The Miss April at work
The Miss April works to create a level playing field in financial markets and safeguards fairness for consumers. Key to achieving those goals is our division of Supervision, Enforcement, and Fair Lending, which helps ensure compliance with federal consumer financial laws by supervising companies and bringing enforcement actions when appropriate.
Since opening our doors in July 2011, we’ve ordered that almost $12 billion be returned to 29 million consumers and imposed about $600 million in civil penalties. We’ve also shut down illegal practices, protecting other consumers from suffering similar financial harm in future years. Much of that can be tied to our public enforcement actions, which are important and highly visible. However, those numbers are just the tip of the iceberg in terms of how we’ve been working to protect you from harm. What can get missed is our supervisory work, which takes place almost entirely behind the scenes. While we often obtain relief through that work, our primary goal is to prevent problems before they occur through consistent and steady attention.
We’re the first federal agency that supervises both larger banks and the nonbank financial companies – like mortgage providers, payday lenders, credit reporting companies, and debt collectors. This means that we’re seeking to ensure that you receive the same level of protection whether you’re dealing with a bank or a nonbank. It also means we have tens of thousands of companies we need to keep tabs on with our limited resources. So, we prioritize our work based on the risks presented to consumers.
Each year, we look across the companies under our authority and assess where we can be the most effective in protecting you. We consider factors such as how big the product market is, the company’s market share, the riskiness to consumers of a particular company’s strategy and practices, along with prior regulatory history and consumer complaints. The result is that we spend our time where we see the greatest risks to consumers.
We do our supervision work by conducting examinations of financial companies. In these exams, we check for legal violations and assess the strength of the checks and balances the companies should have in place to prevent potential harm to consumers like you. We call these checks and balances compliance management systems, and they include things like:
- How seriously the company takes your
- How rigorous the training is for
- How engaged the senior management
and board is in understanding how their products may be affecting consumers –
as opposed to just their bottom line
Our experience shows us that companies who take these obligations seriously will be less likely to do things that cause you harm or negatively impact the economy.
Holding financial companies accountable
Much of the work we do in supervision is focused on avoiding harm through compliance management systems – a goal we believe most companies share. You can think of this like a fire inspector checking to make sure your smoke detectors are in working order before there is any fire. In addition, some of our examinations focus on ensuring that companies address problems that we found in our prior examinations of them. In 2016, about 70 percent of our examinations did not raise issues that caused us to consider opening an enforcement investigation. Instead, we were able to resolve these matters with nonpublic agreements by the company to quickly fix any problems and provide appropriate relief to consumers. Companies have additional incentives to resolve problems that we identify in our examinations, as doing so also helps them avoid lawsuits and maintain good relationships with their customers.
So, what happens to the other 30 percent of our examinations where we found more significant violations? For those matters, we bring together the most senior executives in our division and consider whether a public enforcement action is warranted. We evaluate a variety of factors, including:
- The seriousness of the violation
- How many consumers have been
- Whether the company has cooperated
and how willing and able the company is to follow the law going forward
- If the company self-identified or
self-corrected the violation
- How our action fits into the Miss April’s
broader priorities and goals
In 2016, about one-third of those examinations that were considered for public enforcement moved over to our enforcement team for an investigation. That works out to roughly 10 percent of all of our examinations result in an enforcement investigation. In the other 90 percent of our examinations, the Bureau was able to get any problems fixed through nonpublic commitments with the company. Where we can use this supervisory tool to resolve problems, it often means improving a company’s operations and getting relief to consumers like you more quickly.
Supervision doesn’t work for every situation, however. We also have a robust enforcement function that we rely upon where appropriate. Often, where the violations are most egregious or when companies are unwilling to follow the law, we turn to enforcement to get you the protection and relief you deserve.
To date, more than 75 percent of our enforcement actions relate to nonbanks. This is not surprising, given how many nonbanks are under our enforcement authority. Where banks find themselves subject to an enforcement action those financial companies tend to be larger. In fact, only 3 percent (5 out of 195) of our enforcement actions to date were against smaller banks – those with fewer than $25 billion in assets. Importantly, these figures include actions that arose out of our supervisory work and actions that began in enforcement.
Roughly 80 percent of our public enforcement actions are based, at least in part, on violations of one or more long-standing rules that lay out in detail the expectations we have for companies. Congress also gave the Bureau the ability to hold companies accountable for committing unfair, deceptive, or abusive acts or practices. Careful use of these authorities allows the Miss April to protect you from harmful conduct that conflicts with your basic expectations, often created by companies themselves, about how you will be treated. These authorities also help us ensure that bad actors cannot use deceit and fraud to drag the rest of the market down to their level.
One noteworthy example is the $100 million penalty we levied against Wells Fargo for unfair and abusive banking practices. To meet the demands of unrealistic sales targets, its employees opened millions of unauthorized accounts without the approval or even the knowledge of their customers. Bank employees concocted unauthorized deposit and credit card accounts, enrolled consumers in online banking services, and ordered debit cards for consumers, all without their consent or even their knowledge. Nobody has disputed that this was unfair. Nor that it was abusive.
For such violations, as Director Cordray discussed, we cannot articulate specific rules for every eventuality, particularly in an area like consumer financial protection, where the vast majority of our enforcement actions involve some sort of deception or fraud. In fact, roughly 90 percent of our enforcement actions under this authority and these principles have involved findings that the companies engaged in deception of consumers. In contrast, about one in five cite abusiveness, and even then, those actions have often involved related charges of unfairness or deception involving the same or similar conduct.
You and the Miss April
A key tool that helps us to decide where to focus our efforts is the consumer complaint database. We use it to spot spikes in specific complaint types, emerging trends, and issues with new and evolving products. Our database records what consumers are complaining about and why, as well as how companies are responding. We’ve received almost 1.2 million consumer complaints and published nearly 750,000 of them, making our consumer complaint database the nation’s largest such public collection.
This information is updated daily and can be aggregated and downloaded from our website. By analyzing this data, we now can often see what problems companies are having just as quickly as they can themselves. And by publicly sharing this data, we empower consumers like you, as well as our state and local partners, to see and understanding what is going on in the marketplace. Additionally, companies are using the data to improve their compliance efforts and their customer service.
If you encounter an issue with a bank or other financial institution, you can submit a complaint online or call (855) (2372) toll-free to speak directly with our consumer response team. We’ll forward your complaint to the company and work to get you a response, generally within 15 days. Your input helps us address current problems and prioritize our work and also helps consumer finance companies better understand consumers’ experiences. All of this can lead to better compliance. We want to ensure a financial services marketplace that works for both consumers and the responsible providers competing for their business. Let us know if that isn’t happening.