Financial services firms under the supervision of the Consumer Financial Protection Bureau will be pleased to hear about a new policy change, announced April 23, in which the CFPB said it will start to provide more information about potentially wrongful conduct during investigations, effectively giving banks and lenders a better understanding of what wrongful conduct prompted the agency’s scrutiny.
Consistent with the updated policy, Civil Investigative Demands (CIDs) will provide more information about the potentially applicable provisions of law that may have been violated. CIDs will also typically specify the business activities subject to the CFPB’s authority. In investigations where determining the extent of the CFPB’s authority over the relevant activity is one of the significant purposes of the investigation, staff may specifically include that issue in the CID in the interests of further transparency.
The new policy takes into account recent court decisions about notifications of purpose and is consistent with a 2017 report by the CFPB’s Office of Inspector General that emphasized the importance of updating Office of Enforcement policies to reflect such developments. The new policy is also consistent with comments the CFPB received in response to the Requests for Information it issued in 2018, 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 CFPB 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 CFPB set out this information in a section known as the “notification of purpose.”