The Consumer Financial Protection Bureau (CFPB or Bureau), fresh off Director Richard Cordray’s Senate confirmation over the summer, is moving forward with more confidence and purpose in its investigation and enforcement strategies, as we last discussed in our report on the CFPB’s roadmap for “Responsible Business Conduct.” Two recent developments suggest that the Bureau is streamlining its supervisory process as well as broadening its enforcement efforts. Companies should broaden their own efforts to strengthen compliance programs, to prevent potential violations of federal consumer financial laws and avoid CFPB scrutiny.
On October 23, Cordray addressed the Reuters Washington Summit, stating that the Bureau is seeking to punish individual wrongdoers, as well as companies, and seeking admissions of wrongdoing from bad actors who commit violations of consumer financial laws. Cordray stated, “Individuals need to know that they’re at risk when they do bad things under the umbrella of a company.” Cordray also stated that, on a case-by-case basis, the CFPB would seek to obtain admissions of guilt from parties, similar to successful efforts of the SEC and CFTC to obtain admissions of guilt in recent, high-profile settlements.
Last month, in comments made on the Morning Money Breakfast at the Peter G. Peterson Foundation, Cordray addressed the CFPB’s recent decision to stop sending enforcement attorneys to its examinations of banking and nonbanking institutions’ compliance with applicable consumer protection laws and regulations. The Bureau had received pressure from both the financial industry and the Federal Reserve Board’s OIG (also the OIG for the Bureau under Dodd-Frank (see Pub. L. No. 111-203, § 1801, 124 Stat. 1376, 2080 (2010)(codified at 5 U.S.C. app. § 8G(c))) to re-evaluate this practice. The CFPB’s internal review determined that the CFPB would no longer send enforcement attorneys to routine examinations of supervised institutions, effective Nov. 1, 2013, to provide for more cooperation in the supervisory process and increase efficiency. Cordray stated that the CFPB’s decision was based on the better use of “deploying resources” and “allocating personnel.”
Director Cordray also provided comments about best practices and compliance, giving businesses insights that can help them better prepare for the CFPB’s increasingly aggressive supervisory and enforcement efforts. Cordray wants the industry to move beyond mere compliance with federal consumer financial laws. Although the agency has no legal authority to insist upon best practices, he sees the agency as having a discernible impact on best practices. He notes that the publicly available Consumer Complaint Database, which the CFPB uses to help adjust its risk scope examinations and prioritize enforcement actions, is helping the industry understand certain patterns of issues concerning consumers. Cordray advised companies to use this information as well as their own customer complaints to get ahead of the issues and become more responsive to those complaints, which will, in turn, minimize legal, regulatory and reputational risk.
The CFPB has weathered the political storm, gained confidence in its constitutionality and now seeks to assert its authority over the largest consumer markets in the world. We should expect only more efforts by the CFPB to flex its regulatory muscle.