The Consumer Financial Protection Bureau (CFPB) continues to evolve its examination and enforcement strategies. Banks must remain vigilant in their compliance efforts. A proactive approach to preparing for CFPB examinations can help minimize your regulatory risk. It also demonstrates a strong commitment to consumer protection.
15 best practices to prepare for your CFPB examination
Our list of best practices provides a comprehensive guide to help bank leaders prepare for their next CFPB examination.
1. Review your compliance management system
At the heart of any successful regulatory compliance program is a robust compliance management system (CMS). Your CMS should be comprehensive, covering all your institution’s consumer financial products and services.
It is crucial to regularly assess and update policies and procedures to reflect changing regulations. This includes implementing a training program for staff at all levels and establishing clear lines of accountability for compliance responsibilities.
If you haven’t yet done so, download the CFPB Supervision and Examination Manual from their website here.
2. Conduct a risk assessment
Conduct a thorough risk assessment of your organization before the CFPB arrives. Identify high-risk areas within your bank and develop “heat maps” to prioritize compliance resources. This process can help you address any known compliance issues before the CFPB examination, potentially avoiding regulatory concerns.
3. Analyze consumer complaints
Consumer complaints can provide valuable insights into potential compliance issues. It is recommended that you:
- Review and categorize all consumer complaints received since your last CFPB examination, looking for trends and patterns in the data.
- Document how you resolved complaints and any resulting policy changes. This information can demonstrate your bank’s responsiveness to consumer concerns and commitment to continuous improvement.
4. Evaluate fair lending practices
Fair lending remains a key focus area for the CFPB. It’s essential that you:
- Review your underwriting policies and procedures for potential disparate impact.
- Analyze loan data for any unexplained approval rate or pricing disparities.
- Assess marketing practices for potential fair lending issues.
5. Assess UDAAP compliance
The CFPB continues prioritizing unfair, deceptive or abusive acts or practices (UDAAP). Review your products, services and marketing materials for potential UDAAP issues. Ensure you provide adequate disclosures to consumers and evaluate sales practices and incentive programs for potential risks.
6. Review third-party relationships
Your bank’s compliance obligations extend to your third-party service providers. Assess your vendor management program and confirm proper oversight of these relationships. Review contracts for compliance requirements and consumer protection provisions.
7. Prepare your data and documentation
Organize and review all documents that could be requested during the CFPB examination, confirming data integrity and accuracy. Prepare a log of information requests and responses to keep track of your interactions with the examiners.
8. Designate an examination point of contact
Appoint a knowledgeable team member to coordinate with CFPB examiners. This person should have access to necessary information and decision-makers within your organization. This will facilitate a smooth examination process.
9. Conduct a mock examination
Testing your organization’s readiness with a simulated CFPB examination can be invaluable. This exercise can help identify and address any gaps or weaknesses in your compliance program before the examination.
10. Review previous examination findings
Address any outstanding issues from prior examinations and document progress on addressing previous “matters requiring attention” (MRAs). This demonstrates your commitment to ongoing compliance improvement.
11. Stay informed on CFPB priorities
Keep abreast of CFPB bulletins, guidance and enforcement actions. Use this information to adjust your compliance program based on emerging regulatory focus areas.
12. Prepare your board and senior management
Brief your leadership on the examination process and potential outcomes. You should make sure they understand their role in fostering a culture of compliance throughout the organization.
13. Review your change management process
Evaluate how your organization implements new regulations or guidance. Ensure timely communication of regulatory changes throughout the organization to maintain ongoing compliance.
14. Assess your complaint management system
Review your processes for receiving, categorizing and resolving consumer complaints. Check that there’s adequate tracking and reporting of complaint data to demonstrate your responsiveness to consumer issues.
15. Evaluate your fair lending testing program
Review your methodologies for identifying potential disparities in lending practices. You should make sure there is regular testing of credit decisions, pricing and servicing activities to proactively address any fair lending concerns.
Prep like a pro for your CFPB examination
Financial institutions can better position themselves for success in CFPB examinations by following these best practices. Remember, the goal is not just to pass the examination. Banks should demonstrate a genuine commitment to consumer protection and regulatory compliance.
A well-prepared bank can use the examination process to showcase its strong compliance culture. It will also highlight its consumer-focused approach to financial services.
Ultimately, preparation for a CFPB examination should be an ongoing process, not a one-time event. It is important to maintain a robust compliance program and stay proactive in addressing potential issues. Banks can then confidently navigate the regulatory landscape and continue to serve customers effectively.
Need a partner in the process? BPM is here to help – connect with us to learn more.
