WASHINGTON — Without a permanent director in place, the Consumer Financial Protection Bureau gave fair warning Tuesday it plans to start monitoring the industry's largest banks for consumer abuses in just over a week.
The new bureau, created with the enactment nearly a year ago of the Dodd-Frank Act, gave new details on the timing of its supervision, the establishment of regional examination offices and the volume of examiners transferred from other regulators.
While the new guidelines are general in scope, they represented another attempt by the agency to start strong on its mandated July 21 launch date, despite the statutory constraints of not having a director. With Senate Republicans cool to any CFPB nominee, the White House has yet to name one. While Dodd-Frank allows the bureau before someone is confirmed to begin supervising banks with over $10 billion in assets, it cannot start other jobs — such as supervising nonbanks — until it has a leader.
"Starting on July 21, we will be a cop on the beat — examining banks and protecting consumers," Elizabeth Warren, who devised the agency and is leading the administration's effort to launch it, said in a press release.
The bureau said the "largest and most complex banks" will be subject to a continual year-round supervision program "customized to reflect the consumer protection and fair lending risk profile of the organization." The agency will conduct periodic exams for other institutions. (Under Dodd-Frank, consumer rules for banks with less than $10 billion are enforced by their primary bank regulator, such as the Federal Deposit Insurance Corp. or Office of the Comptroller of the Currency.)
Examiners at the new agency — including more than 100 staffers sent from other agencies by month's end — will soon become familiar with each bank's structure and business strategy. In the coming weeks, they will start coordinating with other regulators, finalize supervision plans and begin on-site exams. Banks will be kept informed of upcoming exams, the bureau said.
The bureau said exams will focus on a how well a bank is able to address potential violations of consumer rules. Examiners will look at whether a product complies with consumer rules not just at one point in time, but over the entire life of a product, from its development to marketing to sale and thereafter.
"Analyzing information that is unique to the institution — for example, lending activities, fee structures, and marketing practices — as well as assessing product trends at the market level, will … allow the CFPB to detect and address risks to consumers as they develop," the bureau said.
"During an examination, the CFPB will assess each institution's internal ability to detect, prevent, and remedy violations that may harm consumers by reviewing the institution's internal procedures and conducting interviews with personnel. Examiners will look at the products and services the institution offers, with a focus on risk to consumers."
The bureau said it will also conduct fair lending reviews to detect and address potential discriminatory practices.
Most examiners will begin the process remotely, and then begin on-site reviews at supervised institutions. Examiners will be located throughout the country, and managed out of satellite offices in Chicago, New York, San Francisco and Washington, D.C.
"Having examiners and field managers focused on these regions will help ensure that the CFPB understands the business practices and dynamics in different markets throughout the country," the agency said.