May 21, 2017
You can look forward to a new compliance rating system with your next consumer compliance exam. In November 2016, the Federal Financial Institutions Examination Council (FFIEC) issued an updated Uniform Interagency Consumer Compliance Rating System (CC Rating System). The new rating system was developed to better align with changes that have occurred since the release of the original rating system established in 1980 and takes into consideration the new tailored, risk-based exam approach.
The FFIEC member agencies (CFPB, FDIC, Federal Reserve, NCUA, OCC, and SLC) will apply the new rating system to consumer compliance exams beginning March 31, 2017. The new rating system promises not to generate new examiner expectations or increase the regulatory burden for financial institutions.
Details of the New System
The new system is designed with an emphasis on evaluating a financial institution’s Compliance Management System (CMS). It creates a comprehensive, consistent framework for all member agencies to apply, focusing on consumer protection, self-identification and proactively addressing compliance issues.
The rating system is based on a five-point scale, with “1” being the highest/best rating and “5” reflecting a critically deficient program. The new exam rating system will focus less on transactional testing and more on the financial institution’s CMS, paying particular attention to practices that may cause consumer harm. The new rating system will be applied to all institutions regardless of size, allowing examiners to tailor their activities based on the size, complexity, and risk profile of the institution.
The new CC Rating System was designed based on four key principles:
The CC Rating System is split into three categories and includes specifically assessment factors within each category:
There seems to be some common themes throughout the foundation of the new CC Rating System—consumer harm, self-identification and corrective action. It goes without saying that if you have a strong CMS that includes board and management oversight, policies and procedures, training, and monitoring with effective corrective action, your next compliance exam should go well.