81 FR 74410 - Compliance Bulletin and Policy Guidance; 2016-02, Service Providers
BUREAU OF CONSUMER FINANCIAL PROTECTION Federal Register Volume 81, Issue 207 (October 26, 2016)
Federal Register Volume 81, Issue 207 (October 26, 2016)
| Page Range | 74410-74412 | |
| FR Document | 2016-25856 |
[Federal Register Volume 81, Number 207 (Wednesday, October 26, 2016)] [Notices] [Pages 74410-74412] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-25856] ======================================================================= ----------------------------------------------------------------------- BUREAU OF CONSUMER FINANCIAL PROTECTION Compliance Bulletin and Policy Guidance; 2016-02, Service Providers AGENCY: Bureau of Consumer Financial Protection. ACTION: Compliance bulletin and policy guidance. ----------------------------------------------------------------------- SUMMARY: The Bureau is reissuing its guidance on service providers, formerly titled CFPB Bulletin 2012-03, Service Providers to clarify that the depth and formality of the risk management program for service providers may vary depending upon the service being performed--its size, scope, complexity, importance and potential for consumer harm-- and the performance of the service provider in carrying out its activities in compliance with Federal consumer financial laws and regulations. This amendment is needed to clarify that supervised entities have flexibility and to allow appropriate risk management. DATES: The Bureau released this Compliance Bulletin and Policy Guidance on its Web site on October 31, 2016. FOR FURTHER INFORMATION CONTACT: Suzanne McQueen, Attorney Adviser, Office of Supervision Policy, 1700 G Street NW., 20552, 202-435-7439. SUPPLEMENTARY INFORMATION: [[Page 74411]] 1. Compliance Bulletin and Policy Guidance 2016-02, Service Providers The Consumer Financial Protection Bureau (CFPB) expects supervised banks and nonbanks to oversee their business relationships with service providers in a manner that ensures compliance with Federal consumer financial law, which is designed to protect the interests of consumers and avoid consumer harm. The CFPB's exercise of its supervisory and enforcement authority will closely reflect this orientation and emphasis. This Bulletin uses the following terms: Supervised banks and nonbanks refers to the following entities supervised by the CFPB:Large insured depository institutions, large insured credit unions, and their affiliates (12 U.S.C. 5515); and Certain non-depository consumer financial services companies (12 U.S.C. 5514). Supervised service providers refers to the following entities supervised by the CFPB: Service providers to supervised banks and nonbanks (12 U.S.C. 5515, 5514); and Service providers to a substantial number of small insured depository institutions or small insured credit unions (12 U.S.C. 5516). Service provider is generally defined in section 1002(26) of the Dodd-Frank Act as ``any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.'' (12 U.S.C. 5481(26)). A service provider may or may not be affiliated with the person to which it provides services. Federal consumer financial law is defined in section 1002(14) of the Dodd-Frank Act (12 U.S.C. 5481(14)). A. Service Provider Relationships The CFPB recognizes that the use of service providers is often an appropriate business decision for supervised banks and nonbanks. Supervised banks and nonbanks may outsource certain functions to service providers due to resource constraints, use service providers to develop and market additional products or services, or rely on expertise from service providers that would not otherwise be available without significant investment. However, the mere fact that a supervised bank or nonbank enters into a business relationship with a service provider does not absolve the supervised bank or nonbank of responsibility for complying with Federal consumer financial law to avoid consumer harm. A service provider that is unfamiliar with the legal requirements applicable to the products or services being offered, or that does not make efforts to implement those requirements carefully and effectively, or that exhibits weak internal controls, can harm consumers and create potential liabilities for both the service provider and the entity with which it has a business relationship. Depending on the circumstances, legal responsibility may lie with the supervised bank or nonbank as well as with the supervised service provider. B. The CFPB's Supervisory Authority Over Service Providers Title X authorizes the CFPB to examine and obtain reports from supervised banks and nonbanks for compliance with Federal consumer financial law and for other related purposes and also to exercise its enforcement authority when violations of the law are identified. Title X also grants the CFPB supervisory and enforcement authority over supervised service providers, which includes the authority to examine the operations of service providers on site.\1\ The CFPB will exercise the full extent of its supervision authority over supervised service providers, including its authority to examine for compliance with Title X's prohibition on unfair, deceptive, or abusive acts or practices. The CFPB will also exercise its enforcement authority against supervised service providers as appropriate.