April Compliance News by the Numbers: 7 Important Stats
This month has brought some interesting industry news. We’ve pulled together a list of 7 articles that we found particularly compelling. Some of the articles are hard news, and others put the challenges we all face as compliance professionals in an interesting light.
As a company whose focus is loan data, analysis and statistics, we've organized the news by the numbers. It makes sense to us, we hope it does to you, too.
Without further ado... Compliance News By The Numbers.
1. Until last week, the last time the Federal Reserve's board talked about an "enforcement matter" regarding a bank was in November 2010, according to an article by Alan Zibel and Ryan Tracy in the Wall Street Journal.
In recent years, these type of issues might have been solved by staff at the central bank without any board involvement.
The article goes on to state that this marks a key victory for Senator Elizabeth Warren (D-MA) and her efforts at improving the regulatory agencies.
In a recent interview, Sen. Warren said, "My job is to push: It's about encouraging the regulators to pick up the tools they've got and use them. That can't happen if the regulators aren't paying attention."
As one of the key architects of the CFPB, Sen. Warren has some very specific, very strong ideas about the role of regulators in banking and lending. Other leaders at federal regulatory agencies, like Daniel Tarullo, Governor of the Federal Reserve, pay attention to Warren's leadership, the article goes on to say.
2. Community banks spent $250 million in their efforts to comply with new federal regulations in the first quarter of 2013, according to a press release from Indiana Senator Daniel Coats.
Senator Daniel Coats (R-IN) introduced the Community Financial Protection Act on April 10, a bill that is intended to relieve some of the CFPB’s pressure on lenders and community banks. (Here's the full text of the bill.)
The Indiana Bankers Association, the Indiana Credit Union League, and the Credit Union National Association support Coats’ proposed legislation. It will be interesting to see how legislators and regulators respond to this proposed bill, or if this is just a symbolic display by Senator Coats to indicate that he supports community banks.
3. Excluding baseline reviews, the CFPB has completed 82 examinations as of July 13, 2013, according to the CFPB Monitor. Of those 82, approximately 77 percent were exams of depository institutions.
The CFPB was founded on July 11, 2011, and two years later, it had completed 82 exams. That's approximately 3 exams per month for the past two years. The Office of the Inspector General recently released a report saying that the CFPB can (read: should) improve the efficiency and efficacy of its examination process. Pressure like this pushes the CFPB to implement more sophisticated exam practices - we'll be watching closely to see what those might look like.
4. 40 percent of dollars loaned to small, minority, and women-owned businesses come from community banks, according to a story by Bernard L. Weinstein in The Hill.
The article also stated that while community banks represent approximately 12 percent of bank assets nationally, they are responsible for almost 50 percent of small business loans under $100,000. While this statistic isn't news to us or our community bank clients, we're glad it is being reported.
This article highlights the potentially negative effects of dissolving Fannie Mae and Freddie Mac, because community banks hold about $6 billion of the $36 billion in preferred stock. If these two bodies were dissolved, there is no recourse for private entities like community banks to have access to those funds. "To the extent community banks have to write down their capital as a result of possible Congressional action regarding Fannie and Freddie, the pool of lendable funds to small businesses could decline," Weinstein goes on to say. If you're interested, the article also includes many other statistics about the importance of community banks to small businesses and overall economic health.
5. The average compensation of a federal bank regulator is 2.7 times the average compensation of a banker, according to an editorial by Paul Kupiec in the Wall Street Journal.
This one may make you wonder. Kupiec's editorial includes many more fascinating statistics about the salary and compensation of an average FDIC, OCC, and CFPB employee versus the salary and compensation of the average bank employee.
"Fewer than 7% of employees in any of these regulatory agencies earned less than $50,000," Kupiec adds. "In other words, 93% of the employees in these federal bank regulatory agencies earned more than the average banker's salary in 2012."
CFPB limo drivers make over $80,000 a year. This news has me reconsidering my career path. But seriously, it's a well-supported article, and definitely worth the read.
6. The CFPB ordered Bank of America to refund $727 million to its customers, said Richard Cordray, director of the CFPB in the prepared remarks for the BofA Enforcement Action press call.
Additionally, the Office of the Comptroller of the Currency (OCC) issued a $25 million civil money penalty to BofA, which will be paid to the U.S. Treasury, according to an OCC press release. The OCC press release said that BofA’s billing practices violated UDAAP - unfair, deceptive, and abusive acts and practices - policies of the Federal Trade Commission Act.
In related news, TRUPOINT Partners will soon be launching our UDAAP RiskCheck. Be among the first to get UDAAP RiskCheck product updates - sign up here!
7. The CFPB has received 300,000 consumer complaints thus far, said Steven Antonakes, the deputy director of the CFPB, in the prepared remarks for a speech given to the Consumer Bankers Association.
Antonakes said that the CFPB views their Consumer Complaint Database as a diagnostic tool for the industry that emphasizes the voice of the consumer, and can push lenders to prioritize regulatory risk management and quality customer service. The CFPB can and does use these complaints to initiate enforcement or supervisory actions, he added.
In the same speech, Antonakes said the CFPB intends to focus on other credit and lending markets, and policy development in 2014. He added that some of those areas of focus will be: the Ability-to-Repay rule, credit card industry, debt collection, student loan servicing, and indirect auto lending.
It’s hardly a jump to conclude that the scope of the regulatory agencies will continue to increase, or to conclude that the regulatory penalties will continue to weigh heavily on lenders. This regulatory environment is tough - it would be hard to argue otherwise - but we can feel some comfort that, as the regulatory agencies become more sophisticated, so do lenders and service providers.
We know that compliance officers are dealing with the unprecedented volume of regulatory changes and nature of these challenges, and are hard at work developing and implementing compliance programs that respond to those changes.
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