency in its implementation, and improve transparency with CFPB staff and supervised entities, the Ombudsman recently recommended that the CFPB review the policy's implementation. Until that review is complete, the Ombudsman recommended that the CFPB establish ways to clarify the Enforcement Attorney role in practice at the supervisory examination. The Ombudsman understands that the CFPB now is considering these recent recommendations.
The recommendation comes on the heels of meetings between the Ombudsman and various interested parties. These included individual meetings with CFPB leaders and staff, as well as bank officials, outside attorneys, as well as other meetings with some groups representing providers of consumer financial products and services that do not work with banks, according to the report.
We are not sure what it would mean for the Bureau to "review implementation" of the enforcement attorneys' role in examinations, or what ways there are to "clarify" that role, but we find it encouraging that the Bureau is at least "considering" the Ombudsman's recommendations. It remains to be seen what results emerge from this consideration, and whether the Bureau's continues to base its enforcement actions on the examination process. But there is at least some indication that the Bureau is listening to the industry's concerns. A more cooperative and less enforcement-oriented examination process could enable it to achieve the Bureau's consumer protection goals more quickly and with less cost to the industry and, ultimately, to consumers.