A kinder, gentler CFPB? Bureau announces new enforcement rules

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Kathy Kraninger may be charting a different path as director of the Consumer Financial Protection Bureau than that of her immediate predecessor, Mick Mulvaney, but one area where it appears Kraninger’s CFPB will be similar to Mulvaney’s is in the bureau’s friendlier attitude toward the companies it regulates.

To that end, the CFPB announced Tuesday that it is making changes to its policies on Civil Investigative Demands, the tool the bureau uses to issue investigational subpoenas to companies when probing potential violations of law.

Under the newly announced policy, the CFPB will provide more information to companies about the “potentially wrongful conduct under investigation” in order to provide companies with more “transparency.”

According to the CFPB, its CIDs will now “provide more information about the potentially applicable provisions of law that may have been violated.”

Additionally, the bureau said that CIDs will also “typically specify the business activities subject to the Bureau’s authority.”

Beyond that, the CFPB said that with investigations where determining how much authority the bureau has over a certain activity is one of the “significant” reasons for the investigation, the bureau “may specifically include that issue in the CID in the interests of further transparency.”

According to the bureau, the new policy is partially based on several recent court decisions, which held that previous CIDs were unduly extensive for certain companies to handle – a factor previously discussed by Mulvaney when he made his own changes at the bureau.

“It is not appropriate for any government entity to ‘push the envelope’ when it comes into conflict with our citizens. The damage that we can do to people could linger for years and cost them their jobs, their savings, and their homes,” Mulvaney wrote in a memo to CFPB employees in January 2018.

“If the CFPB loses a court case because we ‘pushed too hard,’ we simply move on to the next matter. But where do those that we have charged go to get their time, their money, or their good names back?,” Mulvaney continued. “If a company closes its doors under the weight of a multi-year Civil Investigative Demand, you and I will still have jobs at CFPB. But what about the workers who are laid off as a result? Where do they go the next morning?”

During his time at the bureau, Mulvaney made several broad policy changes and signaled that the CFPB planned to rein in its enforcement actions. Namely, Mulvaney said the bureau would focus on “equally protecting the legal rights of all, including those regulated by the bureau,” and would cease to “push the envelope” when it came to new rules, regulations, or enforcement.

And while Kraninger has reversed two of Mulvaney’s most controversial decisions (changing the name of the agency to the Bureau of Consumer Financial Protection and gutting the bureau’s advisory boards), Kraninger is now keeping with Mulvaney’s policy of being a little nicer to the financial services industry.

According to the CFPB, these new policy changes also take into account reaction received from the financial services industry last year when the bureau asked about how it might alter its use of CIDs.

And at least one group in the financial services industry welcomed the new enforcement policy.

“The CFPB’s policy changes to its CIDs procedures is welcomed news as credit unions will no longer be subject to ambiguous and vague requests for information,” National Association of Federally-Insured Credit Unions Executive Vice President and General Counsel Carrie Hunt said in a statement.

“We appreciate the Bureau listening to our concerns and committing itself to providing relevant parties with additional information on the purpose and scope of an investigation,” Hunt continued. “Going forward, we will continue to work with the Bureau to improve confidentiality protections and allotted response time for CID recipients.”

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