Banking and Finance Law Daily Industry groups urge CFPB to reform CID processes
Monday, April 30, 2018

Industry groups urge CFPB to reform CID processes

By Katalina M. Bianco, J.D.

A number of industry trade groups have commented on the Consumer Financial Protection Bureau’s civil investigative demand (CIDs) processes in response to the Bureau’s Request for Information (RFI) on its CIDs released in January of this year (see Banking and Finance Law Daily, Jan. 24, 2018). The groups approve of the Bureau’s reassessment of its CID procedures and offered recommendations for improvement.

Joint letter. The Consumer Bankers Association, Financial Services Roundtable, and Consumer Mortgage Coalition jointly commented on the Bureau’s RFI, calling for the CFPB to reform its procedures "to create a fairer and less burdensome process." The associations noted that their issue is not with the CFPB’s mission but with its methods.

"The Bureau has used civil investigative demands in a manner that has been opaque, burdensome, and often unfair to providers of financial services," the trade associations wrote. "These commonsense reforms will ensure rules and regulations are enforced appropriately for not just supervised institutions but also consumers."

The associations provided the Bureau with recommendations for initiating investigations into CID subjects over which it has supervisory authority and those not under its authority, noting that in either case, transparency regarding internal communications should be enhanced.

The associations also recommended the Bureau:

  • increase safeguards to ensure a meaningful review of CIDs by its enforcement division prior to issuance;
  • adopt procedures ensuring that CID subjects have a full and fair opportunity to respond; and
  • take steps to improve CID recipients’ understanding of an investigation, such as enhancing the information set out in the Notification of Purpose.

Center for Capital Markets Competitiveness. The Center for Capital Markets Competitiveness (CCMC) wrote in its comment letter that while it is important the Bureau investigate potential wrongdoing, investigations must be handled "within appropriate parameters that are established through due process and uphold important rights such as free speech."

The CMCC offered the Bureau four guiding principles:

  1. Protect institutions’ free speech rights.
  2. Keep petitions to set aside CIDs private so institutions are not deterred from asserting their rights.
  3. Provide subject institutions with fair notice the CFPB is investigating potential violations.
  4. Tailor requests to relevant documents that could provide information about an alleged violation.

The CIDs’ Notification of Purpose statements should clearly describe the specific conduct under investigation, the relevant time period, and the exact statutory provisions of law alleged to have been violated.Mortgage Bankers Association. The Mortgage Bankers Association reiterated its support of the Bureau’s reassessment of its processes and practices after being in operation for six years and offered its own recommendations for CIDs moving forward. These changes, the MBA wrote, would benefit both CID recipients and the Bureau.

  • The Bureau should establish a standard that clearly articulates when the Bureau has sufficient "reason to believe," a requirement under the Dodd-Frank Act, to issue a CID.
  • The attorney-client privilege status of materials submitted to the Bureau should be respected.
  • The Bureau should adopt more flexible processes and time periods for filing petitions to modify or set aside a CID as well as for the 10-day meet and confer requirement.
  • Allow petitioners to see Bureau investigators’ responses to petitions to modify or set aside a CID.
  • Review of CID petitions should be conducted by a neutral party, such as an administrative law judge, rather than by the CFPB director.

Companies: Center for Capital Markets; Consumer Bankers Association; Consumer Mortgage Coalition; Financial Roundtable; Mortgage Bankers Association

MainStory: TopStory CFPB DoddFrankAct EnforcementActions OversightInvestigations

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