With Great Enforcement Power Comes Great Agency Responsibility: How the CFPB Used Their Enforcement Powers in 2012 Enforcement Actions

Abstract

The Consumer Financial Protection Bureau was created in order to be administrator to all federal consumer protection laws. The CFPB was given a broad list of responsibilities. The CFPB is responsible for: Rulemaking; Assessing existing regulations; Prohibiting unfair, deceptive, and abusive acts or practices; Consumer education; Examinations; and Enforcement. Along with this responsibility, the CFPB has been given power to enforce federal consumer protection laws while creating a fair environment for all participants. This places a responsibility on the agency to create and enforce these regulations in such a way that the regulations and enforcement of those regulations is fair for all participants. As in most situations where fairness is required, not all participants will get everything that they think they need.The CFPB has four major enforcement powers. They are: Civil investigation and administrative discovery, Perform hearings and administrative adjudications, Litigation authority, and to allow states to use their own attorney generals to enforce all CFPB regulations. These powers have been used nine times in 2012. Five actions were administrative adjudication against consumer financial banks. These actions resulted in consumer refunds of $425 million spread over 5.75 million consumers, and civil penalties of $66.5 million. The other four enforcement actions were litigation actions that resulted in approximately $14 million in refunds, and over $1 million in penalties. CFPB enforcement direction can be inferred from analysis of these individual actions.The CFPB has issued consent orders for all of the large administrative adjudication actions, therefore reimbursing customers and collecting penalties without establishing any fault on the banks. The four litigation actions were all against much smaller companies. This has built up the CFPB Civil Penalty Fund, and has allowed the CFPB to distribute this money to consumers affected by the smaller companies that could not provide any remedies to consumers. This Civil Penalty Fund is being used under the discretionary rules provided in it’s formation to not only provide consumer remedies, but to also fund consumer literacy programs. The CFPB has used its great enforcement powers sparingly thus far, but has begun to move towards covering all of its many responsibilities.