Since its launch in 2011, the Consumer Financial Protection Bureau (CFPB or Bureau) has developed a reputation for its aggressive investigation and litigation tactics. The Bureau's Enforcement Policies and Procedures Manual for its enforcement staff provides a peek behind the curtain at how CFPB enforcement actions unfold.
Despite the CFPB's push for transparency, a copy of the 390-page document is not available on its otherwise comprehensive website. (By comparison, the Federal Trade Commission (FTC) has for many years made available its Operating Manual as a public record.)
Following sections on document maintenance and retention policies, the manual includes a discussion of its policies governing the conduct of investigations, litigation, remedies, adjudicative proceedings, working with other law enforcement partners, practice guidance, and administrative issues, as well as model forms and sample language used in investigations and litigation by CFPB enforcement staff.
A memo written by then Enforcement Director Richard Cordray (now Director) setting out the "enforcement action process" also is included, which sets out the notification, consultation, and approval policies and procedures that the Office of Enforcement follows when taking critical action throughout the various stages of the enforcement process.
The manual also describes the steps CFPB staff are supposed to follow when opening an enforcement matter and how staff identify subjects for investigations in the first place. For example, triggers for an inquiry can come from a number of sources, including informants, news media, market observation, supervisory examinations, and law enforcement partners. While the manual includes extensive discussion of the process for consultation between enforcement staff and other CFPB divisions, there's no specific instruction to consider the cost to companies from the disruption caused by an investigation or the length of time an investigation may take.
Enforcement matters are divided into two categories: (1) the "Research Matter" and (2) the formal "Investigation." According to the manual, an enforcement matter may be opened at any stage, whether it is the research, the investigation, or when the CFPB is ready to approach a subject to settle or file a complaint. The decision process of whether to conduct a Research Matter or Investigation is considered in light of its impact on (1) Bureau resources; (2) the market in general; (3) the potential subject(s); (4) other Bureau divisions; (5) the Office of Enforcement Strategic Plan; and (6) law enforcement partners.
The FTC and the Bureau have overlapping jurisdictions over a number of nonbank entities and share the ability to enforce a number of the same federal consumer financial laws. Pursuant to the Consumer Financial Protection Act and a memorandum of understanding, staff are required to notify the FTC upon approval of a Research Matter and at least five days before opening an Investigation of nonbanks.
In the manual, enforcement staff are reminded that the CFPB is authorized to investigate merely on suspicion that any person has violated any provision of federal consumer financial law, or to seek assurance that a violation has not occurred, which is a practice that has come under criticism. Based on petitions to quash CIDs published by the CFPB, the practice of investigating "any person" appears to continue to be standard operating procedure. The manual does little to constrain the Assistant Director for Enforcement from approving the opening of investigations and does not identify anyone as having veto power over an investigation.
As part of the litigation policies section of the manual, staff are told to consider whether alleged violations fall within the applicable statute of limitations, and whether it would be prudent to seek an agreement tolling the application limitations period. Staff are informed that "Where no statute of limitations is specified in the law, an action seeking a fine, penalty, or forfeiture must be brought within five years from the date the claim first accrued pursuant to 28 U.S.C. Section 2462." For the enumerated consumer laws transferred under the Dodd-Frank Act to the CFPB, staff are informed that "unless specified otherwise, there is no limitations period when bringing an action for other relief, including equitable monetary relief." The manual also sets out the Bureau's view on the legal standards for seeking extraordinary remedies, including temporary restraining orders, asset freezes, and receiverships. There's also a section on remedies, including the detailed framework for civil money penalties.
Last, there are detailed policies on the sharing of information with law enforcement, criminal investigations, and storage of materials obtained during an investigation. There's also ethical guidance provided to staff, including when and how information may be obtained from the consumer response office, which handles consumer complaints for the Bureau.
The manual was released in response to a Freedom of Information Act request, and portions of the copy made available to us were redacted. The Enforcement Policies and Procedures Manual is available for download here.
The manual includes a blanket disclaimer stating that "it is not intended to nor should it be construed to (1) restrict or limit in any way the CFPB's discretion in exercising its authorities; (2) constitute an interpretation of law; and (3) create or confer, upon any person, including one who is subject of a CFPB investigation or enforcement action, any substantive or procedural rights or defenses that are enforceable in any manner." The manual does not include dates or details concerning its revision history, if any.
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For more information, please contact Jonathan L. Pompan at 202.344.4383 or [email protected].
Jonathan L. Pompan, Andrew E. Bigart, and Alexandra Megaris advise on consumer financial services matters and represent clients in investigations and enforcement actions brought by the CFPB, FTC, state attorneys general, and regulatory agencies.
For more information about this and related industry topics, see www.Venable.com/cfpb/publications.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can be provided only in response to a specific fact situation.