At a time when the CFPB is getting accustomed to a new director, the CFPB has been found to have gone outside its examination authority, according to the Office of the Inspector General (OIG).
According to a report released in March, OIG identified instances in which the Consumer Financial Protection Bureau (CFPB) examined financial service providers that were outside of the agency’s jurisdiction. Specifically, the Division of Supervision, Enforcement and Fair Lending (SEFL), “inadvertently scheduled examinations at institutions that are outside its supervisory jurisdiction because it did not have sufficient information about those institutions,” the report says.
The OIG reportedly identified “multiple instances” of this occurring during its review period, which consists of 2017 and 2018 supervisory planning cycles. However, the report also states that OIG understands that similar occurrences took place in planning cycles that pre-date 2017.
Established jurisdiction and misuse of resources
According to the CFPB’s establishing document, the Dodd–Frank Wall Street Reform and Consumer Protection Act that was signed into law by President Barack Obama in the summer of 2010, the CFPB is authorized to supervise depository institutions and their affiliates with more than $10 billion in total assets, as well as nondepository institutions that could number in the thousands. The Bureau also seeks to prioritize its activities based on annual assessments of risk posed to consumers by these institutions.
In some of the instances documented by the report, the CFPB apparently began to investigate debt collection institutions that did not fall under its jurisdiction before eventually canceling the investigations after the discovery was made, but prior to their scheduled start dates. Still, the OIG calls this a poor use of the Bureau’s resources.
“Our review of scheduling documentation corroborates multiple instances of SEFL canceling scheduled examinations after discovering the institution did not satisfy the [jurisdictional requirements],” the report reads. “As a result, regional offices had to reassign examiners to a different examination or request that they perform other responsibilities.”
OIG also discovered that the Bureau scheduled several examinations in incorrect regions, requiring certain regional offices to, “relocate examiners across the country or to reassign them to alternative work,” the report says.
CFPB management responded to the OIG report by concurring with its recommendations to increase the lead time for initial research on supervised institutions, “when verifying whether an institution is subject to the Bureau’s supervision and the location of the operations to be examined.”
The CFPB also told OIG that SEFL has addressed their recommendations by sending information requests to institutions with increased lead time, “before scheduled examinations to avoid abrupt, late-stage cancellations,” the report says.
Read the full OIG report for more.