Business Regulation and Consumer Protection:
Examinations of Financial Institutions Do Not Assure Compliance With Consumer Credit Laws
GGD-81-13, Jan 2, 1981
Contact:
Consumer credit protection laws set forth basic principles to protect and inform consumers seeking credit. Financial institutions are responsible for complying with these laws. Federal financial institution regulatory agencies supervise institutions that extend credit and have responsibilities for ensuring that financial institutions comply with the laws.
GAO found that the agencies' programs for identifying violations and enforcing compliance with the laws were inconsistent and, for the substantive aspects of some laws, inadequate. As a result, consumers have not been assured consistent protection, and financial institutions have not been treated equally. For the most part, agencies identified violations of technical requirements involving forms and disclosures, whereas violations of the substantive principles of some laws were seldom cited. Examiners performed few specific analyses to test institutions' practices and generally only reviewed institutions' forms and talked to institutions' management. Weaknesses in agencies' methods of examining for compliance prevent the agencies from identifying violations which should be corrected. Agencies need uniform compliance enforcement standards. Since 1977, the agencies have made substantial progress in correcting these shortcomings. However, more changes are needed.
Status Legend:
- Review Pending
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: The Comptroller of the Currency, the Federal Home Loan Bank Board, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System should provide such standards to the institutions they supervise.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Comptroller of the Currency, the Federal Home Loan Bank Board, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System should provide such standards to the institutions they supervise.
Agency Affected: Federal Deposit Insurance Corporation
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Comptroller of the Currency, the Federal Home Loan Bank Board, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System should provide such standards to the institutions they supervise.
Agency Affected: Federal Reserve System
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Comptroller of the Currency, the Federal Home Loan Bank Board, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System should provide such standards to the institutions they supervise.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Federal Financial Institutions Examination Council should monitor the progress of the Office of the Comptroller of the Currency task force on consumer examination to determine the applicability and value of such a review for the other financial institution regulatory agencies.
Agency Affected: National Credit Union Administration
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration, and the Comptroller of the Currency under the direction of the Federal Financial Institutions Examination Council should establish and, to the maximum extent practicable, use uniform enforcement standards to correct violations of consumer laws. Such standards should recognize variations in significance of violations and the persistence of violations. The standards should also include probable penalties that will be invoked for noncompliance.
Agency Affected: Federal Reserve System
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration, and the Comptroller of the Currency under the direction of the Federal Financial Institutions Examination Council should establish and, to the maximum extent practicable, use uniform enforcement standards to correct violations of consumer laws. Such standards should recognize variations in significance of violations and the persistence of violations. The standards should also include probable penalties that will be invoked for noncompliance.
Agency Affected: Federal Reserve System
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration, and the Comptroller of the Currency under the direction of the Federal Financial Institutions Examination Council should establish and, to the maximum extent practicable, use uniform enforcement standards to correct violations of consumer laws. Such standards should recognize variations in significance of violations and the persistence of violations. The standards should also include probable penalties that will be invoked for noncompliance.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration, and the Comptroller of the Currency under the direction of the Federal Financial Institutions Examination Council should establish and, to the maximum extent practicable, use uniform enforcement standards to correct violations of consumer laws. Such standards should recognize variations in significance of violations and the persistence of violations. The standards should also include probable penalties that will be invoked for noncompliance.
Agency Affected: Federal Reserve System
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration, and the Comptroller of the Currency under the direction of the Federal Financial Institutions Examination Council should establish and, to the maximum extent practicable, use uniform enforcement standards to correct violations of consumer laws. Such standards should recognize variations in significance of violations and the persistence of violations. The standards should also include probable penalties that will be invoked for noncompliance.
Agency Affected: Federal Deposit Insurance Corporation
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration, and the Comptroller of the Currency under the direction of the Federal Financial Institutions Examination Council should establish and, to the maximum extent practicable, use uniform enforcement standards to correct violations of consumer laws. Such standards should recognize variations in significance of violations and the persistence of violations. The standards should also include probable penalties that will be invoked for noncompliance.
Agency Affected: Federal Home Loan Bank Board
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration and the Comptroller of the Currency should work together, under the direction of the Federal Financial Institutions Examination Council, to develop and administer a consistent, effective consumer law compliance examination program. The agencies should (1) reassess the nature and objectives of consumer law compliance examinations and define criteria for examination frequency; (2) develop uniform examination procedures and instructions for all consumer laws that detail specific worksteps to assess the substantive as well as the technical provisions of the laws and regulations; (3) determine and allocate the level of resources necessary to implement uniform examination procedures; (4) continue, or in the case of FHLBS establish, programs providing separate career paths for consumer law compliance examiners or establish extended staff rotation programs of 18 months or more, to ensure consistent deployment of highly qualified examiners and (5) place more emphasis on examination techniques to assess the substantive requirements of the laws and regulations in the consolidated training program for consumer law compliance examiners.
