Current status is Ordered to be Reported (Amended) by the Yeas and Nays: 35 - 17.

119th CONGRESS

1st Session

H. R. 940

1. Short title
2. Timeliness of examinations and examination reports
3. Timeliness of required permission, regulatory, and reporting guidance
4. Office of Independent Examination Review
5. Right to independent review of material supervisory determinations
6. Additional amendments

1. Short title

This Act may be cited as the "Fair Audits and Inspections for Regulators’ Exams Act" or the "FAIR Exams Act".

2. Timeliness of examinations and examination reports

The Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended by adding at the end the following:

1012. Timeliness of examinations and examination reports

(a) Timeliness of examinations - A Federal financial institutions regulatory agency shall complete any examination of a financial institution within 270 days of commencing the examination, except that such period may be extended by the Federal financial institutions regulatory agency by providing written notice to the financial institution describing with particularity the reasons that a longer period is needed.

(b) Final examination report - A Federal financial institutions regulatory agency shall provide a final examination report to a financial institution not later than 90 days after the later of—

(1) - the exit interview for an examination of the institution; or

(2) - the provision of additional material information by the institution relating to the examination.

(c) Exit interview requirement - Within 30 days of completing an examination, a Federal financial institutions regulatory agency shall conduct an exit interview with the financial institution’s senior management, except that such period may be extended by the Federal financial institutions regulatory agency by providing written notice to the institution and the Board describing with particularity the reasons that a longer period is needed to complete the exit interview.

(d) Examination materials - Upon the request of a financial institution, the Federal financial institutions regulatory agency shall include with the final report an appendix listing all examination or other factual information relied upon by the agency in support of a material supervisory determination.

3. Timeliness of required permission, regulatory, and reporting guidance

The Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3301 et seq.), as amended by section 2, is further amended by adding at the end the following:

1013. Timeliness of required permission, regulatory, and reporting guidance

(a) Request for permission or guidance - With respect to an action that a financial institution is taking or is intending to take, the financial institution may request a written determination by the applicable Federal financial institutions regulatory agency of—

(1) - the agency’s non-objection to the financial institution conducting a particular activity;

(2) - the agency’s interpretation of a law or regulation; and

(3) - the agency’s interpretation of generally accepted accounting principles or accounting objectives, standards, and requirements.

(b) Contents of request - A request made under subsection (a) shall be in writing and contain—

(1) - the nature of the request;

(2) - applicable facts relating to the matter;

(3) - applicable law, regulation, or generally accepted accounting principles relating to the matter; and

(4) - a summary of the request.

(c) Response to request - A Federal financial institutions regulatory agency receiving a request under subsection (a) shall, not later than 30 days after receiving the request—

(1) - provide the financial institution making the request with written notification that the agency received the request and stating whether the request contains all of the information required under subsection (b); and

(2) - if the request does not contain all of the information required under subsection (b), provide the financial institution with an explanation of what information is missing.

(d) Providing missing information - If a Federal financial institutions regulatory agency informs the financial institution under subsection (c) that the request does not contain all the information required under subsection (b), the financial institution may provide the missing information to the Federal financial institutions regulatory agency during the 30-day period beginning on the date the financial institution receives the explanation of the missing information under subsection (c).

(e) Determination - A Federal financial institutions regulatory agency receiving a request under subsection (a) shall make a determination on the request and provide the financial institution with a written notice of such determination—

(1) - if the initial request contains the information required under subsection (b), not later than the end of the 60-day period beginning on the date the Federal financial institutions regulatory agency notifies the financial institution of the receipt of the request under subsection (c); or

(2) - if the initial request does not contain the information required under subsection (b), but the financial institution provides the missing information during the 30-day period described under subsection (d), not later than the end of the 60-day period beginning on the date such missing information is provided; or

(3) - if the initial request does not contain the information required under subsection (b), and the financial institution does not provide the missing information during the 30-day period described under subsection (d), not later than the end of the 60-day period beginning on the end of such 30-day period.

(f) Reports and publication - Each Federal financial institutions regulatory agency shall, within 120 days after making a determination under paragraph (5), publish a summary of the determination on the public website of the Federal financial institutions regulatory agency. Each Federal financial institutions regulatory agency shall redact any confidential supervisory information about the financial institution, any identifying facts about the financial institution, and any sensitive personally identifiable information, and anonymize any un-redacted information that could, individually or in the aggregate, identify the financial institution.

