The Consumer Financial Protection Bureau is proposing to stop using funds from its Civil Penalty Fund to finance consumer education and financial literacy programs, saying the practice created incentives for regulators to bring enforcement actions “for the purpose of aggrandizing the operational scope of the agency.”
The Civil Penalty Fund was created by the Consumer Financial Protection Act to provide payments to victims of activities subject to civil penalties. In 2013, the bureau enacted a rule that allowed it also to use monies from the fund for consumer education and financial literacy. Since then, the CFPB has allocated more than $3 billion to victims but only $28.8 million to consumer education and financial literacy.
According to a Federal Register filing, the CFPB’s current leadership believes the 2013 rule lacks both adequate guardrails and transparency for determining how funds are spent on such efforts. The lack of such guardrails creates perverse incentives for the bureau to bring enforcement actions simply for the purpose of increasing its authority, according to the filing.
The CFPB will take public comment on the proposed rule reversal until July 18.
