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Wednesday, November 9, 2016

FFIEC Finalizes New Consumer Compliance Rating System

The Federal Financial Institutions Examination Council has finalized its new uniform interagency consumer compliance rating system, intended to reflect changes in consumer compliance supervision since the current system was introduced in 1980. The final system was adopted substantially as proposed with a few points of clarification. The new system will begin to be used by FFIEC member agencies for examinations beginning on or after March 31, 2017.

The revisions reflect the adoption by the regulatory agencies of risk-based supervision focused on institutions’ compliance management systems, compared to the transaction testing that was common in the 1980s. The new model retains the 1-to-5 rating scale, which would be “based primarily on the adequacy of its CMS,” FFIEC said. Institutions would be assessed in three categories: board and management oversight, compliance program and violations of law and consumer harm.

To foster regulatory consistency, the new rating system will apply to all institutions – banks and nonbanks alike. Since the CFPB is an FFIEC member, which would mean the rating system would apply to the non-depository institutions the CFPB oversees for consumer compliance purposes. In its comment letter filed in June, ABA expressed its general support for the proposed changes.

View the final guidance.

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