In last week’s blog post, I discussed one of my key takeaways from the American Bar Association (ABA) Business Law Section Spring Meeting—not all financial institutions are created equal. The CFPB expects that a company’s policies and procedures will be tailored to the nature, size, scope and complexity of the particular company. Not only is this a good business practice, it is the law.
In today’s post, we continue the same theme in the context of CFPB enforcement actions. From time to time, our blog discusses CFPB enforcement actions (e.g., here and here). And while there are certainly common elements, put simply, the CFPB treats different companies differently in enforcement actions.
At the ABA Spring Meeting, I attended a presentation on Unfair, Deceptive or Abusive Acts or Practices (UDAAP) with a panel that included an FTC and CFPB representative, among others. The session offered very good insight into the CFPB’s approach to enforcement actions. To summarize—and reiterate last week’s message— not all financial institutions are created equal.
To a certain degree, the CFPB takes a case-by-case approach to enforcement actions, and some companies may be higher on the priority list than others. The supervisory focus of the CFPB is centered on risk to consumers on a product-by-product basis. In terms of exercising its UDAAP authority, expect the CFPB to look for ‘debt traps’, scrutinize debt collection practices and seek out companies committing discrimination.
Once a company is on the CFPB’s radar screen, there are several factors that can ultimately affect the outcome of an enforcement investigation. The CFPB representative emphasized the importance of a company engaging in “responsible conduct” before and after a compliance violation occurs. In 2013, the CFPB published a Bulletin outlining “responsible conduct” that it will consider in enforcement actions. Specifically, responsible conduct includes: self-policing, self-reporting, remediation and cooperation. As the Bulletin explains, “If a party meaningfully engages in these activities … it may favorably affect the ultimate resolution of a Bureau enforcement investigation.” Basically, the CFPB wants to see that a company goes above-and-beyond the minimum required by the law.
In an enforcement action, there are other things a company can do to better its position (or, conversely, harm its position) in the eyes of the CFPB. For example, companies need to be truthful with the CFPB. If a company representative acts as an obstructionist, the CFPB will take note. Along those same lines, once an enforcement action begins, a company can request an ‘up-the-chain’ meeting, but it should not try to circumvent the proper chain of command (i.e., make the request through the assigned enforcement staff).
Not all enforcement actions are created equal. Understanding this will help a company navigate CFPB supervision and enforcement.