It can cost companies a significant amount of time and resources to understand relevant consumer financial services law and regulations, navigate a thicket of present and past guidance and rulemakings, and keep up with the CFPB's policies and procedures. Many companies may seek professional assistance, especially if they are under investigation and facing the threat of an enforcement action, but now there's an additional factor: the possibility of heightened scrutiny if they are being represented by a CFPB alum.
New guidance issued to CFPB staff, "Ethics Guidance for Engaging with Former Federal Employees," was released on November 19, 2021. CFPB Director Rohit Chopra said the guidance is intended to protect the public trust and detect revolving-door misconduct. Chopra raised concerns that companies subject to CFPB oversight and enforcement may feel the need to hire former CFPB staff to make sure they are prepared to satisfy legal and regulatory compliance obligations under federal consumer financial law. Accordingly, Chopra vowed the CFPB will apply heightened scrutiny to policymaking and decisions when a party has hired former CFPB staff.
"No regulated entity should feel the need to retain the services of a former government employee to meet its legal and regulatory obligations," he said in a public statement accompanying the guidance. "At the CFPB, agency alumni will not get special treatment. In fact, it will be just the opposite. We will be applying heightened scrutiny to matters and decisions where a party has employed or retained the services of a former employee to ensure that the CFPB is meeting the highest standards of ethics and integrity."
It is not uncommon for companies to consider hiring former government employees to engage with their former employer and believe this can be a unique advantage. However, the CFPB staff are subject to a number of restrictions that limit their access to information, policymaking, and decision-making processes beyond the specific aspects of matters they work on pursuant to internal rules and procedures, including ethical conduct rules issued in August 2017 and initially in 2012.
The new guidance concerning departing and former CFPB employees advises staff to:
- Protect supervisory, confidential, and non-public Bureau information.
- Provide no preferential treatment for former federal employees.
- Report potentially unlawful communications by the former federal employee.
- Report any suspected disclosure of non-public or confidential Bureau information by the
- Report any communication between former employees and the Bureau during the first year after they leave the Bureau.
- Report behind-the-scenes assistance concerning any specific-party matter in which the former attorney participated.
In a related twitter post, Chopra repeated his warning: “Agency alumni should never get special treatment. At the @CFPB, we will apply heightened scrutiny to matters where a party has employed or retained the services of a former government employee to ensure that we meet the highest standards of ethics and integrity."
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Jonathan L. Pompan, a partner in the Washington, DC office of Venable LLP, co-chairs the firm’s Consumer Financial Protection Bureau (CFPB) Task Force. His practice focuses on providing comprehensive legal advice and defending enforcement investigations on behalf of a broad spectrum of clients, such as nonbank financial products and services providers, including fintechs, lenders, debt buyers and collectors, advertisers and marketers, and trade and professional associations, before the CFPB, the Federal Trade Commission, state attorneys general, and regulatory agencies.
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.