The Bureau of Consumer Financial Protection (“BCFP”) (also referred to as the “CFPB”) issued Compliance Bulletin 2018-01 on September 25, 2018, to announce changes to how it articulates supervisory expectations to institutions in connection with supervisory events. The Connecticut Department of Banking, Consumer Credit Division (“Department”) issued a memorandum on August 22, 2018, to address questions received concerning the effect that certain amendments to the Banking Law of Connecticut (“Amendments”) will have on Connecticut licensees currently maintaining licenses for non-U.S. locations.
BCFP Compliance Bulletin 2018-01
The BCFP will continue to communicate findings to institutions in writing by way of examination reports and supervisory letters. Effective immediately, those reports and letters will include two categories of findings that convey supervisory expectations:
- Matters Requiring Attention (MRAs): MRAs will continue to be used by the BCFP to communicate to an institution’s Board of Directors, senior management, or both, specific goals to be accomplished in order to correct violations of federal consumer financial law, remediate harmed consumers, and address weaknesses in the compliance management system (“CMS”) that the examiners found are directly related to violations of federal consumer financial law. MRAs include timeframes for periodic reporting of efforts taken to address these matters, as well as expected timeframes for implementation.
- Supervisory Recommendations (SRs): SRs will be used by the BCFP to recommend actions for management to consider taking if it chooses to address the BCFP’s supervisory concerns related to CMS. SRs will be used when the BCFP has not identified a violation of federal consumer financial law, but has observed weaknesses in CMS. SRs will not include provisions for periodic reporting nor expected timelines for implementation. The BCFP will, however, review through monitoring the steps institutions have taken to address SRs, including any information that institutions may provide regarding actions taken.
Neither MRAs nor SRs are legally enforceable. The BCFP will, however, consider an institution’s response in addressing identified violations of federal consumer financial law, weaknesses in CMS, or other noted concerns when assessing an institution’s compliance rating, or otherwise considering the risks that an institution poses to consumers and to markets. These risk considerations may be used by the BCFP when prioritizing future supervisory work or assessing the need for potential enforcement action.
CONNECTICUT DEPARTMENT OF BANKING MEMORANDUM
The Amendments include a provision requiring that any activity subject to consumer credit licensure be conducted from an office located in a state with state being defined as “any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the trust territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands.” As certain licenses effective through December 31, 2018 may be held for locations that do not meet the definition of “state,” the issue was raised whether the activities conducted at non-state locations would be in violation of these requirements despite the licensee holding an otherwise valid license for the remainder of the year.
The Department recognizes that Connecticut licenses for offices not located in a “state” have already been issued and, by their terms, are effective through December 31, 2018. However, the Department takes a no-action position concerning the requirement that any Connecticut activity by the above-referenced licensees be conducted from a “state” for the period of October 1, 2018 to December 1, 2018, when the following condition is present:
The entity or individual engaging in business is deemed to have an otherwise valid license for such activity, effective through December 31, 2018, to conduct said business under the controlling statutes prior to the requirement that the licensed activities be conducted from an office located in a “state,” as defined in Section 36a-2(64) of the Connecticut General Statutes.