Over-Emphasis on Enforcement at CFPB Leads to Inefficiency, ABA Says

The Consumer Financial Protection Bureau has to date over-emphasized enforcement activities as part of its regulatory toolbox, the American Bankers Association said in a comment letter to the bureau today. As a result, it has too seldom employed less adversarial supervisory solutions that facilitate compliance in a broader way. “Although the bureau has a robust supervision program, it has consistently chosen enforcement over supervision to address alleged compliance issues,” ABA wrote, noting that over-reliance on enforcement wastes public and defendant resources, risks inadequate consumer redress through the court process and leads to a less transparent financial marketplace.

ABA specifically called out the previous CFPB director’s practice of relying on “regulation by enforcement,” in which regulated entities would be expected to review consent orders and other individual enforcement actions to glean insights for their own compliance efforts. “The bureau should not rely upon the process of bringing and settling enforcement actions as a means of providing guidance,” ABA said. “Instead, the bureau should provide the kind of advance guidance that can make enforcement actions rarer and fairer.”

To help the bureau revamp its enforcement approach, ABA provided specific recommendations, including clearer communications with subjects of investigations, improvements to the notice and opportunity to respond to the process, the right to in-person presentations, the use of a civil money penalty matrix, better interagency coordination and less sensational press releases after actions are finalized.