CFPB offers insight into regulation decisions

Last month, Consumer Financial Protection Bureau Deputy Director Steven Antonakes delivered remarks at a financial industry function.

Last month, Consumer Financial Protection Bureau Deputy Director Steven Antonakes delivered  remarks at a financial industry function. He spoke in some detail about how the CFPB approaches enforcement. His complete remarks, which can be found here, demonstrate the remarkable autonomy and subjectivity with which the Bureau wields its power.

Most government oversight organizations monitor through scheduled high-level visits to regulated entities. Antonakes noted that this method was impracticable given the large number of entities that fall under the oversight of the CFPB. Such a plan, he said, is geared toward the health of entire institutions and the role they play in the overall economy. Antonakes stated the CFBP is not primarily concerned with the well-being of the institutions that it regulates. Rather, they focus on risks to consumers.

Antonakes also addressed the CFPB’s internal decision-making with regard to enforcement actions. Complaints are evaluated by a committee which determines whether a matter will be resolved confidentially or publicly. Confidential action could take the form of a board resolution or memorandum of understanding. Public action would take the form of a civil complaint or a consent decree.

When making the determination between confidential or public action, Antonakes explained that the CFPB uses a common set of factors to ensure consistency. He described these factors as generally falling into “one of three buckets: violation-focused factors; institution-focused factors; and policy-focused factors.” He was unable, however, to offer much clarification on these factors beyond generalities.

Antonakes explained that violation-focused factors include the severity of the violation “in terms of the number of consumers affected, the magnitude of the harm, and the nature of the violation,” and the importance of deterrence. Institution-focused factors involve the actions of the entity, Antonakes said. He noted that confidential action is more likely where the entity voluntarily discontinues a practice or policy on its own. The decision will also take into account the level of cooperation the CFPB experiences.  The CFPB’s policy-focused factors include how the CFPB has treated similar violations in the past and how the CFPB’s action fits into the agency’s “broader priorities and goals.”

These three “buckets” are defined nowhere in Title X of the Dodd-Frank law that created the CFPB. Given that the authorizing stature plainly states that “the Bureau has the authority to administer, enforce, and otherwise implement federal consumer financial laws,” it is difficult to imagine what “broader priorities and goals” Antonakes has in mind. His remarks, however, make it clear that the Bureau will proceed with remarkable autonomy and subjectivity in its dealings with the financial industry.

Fredrikson & Byron Law