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Thursday, January 12, 2012

CFPB: Nonbank Supervision Program

On January 5, 2012, the Consumer Financial Protection Bureau (CFPB) launched its nonbank supervision program.

This program has the goal of implementing supervisory audits and reviews of nonbanks, such as mortgage loan originators, lenders, mortgage bankers, mortgage brokers, servicers, and loan modification or foreclosure relief services (including also payday lenders and private education lenders).

This nonbank supervision program is in many ways an extension of the development of CFPB's bank supervision program that began last July.

We have issued several newsletters about certain aspects of the bank and nonbank supervision programs and I have written several articles about the CFPB.

Six days after the CFPB launched its nonbank supervision program, on January 11, 2012, the CFPB began its very first investigation of a nonbank mortgagee, PHH Corp. of Mount Laurel, NJ. The allegations against PHH Corp. involve violation of RESPA, with respect to the prohibitions against kickbacks. Although there is no mention of the PHH Corp. investigation on the CFPB website, nor is there a press release from the CFPB, we know of the investigation because PHH Corp. filed notice about it with the Securities and Exchange Commission.

Our firm is committed to providing comprehensive audit and due diligence reviews in preparation for the CFPB's nonbank and bank Supervision and Examination Manual (Manual), a basic tool in the CFPB's supervision programs.

Our audit and examination group provides an independent and thorough due diligence review of the CFPB examination requirements, offering corrective actions for enforcement.

I would urge you to contact us and find out about preparing for a CFPB examination.

In this newsletter, I would like to give you a brief overview of the CFPB's nonbank supervision program.

Best wishes,
Jonathan Foxx

In This Newsletter-1
  • Scope of the Nonbank Supervision Program
  • Supervision Process
  • Supervision and Examination Manual
  • Examinations
  • Staffing and Training
  • State Coordination
  • Future Plans
  • Library

By the term "nonbank," the CFPB refers to a financial institution that is not a depository, but offers or provides consumer financial products or services. The nonbank does not have a bank, thrift, or credit union charter.

Nonbanks include, but are not limited to, mortgage lenders (i.e., mortgage bankers), mortgage servicers, loan modification or foreclosure relief services, payday lenders, consumer reporting agencies (CRAs), mortgage loan originators, debt collectors, money services companies, lenders (i.e., creditors), mortgage brokers, and private education lenders.

The CFPB also has authority to supervise any nonbank that it determines is posing a risk to consumers.

Under the law, the CFPB has the authority to oversee nonbanks, regardless of size, in certain specific markets.

The CFPB can also supervise the larger players, or "larger participants."

Please read our newsletter on the "larger participant" supervision.


Similar to the bank supervision program, the CFPB's nonbank supervision program is designed to ensure that nonbanks comply with federal consumer financial laws. It assesses risk to consumers arising from these businesses.

The nonbank supervision program includes conducting individual examinations, while also requiring reports from companies that determine where companies need to put greater focus.

How often and to what degree the examinations are performed will depend on CFPB's analysis of risks posed to consumers based on factors such as the nonbank's volume of business, types of products or services, and the extent of state oversight.


The CFPB's approach to nonbank examination will be to some extent the same as its approach to bank examination. The Supervision and Examination Manual (Manual) acts also as a field guide to examiners, which we outlined here; therefore, essentially, examiners will use the Manual for both nonbank and bank examinations.

This first edition of the CFPB Supervision and Examination Manual (Version 1) is a guide to how the CFPB will supervise and examine consumer financial service providers under its jurisdiction for compliance with Federal consumer financial law.