\2\ --------------------------------------------------------------------------- \1\ See, e.g., subsections 1024(e), 1025(d), and 1026(e), and sections 1053 and 1054 of the Dodd-Frank Act, 12 U.S.C. 5514(e), 5515(d), 5516(e), 5563, and 5564. \2\ See 12 U.S.C. 5531(a), 5536. --------------------------------------------------------------------------- C. The CFPB's Expectations The CFPB expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships. The CFPB will apply these expectations consistently, regardless of whether it is a supervised bank or nonbank that has the relationship with a service provider. The Bureau expects that the depth and formality of the entity's risk management program for service providers may vary depending upon the service being performed--its size, scope, complexity, importance and potential for consumer harm--and the performance of the service provider in carrying out its activities in compliance with Federal consumer financial laws and regulations. While due diligence does not provide a shield against liability for actions by the service provider, it could help reduce the risk that the service provider will commit violations for which the supervised bank or nonbank may be liable, as discussed above. To limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers. These steps should include, but are not limited to: Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law; Requesting and reviewing the service provider's policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities; Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices; Establishing internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law; and Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate. For more information pertaining to the responsibilities of a supervised bank or nonbank that has business arrangements with service providers, please review the CFPB's Supervision and Examination Manual: Compliance Management Review and Unfair, Deceptive, and Abusive Acts or Practices.\3\ --------------------------------------------------------------------------- \3\ http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf at 34 (Compliance Management Review) and 174 (Unfair, Deceptive, and Abusive Acts or Practices). --------------------------------------------------------------------------- 2. Regulatory Requirements This Compliance Bulletin and Policy Guidance is a non-binding general statement of policy articulating considerations relevant to the Bureau's exercise of its supervisory and enforcement authority. It is therefore exempt from notice and comment [[Page 74412]] rulemaking requirements under the Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a). The Bureau has determined that this Compliance Bulletin and Policy Guidance does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring OMB approval under the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. Dated: October 19, 2016. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2016-25856 Filed 10-25-16; 8:45 am] BILLING CODE 4810-AM-P
![74410 Federal Register / Vol. 81, No. 207 / Wednesday, October 26, 2016 / Notices
ADDITIONAL AND AMENDED PET FIELDS
[Same as in 60 day notice]
Affected entities SDRs, SEFs, DCMs, DCOs, SD/MSPs, non-SD/MSP reporting entities
Number of
Burden type Burden per respondent Total burden
respondents
Annual hours burden ................................................... 200 hours .................................................................... 449 89,800 hours.
Annual costs ................................................................ $0 ................................................................................ 449 $0.
TERMINATION OF ORIGINAL SWAPS
[Increased by 50% from 60 day notice]
Affected entities DCOs
Number of
Burden type Burden per respondent Total burden
respondents
One-time hours burden ............................................... 4,500 hours ................................................................. 12 54,000 hours.
Annual costs ................................................................ $375,000 ..................................................................... 12 $4,500,000.
Increases in Hours Burdens and New start-up cost of $341,910 (4,500 hours x Dated: October 21, 2016.
Total Hours Burden $75.98 per hour). The Commission Robert N. Sidman,
Based on an increase in annual estimates that DCOs will use these Deputy Secretary of the Commission.
burden hours of 89,800, Commission connections for 20 years, and therefore [FR Doc. 2016–25925 Filed 10–25–16; 8:45 am]
staff estimate that the revised aggreagate the annualized start-up cost for SDR BILLING CODE 6351–01–P
total annual time burden for the connections will be $17,095 per DCO.
collection is 562,945 hours. Based on 12 DCOs, the aggregate
annualized start-up cost for SDR
Increases in Aggregate Costs BUREAU OF CONSUMER FINANCIAL
connections will be $205,146.
There are three components to the PROTECTION
aggregate increase in annual costs Third, DCOs will incur an aggregate
associated with this revision, (a) costs annual cost of $4,500,000 to maintain Compliance Bulletin and Policy
associated with changes to reporting those SDR connections. Guidance; 2016–02, Service Providers
systems, to be incurred by 449 entities; By combining these three
(b) annualized costs associated with components, the aggregate increase to AGENCY: Bureau of Consumer Financial
establishing SDR connections by DCOs; annual costs associated with this Protection.
and (c) costs associated with collection will be $11,528,150. ACTION: Compliance bulletin and policy
maintaining SDR connections by DCOs. guidance.
