The Consumer Financial Protection Bureau’s onboarding process for banks coming under its oversight is neither timely nor effective, its inspector general found.
Regional offices of the CFPB’s Office of Supervision Examinations completed many key onboarding steps months after institutions transitioned to the bureau’s oversight, and some of the steps more than a year after the institutions transitioned, according to an OIG report released Dec. 2.
Created by the Dodd-Frank Act, the CFPB supervises depository institutions with more than $10 billion in total assets. A bank transitions to CFPB oversight when it exceeds $10 billion in total assets for four consecutive quarters.
According to the OIG, the regional OSE offices’ approach to coordinating with prudential regulators was decentralized, leaving regional offices to develop their own onboarding guidance. As a result, one developed its own guidance, and others did not have any, the report said.
The OIG made four recommendations as a result of its evaluation, including that the CFPB prioritize creating a framework for onboarding depository institutions by establishing objectives and having clear roles and responsibilities at the headquarters level to oversee onboarding.
The OIG also recommended the bureau have an officewide policy that details management’s expectations, and methods to monitor the regional offices’ execution of onboarding.
“A key mission of the CFPB is overseeing compliance with federal consumer financial laws and regulations for depository institutions with over $10 billion in total assets,” the OIG wrote in a one-page summary of the report. “Establishing an onboarding program will help the CFPB to ensure that it is fulfilling its statutory obligation timely and effectively.”
There are typically four steps in the transition to CFPB supervision.
These steps include assigning a CFPB field manager to oversee a depository institution’s transition; reaching out to prudential regulators to establish a relationship with CFPB officers; an informal meet-and-greet between a field manager and an institution’s chief compliance officer; and a formal meeting between the field manager and the bank’s broader leadership to discuss the CFPB’s supervisory approach.
In its evaluation of eight institutions, the OIG found that the CFPB’s regional offices were inconsistent with the timing of such steps. The offices took between 111 days before the transition date to 610 days after the transition date to assign a field manager to oversee a banks transition, the evaluation found.
Wide variances in days also passed regarding the other three steps. Regional offices took, for example, between 111 days pre-transition to 635 days post-transition to host an informal meet and greet with a bank coming under supervision.
According to the OIG, the CFPB “concurs with our recommendations and outlines actions to address them. We will follow up to ensure that the recommendations are fully addressed.”
The CFPB estimates that its policy will be updated to comply with the OIG’s recommendations by the fourth quarter of 2025.
A spokesperson for the CFPB declined to comment further on the report.
