The new regulator of consumer financial products is now implementing a supervisory program for mortgage firms that are not owned by a bank.
Just a day after the President Obama pursued a backdoor appointment of the director of the Consumer Financial Protection Agency, the regulator announced the launch of its non-bank supervision program.
Richard Cordray, the former attorney general for the state of Ohio, was appointed CFPB director by Obama on Wednesday while the Senate was in recess.
The move by the president was quickly blasted by bankers.
“The controversial nature of today’s recess appointment reinforces the banking industry’s concerns about the bureau’s structure and lack of accountability,” ABA President and Chief Executive Officer Frank Keating said Thursday in a statement. “It puts the bureau’s future actions in constitutional jeopardy, threatening its work, complicating compliance efforts of banks and further undermining the entity’s authority and credibility.”
Keating went on to say that the CFPB appointment alters the composition of the board of the Federal Deposit Insurance Corp. and called on Congress to strengthen accountability at the CFPB.
In a statement Thursday, the CFPB said the federal non-bank supervision program being launched by the bureau is “the nation’s first federal non-bank supervision program.” The move will help make non-bank lenders subject to the same rules as banks.
Among non-bank companies now covered by the regulator are mortgage brokers and mortgage servicers. Loan modification firms, foreclosure rescue services and credit reporting firms are also now regulated by the CFPB.
The non-bank supervision program was designed to assess consumer risk from these businesses and ensure that they comply with consumer financial laws.
“The non-bank supervision program will include conducting individual examinations and may also include requiring reports from businesses to determine what businesses need greater focus,” the announcement stated. “How often and to what degree the examinations are performed will depend on CFPB’s analysis of risks posed to consumers based on factors such as the non-bank’s volume of business, types of products or services, and the extent of state oversight.”
CFPB examiners will rely on the CFPB Examination Manual.
The examiners will research regulated firms through publicly available information before visiting a business. They’ll review compliance with federal laws during the entire product lifecycle — including development, marketing, selling and management.
Employees will be interviewed, operations will be observed and the examiner will determine the company’s internal ability to detect, prevent and remedy violations that could harm consumers.
Non-bank firms will be warned of upcoming examinations and given status updates during the process. Violations will require corrective actions and could result in legal actions.
Through a memorandum of understanding with 42 states, CFPB examiners will share information with state examiners and regulators.
One of the first things on the list of the new non-bank supervision program is an expansion of ongoing supervision of mortgage servicers to non-bank servicers.