First, the Commission estimates that Total Aggregate Costs
the costs associated with additional and SUMMARY: The Bureau is reissuing its
amended PET fields will be $15,196 per Commission staff estimate that the
guidance on service providers, formerly
entity (200 hours × $75.98 per hour).4 revised aggregate total annual cost for titled CFPB Bulletin 2012–03, Service
The aggregate increase across all 449 the collection is $99,462,062. The Providers to clarify that the depth and
reporting entities and SDRs for the burden estimate represents the burden formality of the risk management
additional and amended PET fields is that SDRs, swap execution facilities program for service providers may vary
therefore $6,823,004. (‘‘SEFs’’), designated contract markets depending upon the service being
Second, the Commission estimates (‘‘DCMs’’), DCOs, swap dealers (‘‘SDs’’), performed—its size, scope, complexity,
that DCO to SDR connections will major swap participants (‘‘MSPs’’), and importance and potential for consumer
require each DCO to incur a one-time non-SD/MSP swap counterparties incur harm—and the performance of the
to operate and maintain swap service provider in carrying out its
4 In calculating the cost figures associated with recordkeeping and reporting systems to activities in compliance with Federal
burden hours, the Commission estimated the facilitate the recordkeeping and
appropriate wage rate based on salary information
consumer financial laws and
for the securities industry compiled by the reporting of swaps. regulations. This amendment is needed
Securities Industry and Financial Markets Respondents/Affected Entities: SDRs, to clarify that supervised entities have
Association (‘‘SIFMA’’). Commission staff arrived at flexibility and to allow appropriate risk
an hourly rate of $75.98 using figures from a
SEFs, DCMs, DCOs, SDs, MSPs, and
weighted average of salaries and bonuses across non-SD/MSP swap counterparties. management.
different professions from the SIFMA Report on
Estimated Number of Respondents: DATES: The Bureau released this
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Management & Professional Earnings in the Compliance Bulletin and Policy
Securities Industry 2013, modified to account for an 30,210.
1800-hour work-year and multiplied by 1.3 to Guidance on its Web site on October 31,
Estimated Total Annual Burden on 2016.
account for overhead and other benefits. The
Commission estimated appropriate wage rate is a Respondents: 562,945 hours.
weighted national average of salary and bonuses for FOR FURTHER INFORMATION CONTACT:
Estimated Total Annual Cost: Suzanne McQueen, Attorney Adviser,
professionals with the following titles (and their
relative weight): ‘‘programmer (senior)’’ (30% $99,462,062. Office of Supervision Policy, 1700 G
weight); ‘‘programmer’’ (30%); ‘‘compliance advisor Frequency of Collection: Ongoing. Street NW., 20552, 202–435–7439.
(intermediate)’’ (20%); ‘‘systems analyst’’ (10%),
and ‘‘assistant/associate general counsel’’ (10%). (Authority: 44 U.S.C. 3501 et seq.) SUPPLEMENTARY INFORMATION:
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![74412 Federal Register / Vol. 81, No. 207 / Wednesday, October 26, 2016 / Notices
rulemaking requirements under the incompetent military members or information under the provisions of the
Administrative Procedure Act pursuant retirees. DFAS is representing all Paperwork Reduction Act.
to 5 U.S.C. 553(b). Because no notice of services as the functional proponent for DATES: Consideration will be given to all
proposed rulemaking is required, the Retired and Annuitant Pay. comments received by November 25,
Regulatory Flexibility Act does not Affected Public: Individuals or 2016.
require an initial or final regulatory households. FOR FURTHER INFORMATION CONTACT: Fred
flexibility analysis. 5 U.S.C. 603(a), Frequency: On occasion. Licari, 571–372–0493.
604(a). The Bureau has determined that Respondent’s Obligation: Required to
SUPPLEMENTARY INFORMATION:
this Compliance Bulletin and Policy obtain or maintain benefits.
Title, Associated Form and OMB
Guidance does not impose any new or OMB Desk Officer: Ms. Jasmeet
Number: Application Forms and
revise any existing recordkeeping, Seehra.
Information Guide, Naval Reserve
reporting, or disclosure requirements on Comments and recommendations on
Officers Training Corps (NROTC)
covered entities or members of the the proposed information collection
Scholarship Program; OMB Control
public that would be collections of should be emailed to Ms. Jasmeet
Number 0703–0026.
information requiring OMB approval Seehra, DoD Desk Officer, at Oira_ Type of Request: Reinstatement, with
under the Paperwork Reduction Act, 44 submission@omb.eop.gov. Please change, of a previously approved
U.S.C. 3501, et seq. identify the proposed information collection for which approval has
Dated: October 19, 2016. collection by DoD Desk Officer and the expired.
Richard Cordray,
Docket ID number and title of the Number of Respondents: 14,000.
information collection. Responses per Respondent: 7.
