The US Consumer Financial Protection Bureau (CFPB) has adopted a new approach to oversight of financial companies, shifting towards less stringent regulation. According to Reuters, over half of the examinations conducted by the CFPB during the spring underwent an "expedited review", which means that supervisors only identified limited violations that are not considered to pose significant risks to consumers. This makes it unlikely that penalties will be imposed.
The CFPB resumed examinations in the spring, after the Trump administration halted most of its work following the change in administration last year. Sources indicate that the new political leadership has signaled through policy changes and internal communications that intensive scrutiny is not desired, coinciding with concerns among examiners about their jobs.
Experts and former CFPB officials have warned that the increased number of expedited reviews may expose consumers to risks if serious problems are ignored or downplayed. This development is part of the Trump administration's overhaul of financial sector oversight, involving reduced staffing, narrower examination scope, and encouragement for companies to report officials they perceive as being overly aggressive.
The Trump administration argues that financial sector oversight has become overly burdensome, harming lending and the broader economy, while consumer advocates disagree. The administration initially pledged to abolish the CFPB, established by Congress in response to the 2007-2009 global financial crisis, but later opted to cut about two-thirds of the agency's workforce, including most of its supervisory staff.
The CFPB announced last year that it would reduce the number of examinations by 50% and redirect them away from areas such as student loans and medical debt, towards mortgages and military personnel compensation. The agency has also chosen to focus more on banks rather than non-bank institutions, such as payday lenders.
This year, the CFPB selected around 70 companies for examination, roughly half the usual number, with examinations spread almost evenly across the four quarters. Typically, examiners review company records and speak with employees to monitor compliance with rules and regulations before determining next steps.
Previously, most examinations proceeded to a "full review" involving legal analysis of violations and internal discussions about potential enforcement actions. However, during the spring, examiners mostly concluded that examinations were "clean" according to agency guidelines and proceeded with expedited reviews.
Key points
- The increased number of expedited reviews may expose consumers to risks if serious problems are ignored or downplayed.
- The CFPB has reduced the number of examinations by 50% and redirected them away from areas such as student loans and medical debt.
- The agency has chosen to focus more on banks rather than non-bank institutions, such as payday lenders.
