H.R. 940 — FAIR Exams Act

This section establishes timeliness requirements for examinations of financial institutions by federal financial institutions regulatory agencies (i.e., the Board of Governors of the Federal Reserve System, FDIC, OCC, NCUA, and CFPB). Specifically, it (1) requires completion of any examination within 270 days of commencement (extendable with written notice specifying reasons); (2) requires a final examination report within 90 days after the later of the exit interview or receipt of additional material information from the institution; (3) requires an exit interview with the institution's senior management within 30 days of examination completion (extendable with written notice to the institution and the Board specifying reasons); and (4) requires inclusion, upon request, of an appendix in the final report listing all examination or factual information relied upon for any material supervisory determination.

This section establishes a process under the Federal Financial Institutions Examination Council Act of 1978 for financial institutions supervised by federal regulators (i.e., Federal Reserve, FDIC, OCC, NCUA) to request written agency determinations on non-objection to proposed activities, interpretations of laws or regulations, or applications of generally accepted accounting principles. Requests must be written and include the request's nature, relevant facts, applicable law or accounting standards, and a summary; agencies must acknowledge receipt within 30 days (noting any missing information) and issue a determination within 60 days of receipt notification (if complete), submission of missing information (within 30 days of notification), or the end of that 30-day period (if information is not provided). Agencies must publish anonymized summaries of determinations on their public websites within 120 days (redacting confidential supervisory information, identifying facts, and personally identifiable information).

This section establishes within the Financial Institutions Examination Council an Office of Independent Examination Review, headed by a three-member Board of Independent Examination Review appointed by the President with Senate confirmation to one class each: (1) former federal financial institutions regulatory agency employees, (2) licensed attorneys or CPAs with consumer protection experience not employed by regulators in the prior 10 years, and (3) private sector financial services executives recommended by insured depository institutions, insured credit unions, or their trade associations. Board members (serving three-year terms, maximum two terms; no more than two from the same political party) are prohibited from recent employment at regulators or financial institutions; must review examination procedures and quality assurance; investigate complaints from financial institutions; hold quarterly meetings; conduct independent reviews of supervisory appeals; and report annually to congressional banking committees and the Council (with one-fifth of costs assessed on each of the five federal financial institutions regulatory agencies). (As background, the Council coordinates uniform federal examination and supervision of depository institutions.) This section also adds definitions to the Federal Financial Institutions Examination Council Act of 1978 for "Board," "material supervisory determination," "insured depository institution," and "insured credit union."

This section establishes a right for a financial institution to obtain an independent review by the Board of the Federal Financial Institutions Examination Council (FFIEC) of a material supervisory determination (i.e., significant agency findings such as asset classifications or capital adequacy) contained in a final report of examination. (As background, the FFIEC coordinates uniform examination standards among federal banking agencies, including the Federal Reserve, FDIC, OCC, NCUA, and CFPB.) It requires the institution to file a written notice with the Board within 60 days of receiving the report—identifying the determination, stating reasons for appeal, and providing facts, arguments, and documents (with a discretionary extension for good cause)—and allows the institution to request all agency examination information relied upon within 7 days (provided within 14 days). The Board must either determine the appeal on the record or, at the institution's election, conduct a hearing within 60 days (with rights to sworn testimony and evidence under Administrative Procedure Act procedures, using de novo review without deference to the agency), and issue a binding written decision within 60 days after the record closes. It further provides for judicial review by petition within 60 days in the U.S. Court of Appeals for the D.C. Circuit or the circuit where the institution is located; requires referral of any identified violations to the relevant agency; prohibits agency retaliation (including delays or denials of approvals due to the appeal); and mandates annual anonymized reports to the House Financial Services Committee, Senate Banking Committee, and FFIEC on reviews conducted and outcomes.

This section makes amendments to regulatory ombudsman procedures and agency definitions. (1) Section 309 of the Riegle Community Development and Regulatory Improvement Act of 1994 is revised by changing its heading to "Ombudsman" (from including "Regulatory Appeals Process"), striking subsections (a) through (c), redesignating subsections (d) through (g) as (a) through (d), and— (A) in redesignated subsection (b), requiring agencies to ensure safeguards against retaliation for using ombudsman procedures and defining retaliation to include delaying or withholding approval of otherwise approvable requests due to such use; and (B) in redesignated subsection (c)(1)(A), adding as eligible ombudsman issues any examination report matter requiring attention and any suspension of expedited processing eligibility due to supervisory or compliance concerns (absent criminal law violations). Nothing in these changes affects agency enforcement or supervisory authority. (2) Section 205(j) of the Federal Credit Union Act is amended to insert "the Bureau of Consumer Financial Protection" before "the Administration" (i.e., National Credit Union Administration) each place it appears. (Thus, CFPB is added to specified agency references applicable to credit unions.) (3) The Federal Financial Institutions Examination Council Act of 1978 is amended to— (A) redefine "Federal financial institutions regulatory agencies" as the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and National Credit Union Administration, including the Bureau of Consumer Financial Protection only for sections 1012 through 1015 (i.e., excluding CFPB from core FFIEC functions); (B) exclude non-insured credit unions from "financial institution" for sections 1012 through 1015; (C) replace "Consumer Financial Protection Bureau" with "Bureau of Consumer Financial Protection"; and (D) revise agency contributions under section 1005 to one-fourth (from one-fifth) for the four specified agencies. (Thus, FFIEC voting adjusts to four equal members, excluding CFPB.)