4. Office of Independent Examination Review

(a) In general - The Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3301 et seq.), as amended by section 3, is further amended by adding at the end the following:

1014. Office of Independent Examination Review

(a) Establishment - There is established in the Council an Office of Independent Examination Review (the "Office").

(b) Board of Independent Examination Review

(1) In general - The head of the Office shall be the Board of Independent Examination Review, which shall be comprised of 3 members, appointed by the President, by and with the advice and consent of the Senate.

(2) Qualifications - The President shall appoint the 1 member of the Board from each of the following classes of individuals:

(A) - Individuals who have been employed by a Federal financial institutions regulatory agency.

(B) - Individuals who—

(i) - are a licensed attorney or a certified public accountant authorized to practice under the laws of a State, the District of Columbia, or a territory of the United States;

(ii) - have either academic or private sector experience;

(iii) - have relevant work-related experience in consumer affairs or compliance with consumer protection laws with respect to financial institutions; and

(iv) - are not, and were not during the previous 10-year period, employed by a Federal banking agency, a Federal reserve bank, or the National Credit Union Administration.

(i) - with at least 10 years private sector financial services senior management-level experience; and

(ii) - recommended by—

(I) - an insured depository institution;

(II) - an insured credit union; or

(III) - a trade association for such institutions or credit unions.

(3) Prohibition on certain individuals serving as a Board member - The President may not appoint an individual as a member of the Board if the individual—

(A) - is, or was during the previous 2-year period, employed by a Federal financial institutions regulatory agency or a Federal reserve bank;

(B) - is, or was during the previous 2-year period, employed by a financial institution; or

(C) - is reporting, or was reporting in the past 5 years, directly or indirectly to a Federal financial institutions regulatory agency official who makes material supervisory determinations.

(4) Consultation - In appointing members of the Board, the President shall consult with the Federal financial institutions regulatory agencies and financial institutions.

(5) Term

(A) In general - Each member of the Board shall serve for a term of 3 years.

(B) Term limitation - No individual may serve more than 2 full terms on the Board.

(6) Political affiliation - Not more than 2 members of the Board shall be members of the same political party.

(7) Quorum

(A) In general - 3 members of the Board shall constitute a quorum.

(B) Initial quorum - During the 6-month period beginning on the date of enactment of this section, 1 member of the Board shall constitute a quorum until the Board has 3 members.

(c) Staffing - The Board is authorized to hire staff to support the activities of the Office of Independent Examination Review. One-fifth of the costs and expenses of the Office, including the salaries of its employees, shall be paid by each of the Federal financial institutions regulatory agencies. Annual assessments for such share shall be levied by the Council based upon its projected budget for the year, and additional assessments may be made during the year if necessary.

(d) Duties - The Board shall—

(1) - receive and, at the discretion of the Board, investigate complaints from financial institutions, their representatives, or another entity acting on behalf of such institutions, concerning examinations, examination practices, or examination reports;

(2) - hold meetings, at least once every three months and in locations designed to encourage participation from all sections of the United States, with financial institutions, their representatives, or another entity acting on behalf of such institutions, to discuss examination procedures, examination practices, or examination policies;

(3) - review examination procedures of the Federal financial institutions regulatory agencies to ensure that the written examination policies of those agencies are being followed in practice and adhere to the standards for consistency;

(4) - conduct a continuing and regular program of examination quality assurance for all examination types conducted by the Federal financial institutions regulatory agencies;

(5) - carry out an independent review of any supervisory appeal initiated under section 1015; and

(6) - report annually to the Committee on Financial Services of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Council, on the reviews carried out pursuant to paragraphs (3) and (5), including compliance with the requirements set forth in section 1013 regarding timeliness of examination reports, and the Board’s recommendations for improvements in examination procedures, practices, and policies.

(e) Confidentiality - The Board and the Council shall keep confidential—

(1) - all meetings, discussions, and information provided by financial institutions and Federal financial institutions regulator agencies that involve confidential supervisory information or privileged information;

(2) - all information and communications exchanged between a financial institution and the Office of Independent Examination Review; and

(3) - all information and communications exchanged between a Federal financial institutions regulator agency and the Office of Independent Examination Review.

