Federal oversight transition within CFPB reveals a lack of consistency, according to OIG's findings
The Consumer Financial Protection Bureau (CFPB) has announced plans to update its onboarding process for banks coming under its supervision, in response to recommendations made by its Inspector General. The changes are expected to be implemented by the fourth quarter of 2025.
The CFPB has concurred with the recommendations, outlining actions to address the identified issues. The bureau's onboarding process typically involves four steps: assigning a CFPB field manager, reaching out to prudential regulators, an informal meet-and-greet between a field manager and an institution's chief compliance officer, and a formal meeting with the bank's broader leadership.
However, a recent report by the Office of Inspector General (OIG) revealed that regional offices of the CFPB's Office of Supervision Examinations (OSE) completed many key onboarding steps months and even over a year after institutions transitioned to the bureau's oversight. The OIG evaluated eight institutions and found inconsistencies in the timing of CFPB's onboarding steps by regional offices.
To address these issues, the OIG has recommended that the CFPB prioritise creating a framework for onboarding depository institutions, including establishing objectives and having clear roles and responsibilities at the headquarters level. The OIG also suggested that the bureau create an officewide policy detailing management's expectations and methods to monitor the regional offices' execution of onboarding.
The CFPB's new onboarding process is expected to be more risk-based, automated, and well-documented. Key recommendations include integrating automated methods for collecting taxpayer identification number (TIN) information, enhancing documentation and transparency around onboarding and offboarding decisions, adapting onboarding policies with a clear risk-based approach, considering open banking initiatives via secure API data sharing, and maintaining compliance with evolving regulatory frameworks.
These changes aim to modernize the onboarding process, balancing regulatory compliance, operational efficiency, customer experience, and fairness under CFPB oversight. A spokesperson for the CFPB declined to comment further on the report.
The Consumer Financial Protection Bureau (CFPB) has agreed to the recommendations, planning to establish objectives and clear roles for its onboarding process of depository institutions in finance. This revised process is intended to be more efficient, automated, and transparent, incorporating fintech solutions and open banking initiatives for improved risk-based onboarding, thereby ensuring regulatory compliance and a fair customer experience.
