Life cycle of an enforcement action

A central part of the CFPB’s mission is to promote compliance with federal consumer financial laws. CFPB focuses its enforcement on addressing actual harm to consumers. When an institution violates the law and causes real and meaningful harm to consumers, the CFPB uses its enforcement authority to ensure that violations are remedied and consumers are made whole.

The CFPB is charged with taking appropriate enforcement action to address violations of Federal consumer financial law, including filing public enforcement actions when appropriate. But not all situations require an adversarial process and the pursuit of an enforcement action. The CFPB seeks to collaborate with institutions to remedy legal violations voluntarily and make consumers whole for any harm they have suffered. Institutions who self-report violations will not be unnecessarily punished for their candor and willingness to proactively address problems. This approach maximizes the benefit to consumers, and ensures any harm can be addressed quickly, instead of waiting years for the resolution of litigation. In any event, the CFPB will take no more time than necessary to arrive at a fair resolution that accounts for the interests of consumers, institutions, and the CFPB.

Commencing enforcement investigations

The CFPB will ensure its enforcement actions comport with this basic tenet of due process. CFPB enforcement actions are rooted in a clear grant of statutory authority or a regulation promulgated through notice and comment. The CFPB does not seek to stretch the bounds of its statutory authority through novel interpretations or advance a policy agenda through its enforcement actions.

Enforcement relies on a number of sources of information to identify potential issues that may warrant opening an investigation, including:

• Consumer complaints
• The Bureau’s whistleblower hotline
• Referrals from federal regulators and other local, state, and federal agencies
• Market intelligence, and
• The results of supervisory exams

In assessing whether to open an investigation, Enforcement weighs a number of factors, including, but not limited to, whether:

• There is a plausible set of facts that, if proven, would amount to a violation of one or more federal consumer financial laws
• There is reason to believe that one or more specific entities may be engaging in the conduct described in those facts
• There is evidence of a magnitude of harm that justifies investment of resources
• The states or other regulators are not better suited to address the issue
• There are sufficient resources available to properly address the matter, and
• The devotion of those resources is consistent with the strategic planning and articulated priorities or warrants a conscious departure from those plans and priorities

The existence of an investigation does not mean that the subject has violated the law.

Fact gathering

We are authorized to conduct investigations before instituting judicial or administrative adjudicatory proceedings under federal consumer financial law. Enforcement uses investigations to gather facts and identify violations of federal consumer financial law to determine whether a public enforcement action is necessary. Specifically, the Consumer Financial Protection Act authorizes us to issue investigational subpoenas known as civil investigative demands (CIDs) when looking into potential violations of law. A CID may demand, among other things, documents, emails, reports, answers to written questions, and oral testimony. Each CID is required to state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation. CIDs issued by us set out this information in a section known as the “notification of purpose.” CID recipients have a statutory right to petition the Bureau’s Director for an order modifying or setting aside a CID. If necessary, we may seek to enforce a CID in federal court.

Hearing from subjects of investigation

The Notice and Opportunity to Respond and Advise (NORA) process is used by Enforcement, at its discretion, to afford individuals and entities under investigation an opportunity to present their positions to Bureau staff before a lawsuit is filed against them. The NORA process strikes a balance between fairness to those under investigation and protection of the public interest. The discretionary framework of the NORA process allows us to retain our ability to respond to unlawful conduct in a timely fashion.

The primary objectives of the NORA process are to:

• Allow Persons under investigation the opportunity to be heard before the filing of a lawsuit in situations where delay will not unduly harm consumers
• Help ensure that enforcement actions are based on sound policy, and that they effectively further our priorities
• Alert us to potential unintended and undesirable consequences of enforcement actions, and
• Help ensure that we are aware of any material facts relevant to both its investigations and contemplated enforcement actions

Public enforcement actions

When warranted by the investigation, the CFPB is charged with taking appropriate enforcement action to address violations of federal consumer financial law, including filing public enforcement actions when appropriate. But, as noted, not all situations require an adversarial process and the pursuit of an enforcement action. The CFPB seeks to collaborate with institutions to remedy legal violations voluntarily and make consumers whole for any harm they have suffered. Alternatively, Enforcement may close the investigation without taking public action.

If the Director authorizes a public enforcement action, we may bring the action in state or federal court or institute an administrative adjudication proceeding. Administrative adjudication proceedings are formal adversarial proceedings conducted by an administrative law judge, who issues a recommended decision to the Bureau’s Director. The Director issues a final decision, either adopting or modifying the administrative law judge’s recommended decision.

When we enforce the law, we or a court may order the defendant to take action to remedy the harm it caused consumers. This can include requiring the person or company to compensate its victims for this harm by providing consumer redress. Obtaining consumer redress is a top priority in any Enforcement action. In addition, we also have obtained appropriate injunctive relief designed to stop unlawful conduct and prevent future violations. In some instances that relief has included banning individuals and companies from future participation in the marketplace.