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Backlog Forces CFPB to Slow Down New Investigations
Tuesday, April 28, 2015 6:50 AM

An article in Credit Union Journal says credit unions can't afford to ignore the potential ramifications of the Consumer Financial Protection Bureau's recent decision to pull back on new investigations in order to clear out a slew of pending cases.

While CFPB only directly examines the handful of credit unions with more than $10 billion in assets, industry observers suggested the regulator's move may be more political than practical, and could have an impact on CUs.

Multiple current and former officials at CFPB say the agency essentially bit off more than it could chew when it began ramping up investigatory efforts three years ago, and has struggled to clear through the backlog of investigations as hundreds of referrals are also coming in. As a result, the agency is slowing the opening of new cases within enforcement while it works through its existing caseload.

In 2014, "they started slowing down in a sense that they're trying to bring down the cases to a more manageable level," said one former CFPB employee who, like others for this story, declined to speak on the record for fear of alienating the agency. "And it's good that they're trying to recalibrate that. They took on too much in the beginning and it became difficult to get through those investigations in a reasonable amount of time. They overestimated what the staff was capable of handling."

Some cases are now more than two years old, which can be problematic both for the agency and the financial institutions involved.

For the agency, there is a political dimension to prolonged delays. Unresolved cases that go past two years must be reported to Congress under the Government Performance Results Act. Some lawmakers are more likely to criticize the agency if it appears it cannot handle the cases it opens.

As a result, current and former employees said there has been added pressure for enforcement attorneys to quickly resolve outstanding investigations, effectively clearing the decks. "There's definitely pressure from the top to move these cases along and resolve them faster," said one source familiar with the matter.

The slowdown of new cases is already evident in the CFPB's most recent strategic report, which was released in February. The number of new supervision activities that were opened in fiscal year 2013 jumped 7% to 160, but fell 21% in fiscal year 2014 to 127.

Sources said the CFPB had more than 100 investigations still open, a figure that the CFPB's Gilford confirmed.

For more on this article, go here.