On February 7, 2018, the Consumer Financial Protection Bureau ("CFPB" or "Bureau") released the third installment of its call for comments on the Bureau's functions. The latest request for information ("RFI") on the CFPB's enforcement processes should spark the interest of previously investigated and yet-to-be investigated entities alike. Comment letters should include specific suggestions on how the Bureau can change the enforcement process and identify specific aspects of the CFPB's existing enforcement process that should be modified. In addition to considering the regulations governing CFPB investigations, 12 C.F.R. part 1080, commentators should consider reviewing the CFPB Office of Enforcement's Policies and Procedures Manual, which governs the enforcement process. According to the RFI, commentators should include supporting data or information on impacts and costs, where available.

The RFI requests comments on the following topics:

1.      Communication between the Bureau and the subjects of investigations

The CFPB seeks comments on the timing, frequency, and content of communications from the Bureau. Bureau regulations do not address these subjects, but subjects of CFPB investigations may have direct experience with infrequent and incomplete communications with enforcement staff during investigations. In particular, enforcement staff is often reticent to articulate the concerns underlying an investigation. While the agency's concerns are sometimes evident on the face of the information requests contained in a Civil Investigative Demand ("CID"), when those requests are far-reaching it is often hard to ascertain what specific conduct, if any, is the cause for the Bureau's concerns. Additional information regarding the status of the investigation and staff's preliminary thinking would also be helpful to investigation subjects.

2.      The length of the Bureau's investigations

The Bureau's internal guidelines suggest that enforcement staff should settle or file suit within two years of opening an investigation. Commentators should consider whether that timeline is appropriate, and what burdens that timeline may impose on an entity's financial and human resources.

3.      The Bureau's Notice and Opportunity to Respond and Advise ("NORA") process

The CFPB seeks comments on its NORA bulletin and whether the NORA process should be mandatory rather than discretionary. It also seeks comments on the contents of the NORA letter that investigation subjects are provided as part of the NORA process. The NORA process consists of enforcement staff orally informing subjects of the claims that staff intends to recommend. The level of detail provided on a NORA call varies widely among enforcement staff, with some providing only the most cursory description of the claims that will be recommended or the evidence to be relied upon. As the NORA process is one of the only opportunities for investigation subjects to present their view of the case, including legal, factual, and policy arguments about the matter and potentially unintended consequences from an enforcement action, more detailed descriptions of potential claims and their bases would help enforcement subjects provide a more appropriate response. NORA responses are also required within 14 days, which can be a challenging timeline in which to prepare a comprehensive response. While extensions are often granted, that is not always the case. Commentators may consider commenting on the adequacy of the information provided during the NORA process, whether the staff's allegations should be provided in writing, and the deadline for submission of NORA responses. Commentators could draw from experience with other agencies, such as the Wells process at the Securities and Exchange Commission, on which the CFPB process was modeled.

4.      The right to make an in-person presentation to Bureau personnel prior to the CFPB determining whether to initiate legal proceedings

Although the Bureau often grants investigation subjects the opportunity to make a presentation in connection with the NORA process, allowing such presentations is discretionary. Commentators may also consider commenting on which "Bureau personnel" should be available for such in-person meetings.

5.      The calculation of civil money penalties ("CMP"), including whether the CFPB should adopt a CMP matrix and the content of such a matrix

The CFPB does not have a CMP matrix and the basis for CFPB CMP demands is often unclear. The Consumer Financial Protection Act establishes three penalty levels (for violations, reckless violations, and knowing violations) and outlines five CMP mitigating factors that the Bureau should take into account when establishing an appropriate CMP. The CFPB does not appear to have an established process for determining the appropriate penalty level or the application of the statutory mitigating factors. In addition to looking to these statutory guides for penalties as the basis for a matrix, commentators may also consider reviewing the OCC's CMP matrix and the more detailed factors that agency considers when imposing CMPs, including intent, concealment, prior violations, duration, and the number of instances of a violation. This is one of several areas where the Bureau's enforcement function could benefit from greater consistency and transparency.

6.      The standard provisions in Bureau consent orders, including conduct, compliance, monetary relief, and administrative provisions

The Bureau's consent orders contain certain standard provisions imposing reporting obligations, compliance plans, consumer relief, and recordkeeping requirements. Commentators may consider providing the Bureau with detailed data and information on the burden of such obligations, including challenges in implementing consumer redress, timeframes for submitting reports, and ongoing compliance obligations.

It is unclear if this aspect of the RFI is seeking comment on how the Bureau determines whether consumer redress is appropriate and, if so, how such redress should be calculated. Courts have recently begun pushing back on broad CFPB demands for consumer redress and Acting Director Mulvaney has indicated that the Bureau will be focusing on cases with "quantifiable and unavoidable" consumer harm. This is another area where the Bureau could benefit from greater consistency in its approach and clearer guidelines as to when such redress is appropriate.

7.      Whether and how the CFPB should coordinate enforcement activity with other federal and/or state agencies with overlapping jurisdiction

The Bureau has often coordinated its enforcement activities with other federal and state agencies, for better or worse. While such coordination may help enforcement subjects avoid redundant or conflicting demands from regulators, it can also impose additional costs in defending investigations and resolving claims. Moreover, there has long been a concern about the Bureau sharing information with state attorneys general. Commentators should consider providing the Bureau with specific examples of how such coordination, or lack thereof, is burdensome and unpredictable and how the Bureau could modify its practices.

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One important issue not expressly addressed by the RFI is the Bureau's process for determining what (if any) claims to bring and for ensuring consistency in its approach, both within the Office of Enforcement and across the agency. As we've previously noted, the Bureau has at times taken inconsistent approaches to how it considers similar conduct. While the process issues addressed in the RFI are all critically important, at the end of the day it is the claims alleged and the remedies sought that are the real impact of the CFPB's enforcement tool. The Bureau should be striving for a process that results in a consistent and fair application of the law, in which similar conduct is treated similarly in terms of both legal claims and remedies (both consumer redress and CMPs). Commentators should consider commenting on these broader issues as well.

Comments are due 60 days after the RFI is published in the Federal Register. The CFPB expects the RFI to be printed on February 12, 2018.

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