REGULATION BY ENFORCEMENT

The CFPB has been criticized for providing guidance in the form of enforcement actions rather by writing regulations. Expect more of the same.

In a March 9, 2016 speech Director Cordray confirmed that consent orders that accompany the Bureau’s public enforcement actions, “provide detailed guidance for compliance officers across the marketplace about how they should regard similar practices at their own institutions. If the same problems exist in their day-to-day operations, they should look closely at their processes and clean up whatever is not being handled appropriately.” He added that “it would be ‘compliance malpractice’ for executives not to take careful bearings from the contents of these orders about how to comply with the law and treat consumers fairly.”

Many have suggested that the CFPB should publish rules before taking enforcement action. Cordray responds that the suggestion that “law enforcement officials should think through and explicitly articulate rules for every eventuality before taking any enforcement actions at all would lead to paralysis because it simply sets the bar too high.”

Consider adding consent orders to your required reading list.

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