FFIEC Proposes New Consumer Compliance Rating System

The Federal Financial Institutions Examination Council today proposed a new uniform interagency consumer compliance rating system, intended to reflect changes in consumer compliance supervision since the current system was introduced in 1980. One key change is 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 proposed new model would retain 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. “The proposed revisions were not developed with the intention of setting new or higher supervisory expectations for financial institutions,” FFIEC added. “Their adoption will represent no additional regulatory burden.”

To foster regulatory consistency, the new rating system would apply to all institutions — banks and nonbanks alike. Since the Consumer Financial Protection Bureau is a FFIEC member, that would mean the rating system would apply to the non-depository institutions the CFPB oversees for consumer compliance purposes. Comments are due 60 days after publication in the Federal Register.