1. The CFPB’s Legal Minefield for CREDIT UNIONS
Presented by: Ron Brown, IFCCE, MCE, CCCO, CARS, MPRS, CFA
CSI Group
Oklahoma City, Oklahoma

2. CFPB - Background
Created by virtue of the Dodd-Frank Wall Street Reform and Consumer Protection Act. “the Dodd-Frank Act”
One “Agency” responsible for consumer financial protection.
Consolidates enforcement from
Board of Governors of the Federal Reserve
Department of Housing and Urban Development
Federal Deposit Insurance Corporation
Federal Trade Commission
Office of Comptroller of Currency
Office of Thrift Supervision
National Credit Union Administration
COVERED ENTITIES: Individuals or entities engaged in offering or providing consumer financial products and services (Sec 1002)

3. Supervision & Examination
CFPB’s supervision and examination powers Since July 21, 2011, the CFPB has had supervision and examination powers over banks and credit unions with $10 billion or more in assets. The CFPB director does not have direct supervision and examination authority over credit unions with less than $10 billion in assets. NCUA and state legislators retain examination authority for these credit unions. The appointment of a director, however, provides the CFPB with supervision and examination authority over nondepository institutions.  Specifically, the CFPB has authority over nonbanks that provide mortgage origination and servicing, private student loans or payday loans. This authority applies to all nonbanks that provide these products or services, regardless of their asset size. In addition, the CFPB has the ability to supervise and examine “larger participants” in other markets for consumer financial products and services. The Dodd-Frank Act requires the CFPB to issue a rule before July 21, 2012, outlining which nonbanks are larger participants. The CFPB is currently taking steps to determine what other consumer markets should fall under its initial supervisory and examination authority. Last June, the bureau issued a notice and request for comment that identified six consumer finance markets where nonbank larger participants fall under its authority. Those six markets are:
debt collection;
consumer credit reporting;
consumer credit and related activities;
check cashing and money transmitting;
prepaid cards; and
debt relief services. 
The CFPB also indicated that additional markets could be added in subsequent rulemakings. In February, the CFPB took the next step and proposed a definition for "larger participant" in the debt collection and consumer reporting markets. The bottom line: When the larger participants are defined by CFPB regulation, these nonbank entities will be subject to federal oversight for the first time. 

4. CFPB Bottom Line
Going forward, credit unions need to monitor the CFPB for changes and amendments to consumer regulations. The CFPB’s amendments to consumer regulations will apply to credit unions of all asset sizes.
The CFPB’s mission is to protect consumers and, unlike NCUA, the agency does not have a safety and soundness mandate to follow when writing regulations.
Unfair, deceptive or abusive acts or practices: Although we don’t know where the CFPB will act first, credit unions need to be aware of the bureau’s new UDAAP powers.
The bottom line With a director, the CFPB now has the full powers it was granted by the Dodd-Frank Act. While many of these powers relate to supervising non depository institutions, the CFPB also gains new powers that will eventually impact credit unions. As the CFPB continues to regulate, credit unions will need to learn how to track and monitor the CFPB’s rulemaking proceedings and follow any additional initiatives the CFPB undertakes that could impact credit union operations.

5. Regulatory Authority
CFPB’s regulatory authority While most credit unions will not fall under the CFPB’s supervision and examination authority, they will be subject to its regulatory authority. On July 21, 2011, the Dodd-Frank Act transferred regulatory authority of the “enumerated consumer laws” to the CFPB. This transfer of authority means the CFPB is now the regulator tasked with implementing consumer laws through regulation.
Going forward, credit unions need to monitor the CFPB for changes and amendments to consumer regulations. The CFPB’s amendments to consumer regulations will apply to credit unions of all asset sizes.

6. Direct Supervision
Large Bank Supervision Program – banks, thrifts and credit unions with assets over 10 billion
Non Bank Supervision Program – Non bank providers of consumer financial products and services
All non banks in the residential mortgage, private education lending and payday lending
“larger participants” in other markets
Any non bank that it determines is engaging or has engaged in conduct that poses risk to consumers with regard to consumer financial products or services

7. Service Provider Supervision
Service Provider definition:
Any person who provides a material service to a covered entity in connection with the offering or provision by such covered entity of a consumer financial product or service
12 U.S.C. 5514, 5515,5516
Title X grants CFPB Supervisory and Enforcement authority

8. Due Diligence
Verification process used by the covered entities to insure the service providers they use understand and are capable of compliance with all consumer protection laws, included but not limited to:
FDCPA
FCRA
TCPA
GLBA
TRPPA
HIPAA

9. Verification & Monitoring Process
Review Service Provider policies, procedures and training materials
Language in contracts setting forth clear expectations and compliance requirements
Language in contracts setting forth consequences for non compliance and violations of consumer protection laws
Review insurance, bonds, licensing and complaint handling procedures
Audit process for monitoring

10. Complaint Handling Program
CFPB actions are driven by complaints
Service Provider MUST have a system in place to track and respond to consumer complaints
Service Provider MUST demonstrate they take prompt action to address complaints and respond accordingly
Covered entity MUST address any problems and “terminate the relationship where appropriate”

11. CFPB Audits Start at the top Supervision & Examination Manual
Oct. 2011
CFPB Examiners should seek to determine whether the Board and Senior Management have:
Demonstrated clear expectations regarding compliance, not only within the entity but also to third party Service Providers
The Board of Directors is ultimately responsible for administering a compliance management system
Audit Board of Directors meeting minutes and through direct interviews

12. CFPB AUDITS Due Diligence Contracts Oversight Financial Condition
Relevant Experience
Knowledge of Applicable Laws and Regulations
Reputation
Effectiveness of Operations & Controls
Management of Information System
Contracts
Scope
Cost/Compensation
Performance Standards
Reports
Audits
Confidentiality & Security
Oversight
Monitor Financial Condition
Monitor Controls
Assess Quality of Service & Support
Documentation

13. Risk Monitoring You cannot remove the risk… You can mitigate the risk
Service Provider Risk Management
Strategic Risk
Compliance Risk
Reputation Risk
Operational Risk
Transaction Risk
Credit Risk
You cannot remove the risk…
You can mitigate the risk

14. Questions ???
Ron L. Brown
CSI Group