House committee queries recent lack of restitution

The House Financial Services Committee has sent a letter to Kathy Kraninger, director of the Consumer Financial Protection Bureau, requesting additional information on recent enforcement actions that resulted in no restitution to consumers.

The House Financial Services Committee has sent a letter to Kathy Kraninger, director of the Consumer Financial Protection Bureau, requesting additional information on recent enforcement actions that resulted in no restitution to consumers.

The letter is the first of what is likely to be many such inquiries now that new Democratic leadership is in place in the House.

The letter, signed by Committee Chairwoman Maxine Waters (D-Calif.), stated that “the Committee has serious concerns about how the Consumer Bureau is exercising its enforcement activity, especially how it is determining whether to require companies to pay redress to consumers that have been harmed.”  The letter mentioned three recent settlements that involved no restitution. The Committee noted that this was in stark contrast to the activities of the bureau under its previous director and cited the provisions of the Dodd-Frank Act which authorized the bureau to “obtain relief for consumers, including the refund of money, restitution, or the payment of damages or other monetary relief.”

The first settlement mentioned was a consent decree filed with Sterling Jewelers that alleged violations of federal and state laws in connection with issuing credit cards. The proposed settlement required Sterling to pay a $10 million civil money penalty to the CFPB and a $1 million civil money penalty to the State of New York. No restitution to consumers, however, was required.

The second enforcement action cited in the letter involved defendants who were alleged to have engaged in unlawful conduct in connection with offering “short-term loans to consumers located in the United States through a network of affiliated companies located in Canada and Malta.” Although the defendants were made to alter several policies and forbidden from offering some products, there was no monetary penalty at all.

The third case cited by the letter concerned a lender offering payday loans that were in violation of state law. Waters noted that the complaint, originally filed under the previous director, specifically sought “damages and other monetary relief as the Court finds necessary to redress injury to consumers.” However, Waters wrote, the final settlement agreement seeks no such relief.

The letter asks the CFPB to provide records related to the three settlements, including “all documents and communications referring to or related to the issue of restitution” in each. The Committee demanded the documents be delivered on or before March 5.