On June 25, the Consumer Financial Protection Bureau released a bulletin informing banks of ways they can favorably affect the ultimate resolution of an enforcement action from the bureau.
“The Bureau considers many factors in the exercise of its enforcement discretion,” the CFPB said in the bulletin. “This guidance is being provided to inform those subject to the Bureau’s enforcement authority that in addition to these and other factors, 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 said that its severity in an enforcement action depends on the nature, extent, and severity of the violations identified and the actual or potential harm from those violations. The CFPB also will consider the bank’s history of past violations and its effectiveness in addressing violations, the bulletin said.
The CFPB advised banks on four measures they can take to quell it wrath in an enforcement action:
The bureau will consider diminishing punishment on a bank when it proactively uses its resources to prevent and detect violations of consumer financial laws because the practice limits the size and scope of consumer harm.
The bureau made special mention of self-reporting as an activity that can “significantly affect the Bureau’s decision about whether a party should receive favorable consideration.” By self-reporting, a bank advances the Bureau’s mission and reduces the resources the CFPB must expend to identify violations. It also shows the bank’s commitment to address the conduct at issue. “For these reasons, the Bureau puts special emphasis on this category in its evaluation of a party’s overall conduct,” the CFPB said.
If a bank responds to a violation of consumer laws with prompt action, reducing harm and making recompense to those adversely affected, this also will be viewed positively. “Remediation may be even be viewed positively when the party [has] identified a potential rather than an actual violation,” the CFPB added.
A bank which takes step to cooperate with the CFPB above and beyond what the law requires will also receive special consideration. The bureau added, “Simply meeting [the obligations of the law] will not be rewarded by any special consideration.”
“Providers engaging in responsible conduct can help us detect illegal behavior more quickly, use our resources more efficiently, and increase the effectiveness of our enforcement investigations. In some cases, responsible conduct may also mean injured consumers receive money — or other meaningful remedies — more quickly from those who hurt them,” said Kent Markus, assistant director of enforcement at the CFPB. “If providers of financial products and services show significant responsible conduct in our enforcement investigations, we will take that into account when deciding which cases to pursue and how to resolve the ones we do pursue.”