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The economic disruptions caused by the COVID-19 pandemic resulted in an abrupt shock to financial markets and affected many credit channels that households, businesses, and state and local governments rely on. In response, the Board of Governors of the Federal Reserve System took steps to support the flow of credit to these sectors by establishing emergency lending programs that made liquidity available to ensure market stability and provide lending support to various sectors of the economy.
In addition, the Consumer Financial Protection Bureau has continued to play a vital role throughout the pandemic by enforcing federal consumer protection laws and protecting consumers from abuse.
As the Board and the CFPB's independent inspector general, we provide robust oversight of their pandemic response efforts through continuous monitoring, audits, evaluations, and criminal investigations, as well as coordination with our oversight and law enforcement partners.
The following describes our ongoing and planned work. See the Work Plan for full details.
Monitoring of the Federal Reserve's Lending Programs
In response to the economic effects of the COVID-19 pandemic, the Federal Reserve created new lending programs to provide loans to employers, certain businesses, and communities across the country to support the U.S. economy. Specifically, the following programs have been created: the Main Street Lending Program, the Paycheck Protection Program Liquidity Facility, the Municipal Liquidity Facility, the Primary Market Corporate Credit Facility, and the Secondary Market Corporate Credit Facility. We initiated an active monitoring effort of these programs to gain an understanding of the operational, governance, reputational, and financial matters associated with them. Through this monitoring effort, we will refine our focus on the programs and identify areas for future audits or evaluations.
Audit of the CFPB's Consumer Response Operations
Pursuant to the Dodd-Frank Act, the CFPB's Office of Consumer Response collects, monitors, and responds to consumer complaints on financial services and products. The CFPB uses these consumer complaints to help inform the agency's supervision activities, enforce federal consumer financial laws, and write rules and regulations. With an increase in consumer complaints as a result of the COVID-19 pandemic, Consumer Response faces an operational risk with respect to the timeliness in which it can respond to consumer complaints. We plan to assess the effectiveness of the CFPB's processes for reviewing and responding to consumer complaints.
Evaluation of the Federal Reserve System's Paycheck Protection Program Liquidity Facility (PPPLF)
In response to the COVID-19 pandemic, the Board established the PPPLF to extend credit to financial institutions that originate loans through the U.S. Small Business Administration's guaranteed Paycheck Protection Program (PPP), taking the PPP loans as collateral. The PPPLF, managed by the Federal Reserve Bank of Minneapolis and operated out of the 12 Federal Reserve Banks, distributed billions of dollars to eligible lenders. We will assess the effectiveness of the System's internal controls for PPPFL processes related to (1) identifying and managing risk and unresolved loans, (2) addressing nonpayment, and (3) detecting and mitigating fraudulent collateral.
Major Management Challenges