(b) Definitions - Section 1003 of the Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3302) is amended—

(1) - in paragraph (2), by striking "and" at the end; and

(2) - by adding at the end the following:

(4) - the term "Board" means the Board of Independent Examination Review established under section 1014(b);

(5) - the term "material supervisory determination" has the meaning given such term in section 309(c) of the Riegle Community Development and Regulatory Improvement Act of 1994;

(6) - the term "insured depository institution" has the meaning given that term in section 3 of the Federal Deposit Insurance Act; and

(7) - the term "insured credit union" has the meaning given that term in section 101 of the Federal Credit Union Act.

5. Right to independent review of material supervisory determinations

The Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3301 et seq.), as amended by section 4, is further amended by adding at the end the following:

1015. Right to independent review of material supervisory determinations

(a) In general - A financial institution shall have the right to obtain an independent review, as described in this section, of a material supervisory determination contained in a final report of examination.

(b) Notice

(1) Timing - A financial institution seeking review of a material supervisory determination under this section shall file a written notice with the Board within 60 days after receiving the final report of examination that is the subject of such review.

(2) Extension - The institution may file a written request with the Board for an extension of the 60-day time period described under paragraph (1), which shall state good cause for granting the extension. Such request shall be granted in the sole discretion of the Board.

(3) Identification of determination - The written notice shall—

(A) - identify the material supervisory determination that is the subject of the requested independent examination review;

(B) - state the reasons why the institution believes that the material supervisory determination is incorrect or should otherwise be modified; and

(i) - a clear and complete statement of all relevant facts and issues;

(ii) - all arguments that the institution wishes to present; and

(iii) - all relevant and material documents in the possession of the institution that the institution wishes to be considered.

(4) Information made available to institution - An institution seeking an appeal of a material supervisory determination may, not later than 7 days after receiving the final examination report, request that the Federal financial institutions regulatory agency that made the material supervisory determination provide the institution with all examination and factual information relied upon by the agency in making the material supervisory determination. The agency shall provide that information to the institution not later than 14 days after receiving the request.

(1) In general - The Board shall—

(A) - determine the merits of the appeal on the record, including whether the material supervisory determination being appealed should be upheld, canceled, or modified; or

(B) - at the election of the financial institution, conduct a hearing, which shall take place not later than 60 days after the petition for review is received by the Board.

(2) Right to obtain testimony - A financial institution electing for a hearing under paragraph (1)(B) shall have the right the obtain testimony under oath from agency employees and obtain documents and other evidence at the hearing, or in advance of the hearing, according to procedures instituted by the Board consistent with those set forth under sections 556 and 557 of title 5, United States Code.

(3) Basis of decision - The Board shall issue a written decision based upon the record of the examination, supplemented by the record established at any hearing.

(4) Standard of review - The Board’s review of a material supervisory determination being appealed under this subsection shall be de novo, and the Board shall not defer to the opinions of the examiner or agency, but shall independently determine the appropriateness of the agency’s material supervisory determination based upon the relevant statutes, regulations, other appropriate guidance, and the evidentiary record.

(d) Final decision - A decision by the Board on an independent review under this section shall—

(1) - be made not later than 60 days after the record has been closed; and

(2) - be deemed final agency action and shall bind the agency whose supervisory determination was the subject of the review and the financial institution requesting the review.

(e) Right to judicial review - A financial institution shall have the right to petition for review of a Board determination made under subsection (d) by filing a petition for review not later than 60 days after the date on which the decision is made in the United States Court of Appeals for the District of Columbia Circuit or the Circuit in which the financial institution is located.

(f) Referral of violations - If the Board, in carrying out this section, determines that a financial institution has violated a law or regulation, the Board shall refer such determination to the applicable Federal financial institutions regulatory agency.

(g) Annual report

(1) In general - The Board shall report annually to the Committee on Financial Services of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Council on actions taken under this section, including the types of issues that the Board has reviewed and the results of those reviews, including information on each final determination with respect to a material supervisory determination.

(2) Confidentiality - In reporting under paragraph (1), the Board shall redact information about individual financial institutions and any confidential or privileged information shared by financial institutions, and shall anonymize any un-redacted information that could, in the aggregate, identify a financial institution.

(h) Retaliation prohibited

(1) In general - A Federal financial institutions regulatory agency may not—

(A) - retaliate against a financial institution, including service providers, or any institution-affiliated party, for exercising appellate rights under this section; or

(B) - delay or deny any agency action that would benefit a financial institution or any institution-affiliated party on the basis that an appeal under this section is pending under this section.

