Fed OIG Criticizes CFPB in Two New Reports
The Federal Reserve’s Office of the Inspector General (OIG), which also oversees the Consumer Financial Protection Bureau (CFPB), published two separate reports late last week on the CFPB’s supervisory and enforcement divisions. The first report reviewed the Bureau’s adherence to the Dodd-Frank Act regarding its authority to issue civil investigative demands (CID) to covered persons. The OIG found that although the CFPB mostly followed the protocols laid out when issuing CIDs, the Bureau needed to improve the contents of its CID notifications. The OIG noted,
“A potentially noncompliant notification of purpose may limit the recipient’s ability to understand the basis for requests and thereby heighten the risk that the CID may face a legal challenge. In the event of such a challenge, the CFPB’s ability to obtain the information needed to enforce consumer financial protection laws could be delayed, irrespective of the court’s decision. Additionally, noncompliant notifications of purpose pose a reputational risk, potentially affecting interactions with CID recipients and other stakeholders.”
The Inspector General further found fault with the data storage methods relied upon by the CFPB, a common complaint levied on the agency. The OIG recommended that the CFPB set up a central management system for CIDs and improve the notification system to lessen the likelihood that the demands would be challenged in court. NAFSA recently filed an amicus brief to the Supreme Court of the United States in support of a challenge to the CFPB’s CID authority by two tribal lending entities.
The other OIG report focused on the effectiveness of the CFPB’s Examiner Commissioning Program and on-the-job training program. The Bureau’s Division of Supervision, Enforcement, and Fair Lending exists to prevent harm to consumers and promote the development of fair, transparent, and competitive consumer financial markets. The OIG raised concerns with the training program utilized by the agency when hiring new examiners and training those examiners on-the-job. In particular, examiners were being advanced too quickly and struggling to pass all the components of their testing requirements, limiting career success and harming overall employee morale.
The OIG expressed concern that examiners were not afforded adequate training or development opportunities. In relation to the on-the-job training program, employees were under-informed of the benefits and procedures, leading to a low usage rate. The agency’s internal learning and training office lacked the ability to update or modify the training programs, further impeding the effectiveness of the programs. According to the report, the CFPB is already taking actions to address these inadequacies.
