Financial Institutions Examination Fairness and Reform Act

II 116TH CONGRESS 1ST SESSION S. 2649 To amend the Federal Financial Institutions Examination Council Act of 1978 to improve the examination of depository institutions, and for other purposes. IN THE SENATE OF THE UNITED STATES OCTOBER 21, 2019 Mr. MORAN (for himself, Mr. CORNYN, Mr. INHOFE, and Mr. MANCHIN) in- troduced the following bill; which was read twice and referred to the Com- mittee on Banking, Housing, and Urban Affairs A BILL To amend the Federal Financial Institutions Examination Council Act of 1978 to improve the examination of de- pository institutions, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Financial Institutions 4 Examination Fairness and Reform Act’’. 5 SEC. 2. TIMELINESS OF EXAMINATION REPORTS. 6 The Federal Financial Institutions Examination 7 Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended 8 by adding at the end the following: 9 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 2 •S 2649 IS ‘‘SEC. 1012. TIMELINESS OF EXAMINATION REPORTS. 1 ‘‘(a) IN GENERAL.— 2 ‘‘(1) FINAL EXAMINATION REPORT.—A Federal 3 financial institutions regulatory agency shall provide 4 a final examination report to a financial institution 5 not later than 60 days after the later of— 6 ‘‘(A) the exit interview for an examination 7 of the institution; or 8 ‘‘(B) the provision of additional informa- 9 tion by the institution relating to the examina- 10 tion. 11 ‘‘(2) EXIT INTERVIEW.—If a financial institu- 12 tion is not subject to a resident examiner program, 13 the exit interview shall occur not later than the end 14 of the 9-month period beginning on the commence- 15 ment of the examination, except that such period 16 may be extended by the Federal financial institu- 17 tions regulatory agency by providing written notice 18 to the institution and the Director describing with 19 particularity the reasons that a longer period is 20 needed to complete the examination. 21 ‘‘(b) EXAMINATION MATERIALS.—Upon the request 22 of a financial institution, the Federal financial institutions 23 regulatory agency shall include with the final report an 24 appendix listing all examination or other factual informa- 25 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 3 •S 2649 IS tion relied upon by the agency in support of a material 1 supervisory determination.’’. 2 SEC. 3. INDEPENDENT EXAMINATION REVIEW DIRECTOR. 3 (a) IN GENERAL.—The Federal Financial Institu- 4 tions Examination Council Act of 1978 (12 U.S.C. 3301 5 et seq.), as amended by section 2 of this Act, is further 6 amended by adding at the end the following: 7 ‘‘SEC. 1013. OFFICE OF INDEPENDENT EXAMINATION RE- 8 VIEW. 9 ‘‘(a) ESTABLISHMENT.—There is established in the 10 Council an Office of Independent Examination Review. 11 ‘‘(b) HEAD OF OFFICE.—There is established the po- 12 sition of the Independent Examination Review Director, 13 as the head of the Office of Independent Examination Re- 14 view. The Director shall be appointed by the Federal Fi- 15 nancial Institutions Examination Council. 16 ‘‘(c) STAFFING.—The Director is authorized to hire 17 staff to support the activities of the Office of Independent 18 Examination Review. 19 ‘‘(d) DUTIES.—The Director shall— 20 ‘‘(1) receive and, at the discretion of the Direc- 21 tor, investigate complaints from financial institu- 22 tions, their representatives, or another entity acting 23 on behalf of such institutions, concerning examina- 24 tions, examination practices, or examination reports; 25 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 4 •S 2649 IS ‘‘(2) hold meetings, at least once every three 1 months and in locations designed to encourage par- 2 ticipation from all sections of the United States, 3 with financial institutions, their representatives, or 4 another entity acting on behalf of such institutions, 5 to discuss examination procedures, examination 6 practices, or examination policies; 7 ‘‘(3) review examination procedures of the Fed- 8 eral financial institutions regulatory agencies to en- 9 sure that the written examination policies of those 10 agencies are being followed in practice and adhere to 11 the standards for consistency established by the 12 Council; 13 ‘‘(4) conduct a continuing and regular program 14 of examination quality assurance for all examination 15 types conducted by the Federal financial institutions 16 regulatory agencies; 17 ‘‘(5) adjudicate any supervisory appeal initiated 18 under section 1014; and 19 ‘‘(6) report annually to the Committee on Fi- 20 nancial Services of the House of Representatives, the 21 Committee on Banking, Housing, and Urban Affairs 22 of the Senate, and the Council, on the reviews car- 23 ried out pursuant to paragraphs (3) and (4), includ- 24 ing compliance with the requirements set forth in 25 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 5 •S 2649 IS section 1012 regarding timeliness of examination re- 1 ports, and the Council’s recommendations for im- 2 provements in examination procedures, practices, 3 and policies. 