Introducing Our New Format
The Federal Reserve is responsible for promoting consumer protection and community development to help ensure a fair and transparent financial services marketplace that benefits all Americans.1 Fairness and transparency — along with consistency — are guiding principles that inform my perspective on bank supervision and regulation.2 Together, these three elements help to ensure that our supervisory expectations are clear and, in doing so, encourage open communication between banks and supervisors. Consumer Compliance Outlook (CCO) furthers these goals by providing financial institutions, compliance professionals, and the general public with information about compliance with the laws and regulations that protect consumers and support investments in communities.
Fifteen years ago, in the midst of the financial crisis, we published the inaugural issue of CCO.3 That issue included content covering the emerging risks of the day (foreclosure prevention activities) as well as compliance topics that remain relevant today (the Community Reinvestment Act and flood insurance). Over the years following, CCO has sought to provide transparency through sharing information gleaned from the Federal Reserve’s supervisory work so that financial institutions can better manage compliance risk and ensure that consumers are afforded the protections provided by law.
Today, I am pleased to announce enhancements that will further increase the value of CCO. Beginning with this issue, CCO will integrate more supervisory data-driven content and share more information about our examiners' observations. The revamped CCO will enhance transparency regarding the Federal Reserve’s consumer compliance supervisory activities and provide practical steps that institutions may consider when addressing certain consumer compliance risks.
In particular, beginning with this issue, CCO will annually publish data on the top consumer law violations identified by our examiners along with the chief complaint themes. (See Tables 1 and 2 at the end of this article.) We believe that these data may be helpful to compliance professionals as they focus on their institutions’ compliance management systems.
In addition, CCO articles will highlight recent supervisory observations and include special topics that emphasize data-driven information. In coming issues, we also plan to publish data on Matters Requiring Attention (MRAs) and Matters Requiring Immediate Attention (MRIAs) issued across the System in the past year, as well as articles providing insights into those MRAs and MRIAs.4
While we are excited about this additional direction for CCO, we will continue to consider what will be most helpful and informative to our readers. On that front, we value your feedback and encourage you to contact us at outlook@phil.frb.org to share your perspectives.
Table 1: Top Consumer Violations in 2022 for State Member Banks
During 2022, Federal Reserve System examiners conducted 211 examinations.5 The following list describes the most frequently cited violations in 2022.6
|
Provision |
Violations |
% of all Violations |
|
|
|
Regulation C (Home Mortgage Disclosure Act), 12 C.F.R. §1003.4(a): requires a financial institution to collect specific data on applications for covered loans it receives, originates, and purchases for each calendar year. |
239 |
59.4 |
|
|
Regulation BB (Community Reinvestment Act), 12 C.F.R. §228.42(a): requires a bank to collect and maintain specific data for each small business or small farm loan originated or purchased by the bank. |
29 |
7.2 |
|
|
Regulation E (Electronic Fund Transfers Act), 12 C.F.R. §1005.11(c): requires a financial institution to perform an investigation and determine whether an error occurred within 10 business days of receiving a notice of error. |
9 |
2.2 |
|
|
Regulation E (Electronic Fund Transfers Act), 12 C.F.R §1005.11(d): requires a financial institution to respond to a consumer’s notice of error in writing if it determines no error occurred or an error occurred in a manner or amount different from the one the consumer described. |
6 |
1.5 |
|
|
(tie) Fair Credit Reporting Act, 15 U.S.C. §1681m: requires a financial institution taking adverse actionagainst a consumerbased in whole or in part on information in aconsumer report to provide an adverse action notice. |
5 |
1.2 |
|
|
Regulation B (Equal Credit Opportunity Act), 12 C.F.R. §1002.7(d): prohibits a creditor from requiring the signature of an applicant’s spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested. |
5 |
1.2 |
|
|
Regulation B (Equal Credit Opportunity Act), 12 C.F.R. §1002.9(a): requires a creditor to notify an applicant within 30 days after receiving a completed application concerning the creditor's approval of, counteroffer to, or adverse action on the application. |
5 |
1.2 |
|
|
Regulation B (Equal Credit Opportunity Act), 12 C.F.R. §1002.14(a): requires a creditor to provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. |
5 |
1.2 |
|
|
Regulation X (Real Estate Settlement Procedures Act), 12 C.F.R. §1024.17(c): sets limits on the amount a servicer can require a borrower to deposit into any escrow account created in connection with a federally related mortgage loan. |
5 |
1.2 |
|
Subtotal of top violations |
308 |
76.3 |
|
|
Total |
402 |
76.6 |
|
Table 2: Top Consumer Complaints in 2022 for State Member Banks
During 2022, the Federal Reserve monitored consumer complaints by topic. The following list describes the most frequent topics of consumer complaints in 2022.7
|
Complaint Topic |
Number of Complaints |
% of all Complaints |
|
898 |
20.9 |
|
647 |
15.0 |
|
625 |
14.5 |
|
479 |
11.1 |
|
226 |
5.3 |
|
201 |
4.7 |
|
189 |
4.4 |
|
139 |
3.2 |
|
76 |
1.8 |
|
70 |
1.6 |
|
Subtotal of all consumer complaints |
3550 |
82.5 |
|
Total |
4304 |
82.5 |
ENDNOTES
1 See “The Fed Explained,” p. 113.
2 See “Large Bank Supervision and Regulation” (September 2022); “My Perspective on Bank Regulation and Supervision” (February 2021).
3 See Consumer Compliance Outlook (2Q 2008).
4 We are sunsetting the CCO sections “News from Washington,” which summarized recent developments in the consumer compliance industry, and “On the Docket,” which summarized recent court decisions on consumer laws and regulations applicable to Federal Reserve-supervised institutions. While useful, this information is available elsewhere. In addition, to prevent duplication, we are discontinuing the Consumer Compliance Supervision Bulletin, which was published in 2018 and 2019 to share information about examiner observations and other noteworthy developments related to consumer protection.
5 The Federal Reserve System examines state member banks using an examination calendar that factors in institution size and risk profile. Therefore, not all state member banks were examined in 2022.
6 For the purposes of this chart, a violation is a citation of a bank in an examination report by the Federal Reserve for violating the listed provision; the listed numbers do not refer to the number of consumers the violation affected.
7 The Federal Reserve investigates complaints against state member banks and selected nonbank subsidiaries of bank holding companies (Federal Reserve regulated entities). For more information on the Federal Reserve’s complaint handling process, see the Annual Report of the Board of Governors of the Federal Reserve System and The Fed Explained: What the Central Bank Does.