A recent Mortgage Banking Update prepared by Ballard Spahr contains an article by Christopher Willis on the CFPB's recent Bulletin on a proposed "appeals procedure" for Bureau decisions. Willis makes a number or wry observations that bear repeating.
The appeal procedure is somewhat unclear, since the Bulletin is not specific about the personnel who will decide the appeal or the standard of review that they will use. Indeed, with regard to personnel, the Bulletin discusses various permutations of persons in various areas of the CFPB, suggesting that the lineup of decision-makers will be different for appeals of different types of issues.
[I]n the context of a petition to set aside or modify a civil investigative demand, the Director of the CFPB ultimately decides those petitions, while a lower-level official decides supervisory appeals as set forth in the Bulletin. It seems anomalous that the scope of a discovery request would warrant review by the Director, but an examination finding that might require far-reaching changes in an entity's operations is handled at a lower level within the organization. Also, a petition to modify or set aside a CID will be made public unless good cause is shown (and two of them have already been made public), while the supervisory appeal process will be confidential, according to the Bulletin.
I'd agree that these procedures would cause the average knowldegable financial institution employee or attorney to scratch his or her head until he or she remembers that the people at the CFPB who are making these rules don't know the first thing about the business they're regulating. Many of them are happy as a Hollywood starlet in a poppy field that the CFPB is sending them to basic banking school classes so they'll be able to distinguish the Bank of America from Tyra Banks.
Willis isn't finished, though.
The other notable aspect of the supervisory appeal process is its special emphasis on fair lending issues. Fair lending is mentioned three times in the Bulletin, while no other substantive area is mentioned. The Bulletin goes out of its way to state that a supervisory appeal will not delay or affect the CFPB's decision to bring an enforcement action or refer a case to the Department of Justice, and then later makes specific reference to the involvement of persons from the Bureau's Office of Fair Lending and Equal Opportunity.
Does all of this suggest that the CFPB is anticipating appeals from fair lending-related supervisory actions? That is the message that these references seem to convey, and of course that message would be consistent with the separate tracking of fair lending supervisory actions in the Bureau's Five-Year Plan. Although we will have to wait and see what develops with regard to fair lending in the supervision context, one thing is certain: the constant emphasis on fair lending by the CFPB continues.
In another article in the same issue, this one by Alan Kaplinsky that concerns a recent CFPB recent Supervisory Highlights publication, comes to a similar conclusion.
Similarly, in the report, fair lending compliance programs were the only specific compliance programs mentioned by the CFPB in its discussion of the deficiencies it found in compliance management systems.
Thanks to four more years of an administration that has been using disparate impact as a whip with which to keep financial institutions and other lenders in line with an ideological agenda that is likely not supported by that annoyingly obstructionist US Constitution, banks, credit unions, and other lenders better become experts in "fair lending" as interpreted and enforced by true believers.
UPDATE 11.19.12: Corrected the name of the author of the Ballard Spahr article to "Christopher Willis."