All Things FinReg


The Consumer Financial Protection Bureau (CFPB or Bureau) announced on March 6 three steps designed to advance its strategy on one of its key priorities: preventing consumer harm. The CFPB is (i) implementing an advisory opinion program to provide additional guidance to assist companies in better understanding their legal and regulatory obligations; (ii) amending and reissuing its responsible business conduct bulletin; and (iii) engaging with Congress to advance proposed legislation that would authorize the CFPB to establish a whistleblower program with respect to reporting violations of federal consumer financial law.

Taken together, the first and second of these steps further the Bureau’s stated goal of clarifying in a meaningful way the regulatory requirements applicable to covered businesses. At the same time, the proposed whistleblower program would bring the Bureau in line with other federal enforcement agencies, e.g., the US Securities and Exchange Commission, that have launched similar programs in part to enhance the detection of violations in an era of leaner agency staffing.

Under the CFPB’s advisory opinion program, parties can submit requests for an advisory opinion to the Bureau via its website. The CFPB will issue additional procedures in the near term for how requests will be addressed, including how the Bureau will prioritize requests. To increase transparency and to provide regulatory certainty to all regulated entities and other stakeholders, the Bureau will publish the responding advisory opinion in the Federal Register and on its website, and the opinion will include an interpretation of the CFPB’s existing rules.

Notably, this approach is in contrast with the current interpretive guidance process, through which responses to individual regulatory inquiries are generally nonbinding and available to the individual requestor only, meaning that responses are kept confidential and are of no guidance benefit to others. The Bureau states that that process will remain available alongside the advisory opinion program, as will the CFPB’s other efforts to provide guidance to the public. We view advisory opinions as beneficial in assisting industry with compliance efforts, especially with respect to providing color on what conduct or practices constitute a violation.

The CFPB originally published a responsible business conduct bulletin in June 2013. In its current announcement, the Bureau stated that the re-released bulletin updates and strengthens the original, in particular by clarifying the Bureau’s approach to potential favorable consideration in response to instances of responsible business conduct. The new bulletin reiterates the largely unchanged four categories of responsible conduct: self-assessing (which replaces the prior bulletin’s “self-policing”), self-reporting, remediation, and cooperation. If an entity meaningfully engages in these activities, the CFPB states that it “will favorably consider it, along with other relevant factors, in addressing violations of federal consumer financial law in supervisory and enforcement matters.”

According to CFPB Director Kathleen Kraninger, “[e]ntities that build a culture of compliance and engage in responsible conduct support consumer protection and the Bureau’s efforts to both prevent harm to consumers and enforce the law against bad actors.” Without adopting any bright-line rule or formula to be applied in all matters, the re-released bulletin provides some additional color on how the Bureau will address violations of federal consumer financial law in supervisory and enforcement matters involving entities that “meaningfully engage” in responsible conduct.

In short, depending on the nature and extent of an entity’s actions, the Bureau has a wide range of options available to properly account for responsible conduct, including: (i) using its discretion to close an enforcement investigation with no action; (ii) deciding not to include Matters Requiring Attention (MRAs) in an exam report or supervisory letter; or (iii) reducing the number of violations pursued or reducing the sanctions or penalties sought in any public enforcement action. For entities under the Bureau’s supervisory authority, responsible conduct could result in resolving violations non-publicly through the supervisory process. Even if the Bureau does take action, the re-released bulletin provides that those who engage in responsible conduct may receive other types of credit. We note, however, that this revised bulletin is a non-binding general statement of policy, and it remains to be seen how closely the CFPB will hew to this guidance in future enforcement matters.

Regarding the whistleblower program, the Bureau submitted the proposed legislative language to both houses of Congress, as well as the chairs and ranking members of the authorizing committees in both chambers. The proposal would amend Title X of the Dodd-Frank Act to provide the CFPB with authority to establish a whistleblower award program. According to the CFPB, the incentive created for employees to report wrongdoing to the Bureau will assist in advancing enforcement cases, especially as it relates to fair lending violations. Under the proposed legislation, in cases where a whistleblower provides voluntary information that leads to a successful enforcement action, the Bureau will be able to pay an award based on a percentage of the monetary sanctions collected in the action (with the maximum amount of any award being $10 million).

These announcements supplement other recent CFPB initiatives focused on providing additional compliance guidance and fostering the development of innovative products and services that benefit consumers, which we have previously reported on. These efforts include a policy statement regarding how the CFPB intends to apply the “abusiveness” standard in supervision and enforcement matters; a compliance assistance sandbox policy and a revised trial disclosure policy; and a revised no-action letter policy. Viewed collectively, these Bureau initiatives may bring greater transparency and certainty to CFPB supervisory, regulatory, and enforcement activities.