Inside Scoop on the Consumer Financial Protection Bureau – Members of the Implementation Team Speak

The Women in Housing and Finance (WHF) hosted a panel last week with two key members of the Consumer Financial Protection Bureau's (CFPB's) implementation team, Peggy Twohig and Steve Antonakes.Twohig, formerly the Treasury Department's Director of the Office of Consumer Protection, is the Assistant Director for Non-Bank Supervision. Antonakes, who has served as the Massachusetts Banking Commissioner for the past seven years before joining the CFPB, is the Assistant Director for Large Bank Supervision. As the date of enforcement authority (July 21, 2011) quickly approaches, Twohig stated in the opening remarks that the CFPB's implementation team has focused on organizational efforts to translate the agency's mission statement into a functioning organization. The agency currently has 570 employees and has already brought in a number leaders for its operational units. For instance, one of the more recent additions was the appointment of Gail Hillebrand, formerly a senior attorney with Consumers Union, as the Associate Director of Consumer Education and Engagement. The two panelists shared remarks about their current initiatives in their specific groups. Antonakes stated that his activities fall into two main buckets. First, he and his team are educating themselves on the 110 financial institutions that fall under the purview of the Large Bank Supervision unit. These institutions have approximately $10 trillion in assets and represent 80 to 90 percent of the total bank assets in the United States. In order to learn more about these institutions, his group has entered into information-sharing agreements with other state and federal regulators and stressed that his group will continue to work closely with these regulators in sharing information. The education efforts will help determine the scope of examinations, as most of the 110 institutions will be subject to point-in-time supervision, while the largest institutions will be subject to continuous supervision (similar to the resident examination programs of other federal agencies). The second initiative involves the recruitment of examiners. Antonakes plans to recruit from two sources: transferees from existing agencies, and external recruiting of entry-level examiners, including candidates with previous financial services experience. The challenge will be to train these examiners in the short period of time before the CFPB launches. Twohig then shared that the main challenge facing the Non-Bank Supervision group is determining which entities are to be regulated. Non-bank entities, including mortgage lenders, mortgage servicers, student lenders, payday lenders, credit bureaus, and debt collectors, will definitely be supervised by the group. Other types of entities to be regulated will be defined through the rulemaking process. Twohig indicated that they are consulting with trade associations to define what types of industries are to be regulated. An entity that does not fall under the statute can still be examined if the group receives information that the entity is selling a financial product that is posing a risk to consumers. Twohig called this exception the "risk catchall provision." The most important factor in initiating an examination is the risk posed to consumers. The group will then consider asset size and the extent to which existing state laws already regulate the entity. The group will initially focus on larger firms for examination. Twohig also discussed how the group will interact with state regulators. The group has entered into information-sharing agreements with state regulators in order to develop a common standard for examination of non-banking entities. Twohig sees the group augmenting a state's role in regulation in non-banking entities. In areas where there is no state regulation, there is likely more risk to consumers and thus, more authority for the non-banking supervision group to act. Antonakes and Twohig then opened the floor for questions, many of which focused on the examination process. One question posed asked was what extent would the CFPB interfere with prudential federal regulators' safety and soundness exams. Antonakes stated that there is a statutory obligation to coordinate with prudential federal regulators to avoid any overlap. He anticipates robust information sharing and coordination so that there will be no duplicative information requests. Another question asked was whether information provided to CFPB examiners will receive similar privileged treatment as it does with other prudential regulator examinations. Antonakes responded that the examination process will likely be similar to what has been done in the past, but that procedures are still being worked out. Another question was raised about whether fees will be assessed for examinations, and the panelists stated that they believed the necessary funding would be provided so that fees would not be necessary. Finally, there was a question as to whether there would be a problem if no director is named for the CFPB before July 21. Twohig had no answer, but Antonakes believes that the Large Bank Supervision unit will be able to function without CFPB having a director. While there is still much work to be done in defining the scope and procedures of the examinations before the July 21 rollout date, the two common themes from the panelists were: that the primary focus of CFPB examinations will be on consumer risk and that significant efforts will be made to ensure that examinations do not overlap with existing federal and state regulations. – Chester Choi and Amy Mudge

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