CFPB the latest federal agency to propose whistleblower program

CFPB Director Kathleen Kraninger said Friday the program would “incentivize whistleblowers to contact us if they believe their employer is not complying with the law.”

The CFPB whistleblower proposal would mirror similar whistleblower award programs already in place with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Whistleblowers would only be eligible to receive an award on a CFPB administrative proceeding or court action exceeding $1 million and must provide “original information” to the agency—information that leads to a successful enforcement action.

In September 2019, the House passed a bill, sponsored by U.S. Rep. Sylvia Garcia (D-Texas), that would create a whistleblower award program for the Public Company Accounting Oversight Board (PCAOB). The bill, H.R. 3625, is now before the Senate Committee on Banking, Housing, and Urban Affairs.

While the CFPB started taking whistleblower tips in 2011, it had not until now proposed a way for whistleblowers to receive compensation.

According to the CFPB’s proposed bill, whistleblowers who provide testimony to the CFPB could receive not less than $50,000 or 10 percent of the funds collected, whichever is greater, and not more than 30 percent of funds collected, with a cap of $10 million.

The CFPB says it has submitted the legislation to House Speaker Nancy Pelosi and Vice President Mike Pence, who is also the Senate President; as well as chairs and ranking members of authorizing committees in both chambers of Congress.

The SEC has awarded $300 million to whistleblowers since the inception of the agency’s whistleblower program in 2011, the agency said. But through August 2019, the agency has received more than 26,000 tips but issued awards to fewer than 80 whistleblowers, an arrangement some critics say is unfairly tilted against whistleblowers.

Tom Devine, legal director for the Government Accountability Project, said the SEC and CFTC whistleblower programs aren’t helping enough whistleblowers, and that the lack of awards is discouraging them from coming forward.

“Most significant, the rates of retaliation have increased significantly since passage of bounty laws,” he said. “Employers are increasingly paranoid about the overwhelming majority of whistleblowers who raise concerns internally without any expectation of commercial gain.”

The CFTC has awarded approximately $100 million to whistleblowers since its program was launched in 2014, the agency said.

Other CFPB proposals

In addition to the whistleblower award proposal, the CFPB also announced it will implement an advisory opinion program to help companies navigate legal and regulatory obligations, as well as an updated policy on leniency for companies who self-report violations.

Entities will be able to submit requests for advisory opinions to the CFPB through its Website. The agency will provide an interpretation of its existing rules and will make the opinions public by printing them in the Federal Register and posting them on its Website.

Within its strengthened and updated “responsible business conduct” bulletin, the CFPB says it will continue to encourage responsible conduct through self-assessment and self-reporting of violations by businesses.

“The Bureau’s focus is on building a culture of compliance among entities, including covered persons and service providers, in order to minimize the likelihood of a violation of Federal consumer financial law, and thereby prevent harm to consumers,” the new bulletin said.

The CFPB first issued a bulletin on responsible business conduct in 2013.

Based on the severity of the violation and the company’s cooperation in remedying it, the CFPB says it will use its discretion to close an enforcement investigation with no action or decide “not to include Matters Requiring Attention in an exam report or supervisory letter.” But the CFPB will continue to use its discretion to punish companies even if they follow the tenets set out in the bulletin.

“This guidance will not necessarily foreclose the Bureau from bringing any enforcement action or seeking any remedy if it believes such a course is necessary and appropriate,” it said.