4 ‘‘(e) CONFIDENTIALITY.—The Director shall keep 5 confidential all meetings, discussions, and information 6 provided by financial institutions.’’. 7 (b) DEFINITION.—Section 1003 of the Federal Fi- 8 nancial Institutions Examination Council Act of 1978 (12 9 U.S.C. 3302) is amended— 10 (1) in paragraph (2), by striking ‘‘and’’ at the 11 end; 12 (2) in paragraph (3), by adding ‘‘and’’ at the 13 end; and 14 (3) by adding at the end the following: 15 ‘‘(4) the term ‘Director’ means the Independent 16 Examination Review Director established under sec- 17 tion 1013(a) and (b).’’. 18 SEC. 4. RIGHT TO INDEPENDENT REVIEW OF MATERIAL SU- 19 PERVISORY DETERMINATIONS. 20 The Federal Financial Institutions Examination 21 Council Act of 1978, as amended by sections 2 and 3 of 22 this Act, is further amended by adding at the end the fol- 23 lowing: 24 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 6 •S 2649 IS ‘‘SEC. 1014. RIGHT TO INDEPENDENT REVIEW OF MATERIAL 1 SUPERVISORY DETERMINATIONS. 2 ‘‘(a) IN GENERAL.—A financial institution shall have 3 the right to obtain an independent review of a material 4 supervisory determination contained in a final report of 5 examination. 6 ‘‘(b) NOTICE.— 7 ‘‘(1) TIMING.—A financial institution seeking 8 review of a material supervisory determination under 9 this section shall file a written notice with the Direc- 10 tor within 60 days after receiving the final report of 11 examination that is the subject of such review. 12 ‘‘(2) IDENTIFICATION OF DETERMINATION.— 13 The written notice shall identify the material super- 14 visory determination that is the subject of the inde- 15 pendent examination review, and a statement of the 16 reasons why the institution believes that the deter- 17 mination is incorrect or should otherwise be modi- 18 fied. 19 ‘‘(3) INFORMATION TO BE PROVIDED TO INSTI- 20 TUTION.—Any information relied upon by the agen- 21 cy in the final report that is not in the possession 22 of the financial institution may be requested by the 23 financial institution and shall be delivered promptly 24 by the agency to the financial institution. 25 ‘‘(c) RIGHT TO HEARING.— 26 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 7 •S 2649 IS ‘‘(1) IN GENERAL.—The Director shall— 1 ‘‘(A) determine the merits of the appeal on 2 the record; or 3 ‘‘(B) at the election of the financial institu- 4 tion, refer the appeal to an administrative law 5 judge to conduct a hearing pursuant to the pro- 6 cedures set forth under sections 556 and 557 of 7 title 5, United States Code, which shall take 8 place not later than 60 days after the petition 9 for review is received by the Director. 10 ‘‘(2) TIMING OF DECISION.—An administrative 11 law judge conducting a hearing under paragraph 12 (1)(B) shall issue a proposed decision to the Direc- 13 tor based upon the record established at the hearing. 14 ‘‘(3) STANDARD OF REVIEW.—In any hearing 15 under this subsection— 16 ‘‘(A) neither the administrative law judge 17 nor the Director shall defer to the opinions of 18 the examiner or agency, but shall independently 19 determine the appropriateness of the agency’s 20 decision based upon the relevant statutes, regu- 21 lations, other appropriate guidance, and evi- 22 dence presented at the hearing. 23 ‘‘(d) FINAL DECISION.—A decision by the Director 24 on an independent review under this section shall— 25 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 8 •S 2649 IS ‘‘(1) be made not later than 60 days after the 1 record has been closed; and 2 ‘‘(2) be deemed final agency action and shall 3 bind the agency whose supervisory determination 4 was the subject of the review and the financial insti- 5 tution requesting the review. 6 ‘‘(e) RIGHT TO JUDICIAL REVIEW.—A financial insti- 7 tution shall have the right to petition for review of the 8 decision of the Director under this section by filing a peti- 9 tion for review not later than 60 days after the date on 10 which the decision is made in the United States Court of 11 Appeals for the District of Columbia Circuit or the Circuit 12 in which the financial institution is located. 13 ‘‘(f) REPORT.