Alert

Consumer Financial Protection Bureau Issues Guidance on Impact of Responsible Business Conduct

July 2013

The Consumer Financial Protection Bureau (the “Bureau”) issued a Bulletin entitled “Responsible Business Conduct: Self-Policing, Self-Reporting, Remediation, and Cooperation.” (See CFPB Bulletin 2013-06, June 25, 2013.) The Bulletin “inform[s] those subject to the Bureau’s enforcement authority” that “there are activities they can engage in both before and after the conduct in question has occurred that the Bureau may favorably consider in exercising its enforcement discretion.” The Bureau noted that companies could mitigate penalties resulting from enforcement actions if they:

• proactively self-police for potential violations;
• self-report any potential violations;
• act quickly to remediate any harm caused by the violations; and
• cooperate with the Bureau’s investigation, above and beyond what is normally required.

The Bureau believes that these voluntary actions by companies subject to its enforcement jurisdiction will help further the Bureau’s mission of protecting consumers by enhancing the Bureau’s ability to detect violations of federal consumer protection laws and increase the efficiency of enforcement investigations. Accordingly, depending upon the extent of the party’s “responsible business conduct,” the Bureau could elect to resolve an investigation with no public enforcement action, treat the conduct as a less severe type of violation, reduce the number of violations pursued and/or reduce the penalties or sanctions sought by the Bureau.

The Bulletin, however, does clarify that, even if a company voluntarily undertakes efforts to self-police or self-report any violations or remediate the damage, it is far from certain that the company will automatically receive favorable treatment from the Bureau in connection with its enforcement proceeding or investigation. In that regard, the Bureau emphasized “that in order for the Bureau to consider awarding affirmative credit in the context of an enforcement investigation, a party’s conduct must substantially exceed the standard of what is required by law in its interactions with the Bureau.” That is no small feat given that the Bureau’s investigative procedures contain several compressed deadlines for complying with the Bureau’s investigative demands. See generally Anthony Rollo, Gerard Wimberly, & Gabriel Crowson, The ABC’s of a CFPB Civil Investigative Demand, 16 No. 5 Consumer Fin. Services L. Rep. (Aug. 10, 2012).

The Bureau’s Bulletin also cautioned that “self-policing, self-reporting, remediation, and cooperation with the Bureau’s investigation are unquestionably important in promoting the best interests of consumers, but so too are vigorous, consistent enforcement of the law and the imposition of appropriate sanctions where the law has been violated.” The Bureau’s issuance of the Bulletin in no way limits its discretion and responsibility to evaluate each case individually, based on its own facts and circumstances.

In short, the Bureau’s Bulletin confirms that a company subject to the Bureau’s enforcement jurisdiction will have an opportunity to negotiate more favorable treatment in the context of a Bureau enforcement proceeding or investigation, if the company has demonstrated “responsible business conduct” by self-policing or self-reporting violations, remediating any consumer harm, and cooperating in the Bureau’s investigation. That said, there is certainly no guarantee that the Bureau will actually treat the company favorably in light of the nature, extent, and severity of the violations or the harm to consumers caused by those violations.

For more information about the CFPB’s Bulletin or about the CFPB’s enforcement jurisdiction, and consent orders, please contact a member of our Consumer Financial Services Compliance team.