(2) Retaliation - For purposes of this subsection, retaliation includes delaying consideration of, or withholding approval of, any request, notice, or application that otherwise would have been approved, but for the exercise of a financial institution’s rights under this section.

(i) Rulemaking - The Board shall issue rules to establish procedures for hearings described under this section, including that—

(1) - a financial institution may appear at the hearing personally or through counsel;

(2) - a financial institution may provide an oral and written presentation at the hearing;

(3) - the Board may ask questions of any person participating in the hearing;

(4) - the hearing may not involve—

(A) - a cross-examination; or

(B) - discovery;

(5) - the hearing shall not be governed by the Federal Rules of Evidence; and

(6) - the Board shall have a verbatim transcript of the hearing prepared.

(j) Safety and soundness exception - The appeal of a material supervisory determination by a financial institution under this section shall not affect the authority of a Federal financial institutions regulatory agency to enforce the material supervisory determination or to take an action based on such material supervisory determination, if the Federal financial institutions regulatory agency determines that such enforcement or action is necessary to ensure the safety and soundness of the financial institution.

6. Additional amendments

(a) Regulator appeals process, ombudsman, and alternative dispute resolution

(1) In general - Section 309 of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4806) is amended—

(A) - in the heading, by striking "REGULATORY APPEALS PROCESS, OMBUDSMAN," and inserting "OMBUDSMAN" (and by conforming the item relating to such section in the table of contents accordingly);

(B) - by striking subsections (a), (b), and (c);

(D) Retaliation - in subsection (b), as so redesignated—

(i) - in paragraph (2)—

(I) - in subparagraph (B), by striking "and" at the end;

(II) - in subparagraph (C), by striking the period and inserting "; and"; and

(III) - by adding at the end the following:

(D) - ensure that appropriate safeguards exist for protecting any party from retaliation by any agency for exercising rights under this subsection.

(ii) Retaliation - by adding at the end the following:

(6) Retaliation - For purposes of this subsection, retaliation includes delaying consideration of, or withholding approval of, any request, notice, or application that otherwise would have been approved, but for the exercise of a financial institution’s rights under this section.

(E) - in paragraph (1)(A) of subsection (c), as so redesignated—

(i) - in clause (ii), by striking "; and" and inserting a semicolon;

(ii) - in clause (iii), by striking "; and" and inserting a semicolon; and

(iii) - by adding at the end the following:

(iv) - any issue specifically listed in an exam report as a matter requiring attention by the institution’s management or board of directors; and

(v) - any suspension or removal of an institution’s status as eligible for expedited processing of applications, requests, notices, or filings on the grounds of a supervisory or compliance concern, regardless of whether that concern has been cited as a basis for a material supervisory determination or matter requiring attention in an examination report, provided that the conduct at issue did not involve violation of any criminal law; and

(2) Effect - Nothing in this subsection affects the authority of an appropriate Federal banking agency or the National Credit Union Administration Board to take enforcement or other supervisory action.

(b) Federal Credit Union Act - Section 205(j) of the Federal Credit Union Act (12 U.S.C. 1785(j)) is amended by inserting "the Bureau of Consumer Financial Protection," before "the Administration" each place that term appears.

(c) Federal Financial Institutions Examination Council Act - The Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3301 et seq.), as amended by sections 2 through 4 of this Act, is further amended—

(1) - in section 1003 (12 U.S.C. 3302)—

(A) - by striking paragraph (1) and inserting the following:

(1) - the term Federal financial institutions regulatory agencies—

(A) - means the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration; and

(B) - includes the Bureau of Consumer Financial Protection for purposes of sections 1012 through 1015;

(B) - in paragraph (3), by striking the semicolon at the end and inserting ", except that for purposes of sections 1012 through 1015, the term "financial institution" does not include a credit union that is not an insured credit union;";

(2) - in section 1004(a)(4) (12 U.S.C. 3303), by striking "Consumer Financial Protection Bureau" and inserting "Bureau of Consumer Financial Protection"; and

(3) - in section 1005 (12 U.S.C. 3304)—

(A) - by striking "One-fifth" and inserting "One-fourth"; and

(B) - by inserting "described under section 1003(1)(A)" after "agencies".

119-HR940

FAIR Exams Act