Understanding the CFPB’s Risk Prioritization
The Exchange - Insurance and Financial Services Developments
Fall/Winter 2015

Senior associate Sherrie Schiavetti authored the Exchange article “Understanding the CFPB’s Risk Prioritization,” for the American Bar Association’s Insurance and Financial Services Newsletter. In the exercise of its examination authority, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) prioritizes those financial activities that present the greatest risk to consumers.  The CFPB refers to this approach as risk prioritization.  The Bureau applies this risk model in deciding whether to examine an institution, and whether to resolve a matter through informal supervisory measures or through a public enforcement action.  This article discusses the concept of risk priority and its application to the Bureau’s exercise of its supervision and enforcement authority.  It then provides recommendations for financial institutions subject to a Bureau examination.  These actions may reduce an institution’s risk exposure, even within certain high risk markets, and its chances of becoming the next enforcement target.