by: Edward (Ted) W. Somers
and Jeffrey E.
Last week's announcement of the CFPB's new "appeal
process" for supervised entities offers little solace to those organizations
subject to an adverse finding or compliance rating by the Bureau. Pursuant to
Bulletin 2012-07 (Bulletin) released by the CFPB, "Financial service providers,
including depository institutions, under CFPB's jurisdiction may request a
review of a less than satisfactory compliance rating (a 3, 4, or 5) or any
underlying adverse finding set forth in the relevant examination report, or
adverse findings conveyed in a supervisory letter." If this sounds too good to
be true, that's because it is.
Under the "appeal process," the reviewing panel will be
comprised of at least three members of the CFPB's management appointed by an
Assistant Director for Supervision, Enforcement and Fair Lending. The Bulletin
does not set forth the standard or review or any other relevant factors to be
considered by the panel. In addition, the Bulletin explicitly provides that the
panel's recommendation is reviewable by the Associate Director for Supervision,
Enforcement and Fair Lending, who may "make any modifications as he or she
deems appropriate" before releasing a final decision, which, according to the
Bulletin, "will be final; no further attempts to appeal will be accepted."
Given CFPB's inflexibility and track record in sitting as its own judge, as
previously reported by the CFPB-Lawblog, it is doubtful that this new policy
will create legitimate opportunities for supervised institutions to challenge
compliance ratings or other adverse findings -particularly when decisions
obtained through this process are final, with no further chance for appeal.
Whether the new appeals system will create a genuine review process, rather
than the mere appearance of one, remains to be seen.
The new appeals process does not cover CFPB decisions to
initiate supervisory measures, such as requiring memoranda of understanding;
enforcement actions; or referrals of information to other regulatory agencies,
including, specifically, referrals to the DOJ under the Equal Credit
Opportunity Act. Entities subject to such actions appear to possess no
meaningful remedy from this new policy.
One final comment: we note with interest that the
Bulletin repeatedly refers to fair lending issues-a reference that might well
be an early indicator of the Bureau's intent to focus increased attention on
fair lending matters.. Stay tuned to the CFPB-Lawblog for updates and analysis
as this story evolves.
Read more articles about the Consumer Financial Protection
Bureau at Dykema's CFPB Blog
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