Examinations of Financial Institutions Do Not Assure Compliance With Consumer Credit Laws

Consumer credit protection laws set forth basic principles to protect and inform consumers seeking credit. Financial institutions are responsible for complying with these laws. Federal financial institution regulatory agencies supervise institutions that extend credit and have responsibilities for ensuring that financial institutions comply with the laws.

GAO found that the agencies' programs for identifying violations and enforcing compliance with the laws were inconsistent and, for the substantive aspects of some laws, inadequate. As a result, consumers have not been assured consistent protection, and financial institutions have not been treated equally. For the most part, agencies identified violations of technical requirements involving forms and disclosures, whereas violations of the substantive principles of some laws were seldom cited. Examiners performed few specific analyses to test institutions' practices and generally only reviewed institutions' forms and talked to institutions' management. Weaknesses in agencies' methods of examining for compliance prevent the agencies from identifying violations which should be corrected. Agencies need uniform compliance enforcement standards. Since 1977, the agencies have made substantial progress in correcting these shortcomings. However, more changes are needed.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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