CFPB Will No Longer Send Enforcement Attorneys to Supervisory Examinations

The Consumer Financial Protection Bureau (CFPB) will no longer have attorneys in its enforcement division accompany auditors conducting supervisory examinations. The practice had drawn the ire of many in the financial services industry as being presumptive of guilt before examinations even began.

Several news outlets yesterday reported on the move, including The Wall Street Journal and American Banker. Both received confirmation from the CFPB that the policy had changed.

When conducting onsite supervisory examinations, the CFPB, as a matter of policy, sent at least one enforcement attorney as a part of the team. This led many companies being examined to question why it was necessary to have a staffer present whose sole purpose was to build violations cases.

Steve Antonakes, the CFPB’s Deputy Director, explained that the original intent in having lawyers present was to give them “a firsthand understanding of the issues arising in examinations.”

But businesses, beginning with the first major banks to face supervision, pushed back almost immediately. They argued that having an enforcement lawyer present prevented open communication and made the process much more laborious, since it forced the firms to involve their own legal teams in every step of the examination.

The CFPB announced the change in policy Tuesday in a conference call with its examination team. The agency noted that enforcement attorneys will still be very involved in the process, but they will no longer be physically present. “We think this approach will result in better overall oversight,” a CFPB spokesperson said.

The move was widely applauded in the financial industry, including by debt collection industry trade group ACA International.

“This change is important in that it corrects our concern that the inclusion of enforcement lawyers during an examination creates an inherent perception that wrong doing has occurred,” said ACA Chief Executive Officer Pat Morris. “ACA members want to work with the Bureau and believe it will make these examinations less combative by removing a significant hindrance to constructive, open dialogue with the CFPB.”