—The Director shall report annually to 14 the Committee on Financial Services of the House of Rep- 15 resentatives, the Committee on Banking, Housing, and 16 Urban Affairs of the Senate on actions taken under this 17 section, including the types of issues that the Director has 18 reviewed and the results of those reviews. In no case shall 19 such a report contain information about individual finan- 20 cial institutions or any confidential or privileged informa- 21 tion shared by financial institutions. 22 ‘‘(g) RETALIATION PROHIBITED.—A Federal finan- 23 cial institutions regulatory agency may not— 24 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 9 •S 2649 IS ‘‘(1) retaliate against a financial institution, in- 1 cluding service providers, or any institution-affiliated 2 party, for exercising appellate rights under this sec- 3 tion; or 4 ‘‘(2) delay or deny any agency action that 5 would benefit a financial institution or any institu- 6 tion-affiliated party on the basis that an appeal 7 under this section is pending under this section.’’. 8 SEC. 5. ADDITIONAL AMENDMENTS. 9 (a) REGULATOR APPEALS PROCESS, OMBUDSMAN, 10 AND ALTERNATIVE DISPUTE RESOLUTION.— 11 (1) IN GENERAL.—Section 309 of the Riegle 12 Community Development and Regulatory Improve- 13 ment Act of 1994 (12 U.S.C. 4806) is amended— 14 (A) in subsection (a), by inserting after 15 ‘‘appropriate Federal banking agency’’ the fol- 16 lowing: ‘‘, the Bureau of Consumer Financial 17 Protection,’’; 18 (B) in subsection (b)— 19 (i) by redesignating paragraphs (1) 20 and (2) as subparagraphs (A) and (B) and 21 indenting appropriately; 22 (ii) in the matter preceding subpara- 23 graph (A) (as redesignated), by striking 24 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 10 •S 2649 IS ‘‘In establishing’’ and inserting ‘‘(1) IN 1 GENERAL.—In establishing’’; 2 (iii) in paragraph (1)(B) (as redesig- 3 nated), by striking ‘‘the appellant from re- 4 taliation by agency examiners’’ and insert- 5 ing ‘‘the insured depository institution or 6 insured credit union from retaliation by an 7 agency referred to in subsection (a)’’; and 8 (iv) by adding at the end the fol- 9 lowing: 10 ‘‘(2) RETALIATION.—For purposes of this sub- 11 section and subsection (e), retaliation includes delay- 12 ing consideration of, or withholding approval of, any 13 request, notice, or application that otherwise would 14 have been approved, but for the exercise of the insti- 15 tution’s or credit union’s rights under this section.’’; 16 (C) in subsection (e)(2)— 17 (i) in subparagraph (B), by striking 18 ‘‘and’’ at the end; 19 (ii) in subparagraph (C), by striking 20 the period and inserting ‘‘; and’’; and 21 (iii) by adding at the end the fol- 22 lowing: 23 ‘‘(D) ensure that appropriate safeguards 24 exist for protecting the insured depository insti- 25 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 11 •S 2649 IS tution or insured credit union from retaliation 1 by any agency referred to in subsection (a) for 2 exercising its rights under this subsection.’’; 3 and 4 (D) in subsection (f)(1)(A)— 5 (i) in clause (ii), by striking ‘‘; and’’ 6 and inserting a semicolon; 7 (ii) in clause (iii), by striking ‘‘; and’’ 8 and inserting a semicolon; and 9 (iii) by adding at the end the fol- 10 lowing: 11 ‘‘(iv) any issue specifically listed in an 12 exam report as a matter requiring atten- 13 tion by the institution’s management or 14 board of directors; and 15 ‘‘(v) any suspension or removal of an 16 institution’s status as eligible for expedited 17 processing of applications, requests, no- 18 tices, or filings on the grounds of a super- 19 visory or compliance concern, regardless of 20 whether that concern has been cited as a 21 basis for a material supervisory determina- 22 tion or matter requiring attention in an ex- 23 amination report, provided that the con- 24 VerDate Sep 11 2014 04:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2649.IS S2649 kjohnson on DSK79L0C42 with BILLS 12 •S 2649 IS duct at issue did not involve violation of 1 any criminal law; and’’. 2 (2) EFFECT.—Nothing in this subsection af- 3 fects the authority of an appropriate Federal bank- 4 ing agency or the National Credit Union Adminis- 5 tration Board to take enforcement or other super- 6 visory action. 7 (b) FEDERAL CREDIT UNION ACT.—Section 205(j) 8 of the Federal Credit Union Act (12 U.S.C. 1785(j)) is 9 amended by inserting ‘‘the Bureau of Consumer Financial 10 Protection,’’ before ‘‘the Administration’’ each place that 11 term appears [Text truncated for display. 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