CFPB Announces Final Enforcement Action Rules
Last week, the Consumer Financial Protection Bureau (“CFPB”) finalized three rules and issued one interim rule outlining procedures related to violations of consumer protection laws. The press release announcing the final and interim rules is available here. The final rules take effect upon publication in the Federal Register.
- Rule on Investigations. The CFPB drew heavily from the FTC's current and proposed nonadjudicative procedures. The final rule is largely based on section 20 of the FTC Act and its corresponding regulations with a few notable distinctions, as discussed below.
Consistent with analogous FTC provisions, the CFPB’s final rule establishes the following: (1) the CFPB’s authority to conduct investigations in the interest of the public; (2) procedures for issuing information requests and civil investigative demands (“CIDs”); and (3) the rights of recipients of CIDs. While the CFPB has broad discretion in opening and closing investigations, the power to issue a CID is limited to the CFPB Director, Assistant Director of the Office of Enforcement, and Deputy Assistant Director of the Office of Enforcement. Consistent with the Dodd-Frank Act, the rule permits the CFPB to share confidential information with other agencies to the extent the disclosure is relevant to the agency’s authority. CID recipients have the right to (1) be notified of the investigation and the applicable provision of law; (2) retain or request a copy of everything submitted in response to a CID or document request; and (3) obtain counsel. The rule also allows the CFPB to refer investigations to appropriate Federal, State, or foreign government agencies with authority.
Unlike the FTC’s rules, the CFPB's final rule includes a provision disfavoring extensions of time for petitions to modify or set aside a CID. The CFPB believes this is appropriate in light of its significant interest in promoting an efficient process for seeking materials through CIDs. In addition, though both agencies' regulations require a statement of the nature of the conduct at issue and the relevant provisions of law, the FTC rule additionally requires that the recipient of the CID be advised of the "purpose and scope" of the investigation. Commenters expressed concern that the CFPB's exclusion of this phrase would lead to requests for material outside the scope of an investigation. The CFPB disagreed, noting that its notice provisions are consistent with the Dodd-Frank Act and provides for sufficient notice to recipients of CIDs.
- Rule on Adjudicatory Proceedings. The CFPB incorporated the adjudicatory rules of other agencies to create an efficient yet fair resolution of matters. Under this final rule, hearing officers must issue recommended decisions in each adjudication. Parties have the right to contest the recommended decision by filing a notice of appeal. The rule also grants parties access to non-privileged documents and reduces pre-trial procedures.
- State Official Notification Rule. This final rule provides how States should update the CFPB on actions they bring under the Dodd Frank Act. State officials must provide notice to the CFPB at least ten days before initiating an action under section 1042(a) of the Dodd-Frank Act. For matters of emergency, if State officials initiate an action to protect the public interest or prevent irreparable and imminent harm, they must notify the CFPB within 48 hours of filing the action. The notice must include information like the names of parties involved in the action and the nature of claims. In response, the CFPB can intervene and participate in the action as appropriate.
Companies should watch how the CFPB enforces these rules to avoid possible violations under the Dodd-Frank Act. The CFPB will begin accepting comments on this interim final rule after it is published to the Federal Register. Comments must be submitted 60 days after publication.