FDIC Issues New Classification System For Citing Consumer Protection Violations

The FDIC announced that it revised the classification system for citing violations identified during compliance examinations to promote better communication with institutions and consistency in the classification system. The revised classification system replaces the current two-level system with a three-level violation system. According to the FDIC, the key purpose of the revision and the addition of a third level of violation is to effectively communicate the level of severity of violations so that supervised institutions may “appropriately prioritize efforts” to address identified issues.

Under the new classification system, the violations are classified as “Level 3/High Severity,” “Level 2/Medium Severity” and “Level 1/Low Severity.” Level 3 violations are those that “have resulted in significant harm to consumers or members of a community” and may result in restitution to consumers in excess of $10,000. Level 3 violations also include “pattern or practice” violations of