A new Supervisory Statement clarifies when insured depository institutions and insured credit unions will be subject to supervision and enforcement by the Bureau of Consumer Financial Protection (CFPB). The CFPB issued the Supervisory Statement jointly with the federal prudential regulators–the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), and the National Credit Union Administration (NCUA). 

Section 1025 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) gives the CFPB exclusive supervisory authority and primary enforcement authority with respect to federal consumer financial laws over any insured bank, thrift or credit union and its affiliates, but only if its total assets exceed $10 billion (Large Institutions). For other institutions and their affiliates, the federal prudential regulators retain supervisory and enforcement authority with respect to federal consumer financial laws. 

Because the Dodd-Frank Act did not clearly specify how or when to measure (or remeasure) the asset size requirement, institutions with fluctuating asset sizes near $10 billion faced uncertainty as to which agency regulated and enforced its compliance of federal consumer financial laws and under what circumstances its regulator might change. The Supervisory Statement is intended to clarify how and when the asset size test will be measured and remeasured, giving greater clarity and consistency to agencies, institutions and consumers.

Initially, the agencies will look to data in the June 30, 2011 call report to determine whether an institution is a Large Institution subject to CFPB supervisory and enforcement jurisdiction. If an institution reported assets exceeding $10 billion in its June 30, 2011 call report, it will initially be classified as a Large Institution. If it reported assets of $10 billion or less in its June 30, 2011 call report, it will initially remain subject to supervision and enforcement by its existing prudential regulatory agency.

After the initial classification based on the June 30, 2011 call report, growth or shrinkage in an institution’s asset size could result in an institution becoming (or ceasing to be) a Large Institution subject to CFPB jurisdiction. However, the agencies will only change an institution’s classification if its total asset size newly exceeds (or drops to or below) $10 billion as reported in call reports for four consecutive quarters. If a classification changes, it will become effective on the first day of the quarter following the four-quarters measurement period resulting in the change.

In the case of an acquisition, merger or other combination of two or more institutions occurring after June 30, 2011, when each of the institutions had not previously been classified as a Large Institution, the agencies will evaluate, on a pro forma basis, the combined assets of the institutions for the four completed quarters immediately preceding the transaction. If the pro forma combined assets of the institutions for the four-quarters period exceeds $10 billion, the resulting institution will be deemed a Large Institution.