Agency Affected: National Credit Union Administration
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration and the Comptroller of the Currency should work together, under the direction of the Federal Financial Institutions Examination Council, to develop and administer a consistent, effective consumer law compliance examination program. The agencies should (1) reassess the nature and objectives of consumer law compliance examinations and define criteria for examination frequency; (2) develop uniform examination procedures and instructions for all consumer laws that detail specific worksteps to assess the substantive as well as the technical provisions of the laws and regulations; (3) determine and allocate the level of resources necessary to implement uniform examination procedures; (4) continue, or in the case of FHLBS establish, programs providing separate career paths for consumer law compliance examiners or establish extended staff rotation programs of 18 months or more, to ensure consistent deployment of highly qualified examiners and (5) place more emphasis on examination techniques to assess the substantive requirements of the laws and regulations in the consolidated training program for consumer law compliance examiners.
Agency Affected: Federal Home Loan Bank Board
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration and the Comptroller of the Currency should work together, under the direction of the Federal Financial Institutions Examination Council, to develop and administer a consistent, effective consumer law compliance examination program. The agencies should (1) reassess the nature and objectives of consumer law compliance examinations and define criteria for examination frequency; (2) develop uniform examination procedures and instructions for all consumer laws that detail specific worksteps to assess the substantive as well as the technical provisions of the laws and regulations; (3) determine and allocate the level of resources necessary to implement uniform examination procedures; (4) continue, or in the case of FHLBS establish, programs providing separate career paths for consumer law compliance examiners or establish extended staff rotation programs of 18 months or more, to ensure consistent deployment of highly qualified examiners and (5) place more emphasis on examination techniques to assess the substantive requirements of the laws and regulations in the consolidated training program for consumer law compliance examiners.
Agency Affected: Federal Home Loan Bank Board
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration and the Comptroller of the Currency should work together, under the direction of the Federal Financial Institutions Examination Council, to develop and administer a consistent, effective consumer law compliance examination program. The agencies should (1) reassess the nature and objectives of consumer law compliance examinations and define criteria for examination frequency; (2) develop uniform examination procedures and instructions for all consumer laws that detail specific worksteps to assess the substantive as well as the technical provisions of the laws and regulations; (3) determine and allocate the level of resources necessary to implement uniform examination procedures; (4) continue, or in the case of FHLBS establish, programs providing separate career paths for consumer law compliance examiners or establish extended staff rotation programs of 18 months or more, to ensure consistent deployment of highly qualified examiners and (5) place more emphasis on examination techniques to assess the substantive requirements of the laws and regulations in the consolidated training program for consumer law compliance examiners.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration and the Comptroller of the Currency should work together, under the direction of the Federal Financial Institutions Examination Council, to develop and administer a consistent, effective consumer law compliance examination program. The agencies should (1) reassess the nature and objectives of consumer law compliance examinations and define criteria for examination frequency; (2) develop uniform examination procedures and instructions for all consumer laws that detail specific worksteps to assess the substantive as well as the technical provisions of the laws and regulations; (3) determine and allocate the level of resources necessary to implement uniform examination procedures; (4) continue, or in the case of FHLBS establish, programs providing separate career paths for consumer law compliance examiners or establish extended staff rotation programs of 18 months or more, to ensure consistent deployment of highly qualified examiners and (5) place more emphasis on examination techniques to assess the substantive requirements of the laws and regulations in the consolidated training program for consumer law compliance examiners.
Agency Affected: Federal Reserve System
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Comptroller of the Currency, the Federal Home Loan Bank Board, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System should provide such standards to the institutions they supervise.
Agency Affected: Federal Deposit Insurance Corporation
Status: Closed
Comments: Please call 202/512-6100 for additional information.
Recommendation: The Chairmen of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board, and National Credit Union Administration and the Comptroller of the Currency should work together, under the direction of the Federal Financial Institutions Examination Council, to develop and administer a consistent, effective consumer law compliance examination program. The agencies should (1) reassess the nature and objectives of consumer law compliance examinations and define criteria for examination frequency; (2) develop uniform examination procedures and instructions for all consumer laws that detail specific worksteps to assess the substantive as well as the technical provisions of the laws and regulations; (3) determine and allocate the level of resources necessary to implement uniform examination procedures; (4) continue, or in the case of FHLBS establish, programs providing separate career paths for consumer law compliance examiners or establish extended staff rotation programs of 18 months or more, to ensure consistent deployment of highly qualified examiners and (5) place more emphasis on examination techniques to assess the substantive requirements of the laws and regulations in the consolidated training program for consumer law compliance examiners.
Agency Affected: Federal Deposit Insurance Corporation
Status: Closed
Comments: Please call 202/512-6100 for additional information.