Recent Supervisory Data for Institutions the Federal Reserve Supervises
As announced in the First Issue 2023, Consumer Compliance Outlook (CCO) is regularly publishing data-driven articles that leverage the Federal Reserve System’s supervisory information from consumer compliance examinations of state member banks and from complaints consumers filed against state member banks. This approach enhances the transparency of the Federal Reserve’s consumer compliance supervisory activities and provides practical steps that institutions may consider when addressing certain consumer compliance risks.
To that end, CCO is annually publishing three buckets of supervisory data for the institutions the Federal Reserve supervises: 1) the top consumer law violations identified by our examiners; 2) the top consumer complaints; and 3) the top Matters Requiring Immediate Attention (MRIAs) and Matters Requiring Attention (MRAs). These data appear below in three separate tables. In subsequent issues, CCO will discuss these supervisory data, including the common issues, root causes, risk mitigants, and sound practices.
Table 1: Top Consumer Violations in 2023 for State Member Banks
During 2023, Federal Reserve System examiners conducted 223 examinations.1 Table 1 lists the most frequently cited violations in 2023.2
|
Provision |
Number of Violations |
Percentage of All Violations |
|
|
|
Regulation C (Home Mortgage Disclosure Act), 12 C.F.R. 1003.4(a): requires a financial institution to collect for reporting specific and accurate data on applications for covered loans it receives, originates, and purchases for each calendar year. |
276 |
48.3 |
|
|
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. |
28 |
4.9 |
|
|
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. |
23 |
4.0 |
|
|
FTC Act Section 5(a), 15 USC 45: prohibits unfair or deceptive acts or practices in or affecting commerce. |
15 |
2.6 |
|
|
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. |
10 |
1.8 |
|
|
(Tie) 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. |
8 |
1.4 |
|
Regulation Z (Truth in Lending Act), 12 C.F.R. 1026.38(f): requires a creditor to disclose all loan costs associated with a mortgage transaction on the Closing Disclosure. |
8 |
1.4 |
|
|
|
(Tie) Regulation H (Flood Disaster Protection Act), 12 C.F.R. 208.25(i): requires a bank that makes a loan secured by a property in a special flood hazard area to deliver a notice to the borrower indicating whether flood insurance is available under the Flood Disaster Protection Act. |
7 |
1.2 |
|
Regulation X (Real Estate Settlement Procedures Act), 12 C.F.R. 1024.17(i): requires a mortgage loan servicer to submit an annual escrow account statement to the borrower within 30 days of the completion of the escrow account computation year. |
7 |
1.2 |
|
|
Regulation Z (Truth in Lending Act), 12 C.F.R. 1026.9(c): requires the creditor for a home equity loan to deliver written notice of any change in loan terms within 15 days of the change. |
7 |
1.2 |
|
|
Subtotal of Top Violations |
389 |
68.1 |
|
|
Total |
571 |
100 |
|
Table 2: Top Consumer Complaints in 2023 for State Member Banks
During 2023, the Federal Reserve monitored consumer complaints by topic. Table 2 lists the most frequent topics of consumer complaints in 2023.3
|
Complaint Topic |
Number of Complaints |
Percentage of All Complaints |
|
|
|
Funds Availability/Withdrawals/Unable to Access Funds |
1,381 |
23.0 |
|
|
Fraud/Forgery |
1,143 |
19.0 |
|
|
Error Resolution |
737 |
12.3 |
|
|
Restricted/Blocked Account |
735 |
12.2 |
|
|
Credit Reporting |
340 |
5.7 |
|
|
Fees/Terms/Rates |
305 |
5.1 |
|
|
Account Closure |
278 |
4.6 |
|
|
Application/Account Opening |
134 |
2.2 |
|
|
Deposits |
103 |
1.7 |
|
|
Disbursement |
94 |
1.6 |
|
Subtotal of Top Complaints |
5,250 |
87.4 |
|
|
Total |
6,012 |
100 |
|
Table 3: Top MRIAs/MRAs in 2022 for State Member Banks
Table 3 lists the top nine MRIAs and MRAs in 2022 in alphabetical order.
|
Issue |
|
Compliance Risk Assessment |
|
Compliance Testing |
|
Compliance Training |
|
Data Reporting Risk Management |
|
Fair Lending Pricing/Underwriting Risk Management |
|
Fair Lending Redlining Risk Management |
|
Fair Lending Risk Assessment |
|
Fair Lending Training |
|
Mortgage Servicing Risk Management |
ENDNOTES
1 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 2023.
2 For purposes of this table, 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.
3 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.