Director, Bureau of Consumer Financial
Protection.
You may also submit comments and Annual Responses: 98,000.
recommendations, identified by Docket Average Burden per Response: 3
[FR Doc. 2016–25856 Filed 10–25–16; 8:45 am]
ID number and title, by the following hours 30 minutes.
BILLING CODE 4810–AM–P
method: Annual Burden Hours: 46,666.
• Federal eRulemaking Portal: http:// Needs and Uses: This collection of
www.regulations.gov. Follow the information is used to make a
DEPARTMENT OF DEFENSE instructions for submitting comments. determination of an applicant’s
Instructions: All submissions received academic and/or leadership potential
Office of the Secretary must include the agency name, Docket and eligibility for an NROTC
[Docket ID DOD–2014–OS–0074] ID number and title for this Federal scholarship. The information collected
Register document. The general policy is used to select the best-qualified
Submission for OMB Review; for comments and other submissions candidates.
Comment Request from members of the public is to make Affected Public: Individuals or
these submissions available for public Households.
ACTION: Notice. viewing on the Internet at http:// Frequency: Annually.
www.regulations.gov as they are Respondent’s Obligation: Required to
SUMMARY: The Department of Defense obtain or retain benefits.
has submitted to OMB for clearance, the received without change, including any
personal identifiers or contact OMB Desk Officer: Ms. Jasmeet
following proposal for collection of Seehra.
information under the provisions of the information.
Comments and recommendations on
Paperwork Reduction Act. DOD Clearance Officer: Mr. Frederick
the proposed information collection
Licari.
DATES: Consideration will be given to all should be emailed to Ms. Jasmeet
Written requests for copies of the
comments received by November 25, Seehra, DoD Desk Officer, at Oira_
information collection proposal should
2016. submission@omb.eop.gov. Please
be sent to Mr. Licari at WHS/ESD
identify the proposed information
FOR FURTHER INFORMATION CONTACT: Fred Directives Division, 4800 Mark Center
collection by DoD Desk Officer and the
Licari, 571–372–0493. Drive, East Tower, Suite 03F09,
Docket ID number and title of the
SUPPLEMENTARY INFORMATION: Alexandria, VA 22350–3100.
information collection.
Title, Associated Form and OMB Dated: October 21, 2016. You may also submit comments and
Number: Application for Trusteeship, Aaron Siegel, recommendations, identified by Docket
DD Form 2827, OMB License 0730– Alternate OSD Federal Register Liaison ID number and title, by the following
0013. Officer, Department of Defense. method:
Type of Request: Reinstatement, [FR Doc. 2016–25897 Filed 10–25–16; 8:45 am] • Federal eRulemaking Portal: http://
without change, of a previously BILLING CODE 5001–06–P www.regulations.gov. Follow the
approved collection for which approval instructions for submitting comments.
has expired. Instructions: All submissions received
Number of Respondents: 75. DEPARTMENT OF DEFENSE must include the agency name, Docket
Responses per Respondent: 1. ID number and title for this Federal
Annual Responses: 75. Department of the Navy Register document. The general policy
Average Burden per Response: 15 for comments and other submissions
minutes. [Docket ID: USN–2014–0012]
from members of the public is to make
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Annual Burden Hours: 19 hours. these submissions available for public
Submission for OMB Review;
Needs and Uses: The information viewing on the Internet at http://
Comment Request
collection is needed to identify the www.regulations.gov as they are
prospective trustees for active duty ACTION: Notice. received without change, including any
military and retirees. The information is personal identifiers or contact
required in order for the Defense SUMMARY: The Department of Defense information.
Finance and Accounting Service (DFAS) has submitted to OMB for clearance, the DOD Clearance Officer: Mr. Frederick
to make payments on behalf of following proposal for collection of Licari.
VerDate Sep<11>2014 18:25 Oct 25, 2016 Jkt 241001 PO 00000 Frm 00022 Fmt 4703 Sfmt 4703 E:\FR\FM\26OCN1.SGM 26OCN1](https://thefederalregister.org/doc/81_FR_74617/page/3.svg)
Document Created: 2016-10-26 02:17:21
Document Modified: 2016-10-26 02:17:21
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Compliance bulletin and policy guidance. | |
| Dates | The Bureau released this Compliance Bulletin and Policy Guidance on its Web site on October 31, 2016. | |
| Contact | Suzanne McQueen, Attorney Adviser, Office of Supervision Policy, 1700 G Street NW., 20552, 202-435-7439. | |
| FR Citation | 81 FR 74410 |
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