Consumer Compliance Outlook: First Issue 2016

Proposed Changes to the Uniform Interagency Consumer Compliance Rating System

On May 3, 2016, the Federal Financial Institutions Examination Council (FFIEC) published in the Federal Register proposed changes to the Uniform Interagency Consumer Compliance Rating System, more commonly known as the CC Rating System. 81 Fed. Reg. 26553 (May 3, 2016).


The current CC Rating System, adopted in 1980, is a supervisory policy for evaluating financial institutions’ adherence to consumer compliance requirements. The CC Rating System is based on a scale of 1 through 5, in increasing order of supervisory concern. Thus, 1 represents the highest rating and consequently the lowest level of supervisory concern, and 5 represents the lowest rating and consequently the most critically deficient level of performance and the highest degree of supervisory concern. When using the CC Rating System to assess an institution, the banking agencies do not consider an institution’s record of lending performance under the Community Reinvestment Act (CRA) because institutions are evaluated separately for the CRA.

Purpose of the Revisions

The agencies are proposing to revise the current CC Rating System to better reflect current consumer compliance supervisory approaches. The revisions are designed to more fully align the rating system with the agencies’ current risk-based, tailored examination approaches. The proposed revisions to the CC Rating System were not developed to set new or higher supervisory expectations for financial institutions, and their adoption will represent no additional regulatory burden.

When the current CC Rating System was adopted in 1980, examinations focused more on transaction testing for regulatory compliance than on evaluating the sufficiency of an institution’s compliance management system (CMS) to ensure compliance with regulatory requirements and to prevent consumer harm. In the intervening years, each of the FFIEC agencies has adopted a risk-based consumer compliance examination approach to promote strong compliance risk management practices and consumer protection within supervised financial institutions. Risk-based consumer compliance supervision evaluates whether an institution’s CMS effectively manages the compliance risk in the products and services offered to its customers. Under risk-based supervision, examiners tailor supervisory activities to the size, complexity, and risk profile of each institution and adjust these activities over time. Although compliance management programs vary based on the size, complexity, and risk profile of supervised institutions, all institutions should maintain an effective CMS. The sophistication and formality of the CMS typically increase commensurate with the size, complexity, and risk profile of the entity.

As the agencies drafted the proposed rating system definitions, one objective was to develop a rating system appropriate for evaluating institutions of all sizes. Therefore, the first principle discussed within the CC Rating System conveys that the system is risk-based to recognize and communicate clearly that compliance management programs vary based on the size, complexity, and risk profile of supervised institutions. This principle is reinforced in the Consumer Compliance Rating Definitions by conveying to examiners that assessment factors associated with an institution’s CMS should be evaluated commensurate with the institution’s size, complexity, and risk profile.

In developing the revised CC Rating System, the agencies believe it is also important for the new rating system to establish incentives for institutions to promote consumer protection by preventing, self-identifying, and addressing compliance issues in a proactive manner. The proposed rating system would also create a framework for the agencies to recognize institutions that consistently adopt these compliance strategies.

Another benefit of the proposed CC Rating System is to promote coordination, communication, and consistency among the agencies, consistent with the agencies’ respective supervisory authorities. Pursuant to the proposal, each of the agencies would use the same CC Rating System to assign a consumer compliance rating to all supervised institutions, including banks and nonbanks. Furthermore, revising the rating system definitions responds to requests from industry representatives who have asked that the CC Rating System be updated.

The full text of the proposal is available online. PDF The comment period closes on July 5, 2016.