Highlights from Q4 2017

• 45 total actions were levied against financial institutions by federal, state, and local regulators in the fourth quarter, which is a 38% decrease compared to Q4 2016. 280 total actions have been issued over the last five quarters, the highest being the 72 actions issued in Q4 2016, which was the last full quarter prior to the change in administration.


• State and local regulators were involved in a total of 11 actions or 24% of all actions, surpassing the Federal Depository Insurance Commission (FDIC), which had eight actions in the quarter. The Consumer Financial Protection Bureau (CFPB), Federal Reserve Bank (FRB), and the Department of Justice (DOJ) followed, with six actions each. State regulators have posted a slight increase in percentage of total actions from the 23% that were initiated in Q3 2017 and continue to have more relative actions over the last five quarters than they have had historically.


• Regulators most commonly used settlements and formal agreements/consent orders to enforce regulatory requirements, with a total of 29 actions comprising 64% of the total Q4 2017 actions. The next most commonly used method of enforcement was civil money penalty, with eight instances accounting for 18% of the quarter’s actions.


• Unfair, deceptive, or abusive acts or practices (UDAAP) violations continue to account for the highest number of actions, with 12 total actions, as has been the case in the four prior quarters reviewed. There was also increased focus on enforcement of the National Flood Insurance Program, with nine associated violations, or more than double the actions in the prior period.


• Over $25.8 billion in monetary fines, penalties, or borrower restitution was ordered for improper mortgage lending practices over the last five quarters, with $192.7 million coming in Q4 2017. The highest source of monetary fines or penalties in Q4 were related to UDAAP violations, which totaled $295.7 million and accounted for nearly half of the period’s fines. 


• 13 actions in the quarter were related to servicing or origination of closed-end mortgage loans, with an additional six actions related to student loans and credit card products.

Q4 2017 Summary

The number of regulatory enforcement actions decreased 13% in Q4 2017 from Q3 2017, as seen in Figure 1, to the lowest level observed in the last five quarters. Sixty-nine percent of enforcement actions were issued by the five major federal agencies, with eight from the FDIC; six each from the CFPB, the FRB, and the DOJ; and five from the Office of the Comptroller of Currency (OCC), as seen in Figure 2. Compared to Q3 2017, the CFPB, FRB, and DOJ all experienced a decrease in actions, while the FDIC and OCC activity remained constant. Despite this decreased activity, state or local regulators were involved in a total of 11 actions, surpassing the FDIC (with eight actions) as the most frequent actor in the period and maintained the top spot for the third straight quarter.

Shift in Leadership Brings New Focus to the CFPB

In November 2017, after increased criticism of the CFPB’s regulation of financial institutions, CFPB Director Richard Cordray announced his resignation and named Leandra English, who was previously serving as the CFPB’s chief of staff, to serve as interim deputy director of the agency. On the same day as Cordray’s appointment, President Trump announced his own replacement, Mick Mulvaney, the current director of the Office of Management and Budget. This announcement sparked uncertainty for the agency, as Mulvaney was an outspoken critic of the agency prior to his appointment and as a congressman, co-sponsored legislation to disband the agency. On November 26, 2017, English responded to President Trump’s appointment with a lawsuit aimed at preventing Mulvaney’s appointment, which was promptly resolved with a ruling in the president’s favor, based on the 1998 Federal Vacancies Reform Act.

The CFPB with Mulvaney at the helm is marked by a more conservative approach to regulation than with the prior Obama-era administration. Mulvaney has stated that in his view, the CFPB’s role is to serve both lenders and consumers, and began his tenure with a 30-day moratorium on new regulation and a temporary hold on payments made to remediate wronged consumers. CFPB enforcement action in Q4 2017 was at its lowest in the last five quarters, with less than half of the number of actions observed in Q4 2016. As a result of this decrease, the agency is not the primary federal actor in the quarter for only the second time in the last five periods.

Special thanks to contributors Caitlin Cremin and Siwen Tang.