H.R. 940: Fair Audits and Inspections for Regulators’ Exams Act

The bill known as the Fair Audits and Inspections for Regulators’ Exams Act (FAIR Exams Act) proposes several amendments to improve the examination processes of federal financial institutions. Below is a summary of its key provisions:

1. Timeliness of Examination Reports

The bill establishes a requirement that federal financial institutions regulatory agencies must provide final examination reports to financial institutions within 60 days after either the exit interview of an examination or the submission of additional relevant information by the institution. It also stipulates that if a financial institution does not have a resident examiner, the exit interview must occur within nine months of the examination's start, with potential extensions allowed through formal notice.

Additionally, it requires that the final report include an appendix detailing the examination materials relied on for any significant supervisory determinations.

2. Office of Independent Examination Review

The bill creates an Office of Independent Examination Review within the Federal Financial Institutions Examination Council. This office will be headed by an Independent Examination Review Director, appointed by the President with Senate confirmation. The Director will be responsible for:

• Investigating complaints from financial institutions regarding examination processes.
• Conducting regular meetings with stakeholders across the country to discuss examination practices.
• Reviewing and ensuring compliance with examination procedures across federal regulatory agencies.
• Conducting quality assurance programs for examinations.
• Handling appeals related to supervisory determinations made during examinations.
• Providing annual reports to Congress regarding performance and recommendations for improvements.

3. Independent Review of Supervisory Determinations

The bill grants financial institutions the right to seek an independent review of any significant supervisory determinations stated in a final report of examination. Key components of this process include:

• Institutions must notify the Independent Examination Review Director within 60 days of receiving the examination report to initiate a review.
• They must detail the specific supervisory determination in question and state the reasons for their disagreement.
• The institutions can request any additional information used by the agency that was not provided in the examination report.
• If an appeal is made, the Director can either handle it directly or refer it to an administrative law judge for a hearing.
• The Director must issue a final recommendation on the appeal within 60 days of the record closing, which the agency is bound to consider in its final determination.

4. Protection Against Retaliation

The legislation prohibits federal financial institutions regulatory agencies from retaliating against financial institutions for exercising their rights under this act. Retaliation includes any actions that could delay or negatively impact a financial institution resulting from appeals or complaints lodged under this bill.

5. Additional Amendments

The bill proposes various amendments related to regulatory appeals processes and updates the terms of engagement for relevant financial agencies, including the addition of provisions to protect parties from retaliation when they exercise their rights under the new regulations.

Relevant Companies

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