Perhaps reinforcing an outline shared during the director’s public appearance just a few days earlier, the Consumer Financial Protection Bureau this week announced changes to policies regarding civil investigative demands (CIDs).
The regulator said the actions are designed to ensure CIDs provide more information about the potentially wrongful conduct under investigation.
Consistent with the updated policy, the bureau explained in a news release that CIDs will offer more information about the potentially applicable provisions of law that may have been violated. Officials indicated CIDs will also typically specify the business activities subject to the bureau’s authority.
In investigations where determining the extent of the bureau’s authority over the relevant activity is one of the significant purposes of the investigation, the CFPB noted that staff may specifically include that issue in the CID in the interests of further transparency.
The regulator pointed out that the new policy takes into account recent court decisions about notifications of purpose, and is consistent with a 2017 report by the bureau’s Office of Inspector General that emphasized the importance of updating Office of Enforcement policies to reflect such developments.
Officials went on to note the new policy also is consistent with comments the bureau received in response to the requests for information it issued last year, seeking feedback about various aspects of its operations, including its use of CIDs in enforcement investigations.
The Consumer Financial Protection Act of 2010 authorizes the bureau to issue investigational subpoenas known as CIDs when looking into potential violations of law. The act provides that each CID “shall 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 the bureau set out this information in a section known as the “notification of purpose,” according to the regulator.
Both the American Financial Services Association (AFSA) and the National Association of Federally Insured Credit Unions (NAFCU) immediately cheered the bureau’s moves.
“The American Financial Services Association (AFSA) has long advocated that the bureau’s civil investigation demands (CIDs) be both reasonable and more specific given the impact they have on member companies who received vague CIDs in the past. We are pleased that the bureau is taking this approach that is consistent with recommendations we submitted responding to the Bureau’s requests for information,” AFSA president and chief executive officer Bill Himpler said.
NAFCU executive vice president and general counsel Carrie Hunt added, “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. 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. Going forward, we will continue to work with the bureau to improve confidentiality protections and allotted response time for CID recipients.”
The CFPB actions this week appear to be congruent with what director Kathleen Kraninger spelled out during a speech at the Bipartisan Policy Center on April 17. What sometimes begins with CIDs, Kraninger touched on how in-person, onsite examinations might unfold.
Kraninger closed her prepared remarks with this pledge.
“I want to reiterate my commitment to engagement with all the bureau’s stakeholders. All of you want to prevent consumer harm and see consumers have access to fair, transparent and competitive markets. The bureau cannot achieve that outcome alone. That means ensuring transparent processes, fostering relationships and communication, valuing the expertise that others bring, supporting productive public discourse,” she said.
That point resonated strongly with the Consumer Bankers Association (CBA).
“CBA members welcome director Kraninger’s common-sense, principled approach to the CFPB’s direction and her commitment to serve as an impartial regulator,” CBA president and chief exeucutive officer Richard Hunt said. “We applaud director Kraninger’s emphasis on ‘prevention of harm,’ the commitment to a level playing field for all financial institutions, a transparent rulemaking process and a consistent application of examinations.”