Watchdog finds CFPB quality management program lacking

Inspector general office blames two-year hiring freeze for some delays

A report found deficiencies in the Consumer Financial Protection Bureau’s (CFPB) quality management program for its supervision activities.

The quality management program at the division of supervision, enforcement and fair lending (SEFL) often takes a backseat to overseeing financial institutions’ compliance with federal law, according to a November report from the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau. Staff turnover, attrition and a two-year hiring freeze caused delays in creating quality control reports. Formal processes for following up on and documenting quality control recommendations were also found to be lacking.

A CFPB spokesperson declined to comment on the findings.

In the CFPB’s formal response, which was included in the report, David Bleicken, acting associate director of SEFL, said the agency is already in the process of making a number of improvements.

The report found inconsistencies in the CFPB’s quality management program staffing process. In some cases, the CFPB selected quality management program regional representatives based on their independence from the examination process, while others were selected because of their expertise in examinations. Due to “staff turnover,” the report said, one representative was selected who had neither examination nor analyst experience.

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According to CFPB staff interviewed, there is no formal process for following up on open quality control recommendations, the report found. Instead, follow-ups are conducted “ad-hoc,” in an informal process, without documentation.

“We attribute OSE’s lack of formal, updated QMP guidance to staffing constraints on the QMP team due to turnover and the Bureau’s hiring freeze from 2017 through 2019,” the report said.

SEFL is no longer hindered by a hiring freeze. The division is actively increasing its ranks of enforcement attorneys as it intensifies its supervisory and enforcement activities.

Within SEFL, the office of supervision examinations (OSE) directly oversees financial institutions’ compliance with federal laws. In 2014, the OSE implemented a quality management program, to make certain the supervisory program adheres to CFPB standards, policies and procedures, ensure accountability and continuous improvement, and make sure that office has quality controls.

Although it oversees the office of supervision examinations, SEFL leadership has little involvement or knowledge of its quality management program, the report said, and two senior SEFL officials said they do not receive metrics or reports on the program.

SEFL is also more concerned with its supervisory priorities than its quality management program, according to the report. Staff attrition in other areas led to the reassignment of some staff away from the quality management program.

As supervisory activities took precedence, quality control reports faced delays — in some cases up to six months. The CFPB’s quality control program does not have any formal timeframe to complete the reports and “staffing issues” at the Bureau contributed to the slowdown, an official said.

In one instance, an office implemented a recommendation seven months ahead of the relevant quality control report.

The report notes that, according to CFPB officials, a March 2020 SEFL technology initiative could alleviate some of the staffing concerns. The initiative, dubbed the Supervision Technology Initiative, will focus on developing data automation, robotic processing, and machine learning.

But the office of the inspector general noted that, while the tech advancements could lead to the “eventual automation” of some manual quality control activities, SEFL should still look into its staffing level and structure.

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