Massachusetts Division of Banks Revises Examination Procedures
by: Marissa Aquila Blundell, Esq.
On April 1, 2013, the Massachusetts Division of Banks (DOB) began to utilize revised examination procedures as part of its non-depository supervision program. The DOB has aligned its examination process with the procedures the Consumer Financial Protection Bureau (CFPB) uses to determine compliance with federal regulations during the mortgage origination process.
To recap, the CFPB released its Supervisory and Examination Manual, Version 2.0, in October of 2012. The CFPB’s Mortgage Origination Examination Procedures demonstrate its consumer-focused and data-driven approach to supervision. Like the CFPB, the DOB will conduct extensive pre-examination analyses and will verify the accuracy of the information relied upon at the start of the examination. Therefore, all supervised entities should routinely validate the data reported pursuant to requirements under the Home Mortgage Disclosure Act and any state-required production reports to ensure the information submitted is correct.
The DOB examination procedures include a review of the supervised entity’s compliance management system. The CFPB’s Supervisory and Examination Manual provides further details about what constitutes a successful compliance management system. A compliance management system should establish compliance responsibilities, communicate responsibilities to employees, ensure that business processes incorporate compliance responsibilities, review operations to ensure compliance responsibilities are satisfied, and take corrective action as necessary. In addition, the following components of the compliance management system should be strong and well-coordinated: board and management oversight; compliance program; response to consumer complaints; and compliance audit. As each of these areas are interdependent, weaknesses in one area weakens the compliance management system as a whole.
The DOB has also adopted the CFPB’s examination procedures for evaluating compliance with the following federal laws and implementing regulations: Equal Credit Opportunity Act, Regulation B; Home Mortgage Disclosure Act, Regulation C; Truth in Lending Act, Regulation Z; Real Estate Settlement Procedures Act, Regulation X; Homeowners Protection Act; Consumer Leasing Act, Regulation M; Secure and Fair Enforcement (SAFE) Act, Regulation H; Fair Credit Reporting Act, Regulation V; Fair Debt Collection Practices Act; Electronic Funds Transfer Act, Regulation E; Truth in Savings, Regulation DD; and Gramm-Leach-Bliley Act, Regulation P.
The CFPB intends to share information with the various states in order to ensure coordination of and consistency among examinations. Additional details regarding the information sharing between the CFPB and state supervisory agencies are set forth in the Statement of Intent released by the CFPB on December 6, 2012.
About the Author:
Marissa is Senior Vice President and General Counsel of Bankers Advisory, Inc. She can be reached at marissa@bankersadvisory.com
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