The Consumer Financial Protection Bureau not only brings enforcement actions against companies it believes broke the law. It also supervises and examines the business operations of entities that are not suspected of illegal activity. If your operation gets hit with a CFPB exam, there is one thing you must do to prepare: review the bureau’s Supervision and Examination Manual.
The 1559-page manual, which is available online, seems daunting at first. But the CFPB usefully divided it into sections based on different financial products (like mortgages, auto loans, and mortgage servicing) and the various laws the bureau enforces (like the Truth-in-Lending Act and the Real Estate Settlement Procedures Act). Also included in the manual are examination process templates, like a sample entity profile and an examination report.
According to the CFPB, its decision to make the manual publicly available was driven by the Dodd-Frank Act. That law obligates the bureau to enforce federal consumer financial statutes consistently. “To help accomplish this,” the CFPB notes, it “will use the same procedures to examine all supervised entities that offer the same types of consumer financial products or services, or conduct similar activities.”
The main focus of the CFPB’s examinations are, the bureau says, risks to consumers. So activities that engender less consumer risk are presumably subject to less stringent review. Also important to the bureau is an examinee’s “ability to detect, prevent, and correct practices that present a significant risk of violating the law and causing consumer harm.”
The sections in the manual lay out various legal requirements that apply to assorted consumer financial services and how the bureau intends to confirm compliance with those requirements. For example, for affiliated-business arrangements that fall under RESPA, the CFPB investigates whether consumers were required to use the related entity, whether proper disclosures were made, and whether the parent entity receives more than its normal return on ownership interests.
Also, the manual is so comprehensive that you could use it to gauge your business’s compliance with the law even without the CFPB doing an examination. For example, some companies do this as part of mock audits.