CFPB Recognizes Cost Burden of Compliance for Small Banks

A new study by the Consumer Financial Protection Bureau alludes that small banks and financial institutions spend relatively more to comply with federal regulations than their bigger peers, especially when it comes to third-party vendor costs. For instance, the CFPB found that two institutions with less than $1 billion in assets had compliance costs that comprised up to six percent of their total retail deposit operating expense, whereas at five banks with more than $1 billion in assets, those costs were two percent or less.

Though the study only surveyed seven companies, the CFPB found that compliance function costs represent 5-31 percent of the total in-scope regulatory compliance costs. But that doesn’t mean that small companies are off the hook when it comes to compliance.

“Operational effects matter more to the extent they suggest how a specific regulation might affect product pricing and availability or market structure and competition,” the Bureau stated in the report. “Moreover, these types of effects on a market can be understood properly only in the context of the fundamental benefits of regulation to consumers and the marketplace.”

For debt collectors, this means the CFPB is looking for ways to assess the impact of regulation on small firms, but not necessarily doing anything to ease it, at least for now. One of the ways the Bureau is keeping tabs on industry compliance is by addressing the consumer complaints it receives. In fact, when the CFPB released its Advance Notice of Proposed Rulemaking in November, a lot of its regulatory questions stemmed from common consumer complaints.

Collectors and vendors need to be proactive about tracking and responding to consumer complaints, because the CFPB is definitely tracking them. That’s why we’re providing analysis of the CFPB’s complaints data and tips for working through the complaints process at our newest insideCompliance webinar, Collection Complaints – Harnessing and Responding to CFPB Scrutiny. Join us for an information-packed 60-minute webinar on Tuesday, January 2 at 2 p.m. Eastern. Learn how to create a rock-solid complaints management system, and work with the CFPB in the event of an investigation.

What do you think? Are compliance costs too burdensome for small firms? Do you work at a small company trying to balance compliance with your bottom line? Let us know!