Banks call new consumer agency a drag on business

WASHINGTON — Bankers and financial industry leaders are criticizing the new US consumer finance watchdog, saying a slow and inefficient oversight process has slowed lending and made it difficult for them to do business.

The Consumer Financial Protection Bureau’s team that examines banks is understaffed, inexperienced, and takes months to tell banks how they scored on routine audits, the Consumer Bankers Association’s chief executive, Richard Hunt, said Tuesday. For some bank examiners, it is their first job out of college, he said.

Hunt said the bureau’s director, Richard Cordray, is aware of the problems and hopes to do better.


‘‘In the second year,” Hunt said, “he hopes to make it better, where examiners would be more experienced and the banks would not have to wait as long.”

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But the bureau’s spokeswoman, Jennifer Howard, said Hunt had mischaracterized the conversation. ‘‘While we are still working to build out and refine our supervision program, we are pleased with the progress being made and the work being done,’’ Howard said.

As of this month, officials said, nearly half of the 240 examiners had significant experience working for other financial regulators, and nearly 100 had high-level certifications.

The agency, created in 2010, is tasked with protecting consumers from excessive fees, unsafe loans, and other unfair practices. Its examiners conduct routine examinations of big banks, mortgage companies, payday lenders, credit bureaus, and debt collectors.

A core industry complaint relates to delays in receiving formal, written reports — nine months or more, because the agency’s headquarters is putting them through an extra round of scrutiny, Hunt and others said.


Slow, inefficient audits are making it tough for banks to decide what products they can offer without drawing regulators’ ire, said Robert Kottler, head of retail and small business banking for IberiaBank Corp. in New Orleans.

When banks consider a new product, ‘‘one of the first things we talk about is what our regulators think,’’ said Kottler. Because it is difficult to know what the new agency will think, banks are less likely to offer it, he said.

And ‘‘for the examination process to be effective, there can’t be a nine-month time lag,” said Mark Williams, a former Federal Reserve bank examiner who favors stricter oversight of banking.

While it would be impossible for the new agency to ‘‘create a crackerjack exam team overnight,’’ the slow turnaround times are ‘‘a warning sign of a system that needs to be corrected,’’ said Williams, who teaches at Boston University.

The government, he said, can’t afford bank-level salaries or complex risk-management systems, leaving a ‘‘sophistication gap’’ between it and banks. Before the 2008 financial crisis, banks took advantage of this by taking on risks that regulators didn’t understand.