In recent weeks, the CFPB has discussed its supervision process, and we continue to gain valuable insight on the CFPB’s enforcement decision-making approach.  Today’s blog post highlights 10 lessons learned from companies that have faced a CFPB enforcement action.

  1. There appears to be little uniform enforcement policy. Each CFPB team leader seems to follow a different play-book.
  2. The CFPB is full of subject-matter novices, often trying to enforce subtly complex legal concepts, with years of historical development in the making. Rapid turnover in CFPB staff compounds the problem of the knowledge gap.
  3. The CFPB often shoots first and asks questions later. That is, it has a tendency to view complaints as always being valid, unless the company proves them wrong.
  4. You cannot make your policies and procedures too detailed. The CFPB expects to see a solid description of such.
  5. Deadlines are designed to put the subject/target company on the extreme defensive (e.g., CID response periods). The CFPB expects the company to respond immediately no matter what chaos it causes to the business; while the CFPB may then respond at its leisure.
  6. Once the CFPB ‘bites’ it rarely lets go. It is a tenacious opponent with a strong track record of success—and an open wallet to fund its attack.  It is of utmost importance that the CFPB be told at the outset, about the finances of the subject company.  The CFPB’s appetite for a fight may be lessened if there is little opportunity for a large settlement.
  7. Exculpatory evidence must be a part of any settlement discussion reporting. When settlements are put into the review process, it is important that the reviewer—generally the Director—gets to see the company’s own explanations, rather than having such exculpatory evidence filtered out by the reporting examiners.
  8. The CFPB loves the words “unfair” and “reckless” as the latter heats up the value of the settlement dramatically—$25,000/day.
  9. Some CFPB targets have been successful in coming up with creative formulations of settlement, as opposed to cash out the door. Think in terms of credit to customer accounts, refunds, or reduce the number of consumers entitled to relief.
  10. Finally, don’t neglect the importance of the press release that will come at the end of the enforcement action. Negotiate it along with everything else, as the company has not only customers to be concerned with, but also employees and lenders.