FORT WORTH — The Consumer Financial Protection Bureau’s approach to any market, in reference to the larger participant rule, “is pretty consistent,” Calvin Hagins, the CFPB’s deputy assistant director for originations in the Office of Supervision Policy told attendees at the Auto Finance Risk & Compliance Summit Monday.
“The objective is to get an understanding of the business, not so much to tell them how to run their business, but to actually understand how the business operates,” he said. “You should spend your time listening, and that’s the instruction we give our examiners.”
Lenders should have an open dialogue with regulators about the exam findings “because they are not final yet,” Hagins said. This is an opportunity to speak out and agree or disagree with the examiner because “I have been wrong before,” he added.
The scope of a typical review for an auto origination exam “starts at the top with a review of the compliance management system (CMS),” and the CFPB recognizes the development of a CMS will vary “based on the type of entity and the frequency of their primary interactions with regulators,” Hagins said. “We are not expecting perfection the first round out. Although we like to see it, we have to be realistic that it’s not going to happen.”
The CFPB faced similar challenges when looking at debt collectors and consumer reporting agencies in that the agency saw “a lot of things from good to bad, and some things in between, which was expected.”
“The objective of that CMS is not to do it for the regulators, but to do it for yourself,” he said, “because if we never show up, it’s still incumbent upon the entities to be able to determine the level of compliance and have regular reporting to the board of directors. I tell them right up front, don’t do it for me, do it for yourselves.”