As my colleague Barbara Mishkin indicated in her post earlier today, the 2012 CFPB Ombudsman’s Report, released last week, contains a section that indicates that the CFPB has heard, and is considering, the industry’s discomfort with the participation of enforcement attorneys in the examination process.
From the start, this issue has worried supervised entities, who were concerned that the participation of enforcement attorneys in examinations would inhibit free and open communication, and that the attorneys’ presence was a signal that the examination process was intended to be a development ground for enforcement actions. Those fears have been heightened by the fact that the Bureau’s three enforcement actions against credit card issuers all arose from examinations, and this connection was highlighted in remarks by Director Cordray.
There was no indication that the Bureau had any second thoughts about this issue until the Ombusdman’s Report came out. Near the end of the report, there is a section on enforcement lawyers’ participation in examinations, and it concludes with the following passage:
To reflect on the success and challenges of the new policy, achieve consistency in its implementation, and improve transparency with CFPB staff and supervised entities, the Ombudsman recently recommended that the CFPB review implementation of the policy to have enforcement attorneys present at supervisory examinations. Until that review is complete, the Ombudsman recommended that the CFPB establish ways to clarify the Enforcement Attorney role in practice at the supervisory examination. The Ombudsman understands that the CFPB now is considering these recent recommendations.
We are not sure what it would mean for the Bureau to “review implementation” of the enforcement attorneys’ role in examinations, or what ways there are to “clarify” that role, but we find it encouraging that the Bureau is at least “considering” the recommendations made by the Ombudsman’s Office. We’ll have to see what results emerge from this consideration, and whether the Bureau’s enforcement actions continue to emanate from the examination process. But there is at least some indication that the Bureau is listening to the industry’s well-founded concerns about this issue. If the Bureau did this, it would find that a more cooperative and less enforcement-oriented examination process could enable it to achieve its consumer protection goals more quickly and with less cost to the industry and, ultimately, to consumers.