New CFPB Policy - How to Terminate a Consent Order Early
The Consumer Financial Protection Bureau, on October 5, 2020, issued a policy statement regarding applications for early termination of Consent Orders. The policy statement outlines the application process and the standards used for evaluating applications. In general, the CFPB indicates that an eligible entity may be approved for early termination of a Consent Order if all the terms and conditions of the Consent Order have been met and the entity’s compliance position is “satisfactory” in the institutional product line or compliance area for which the Order was issued. The agency states that the following requirements must be met for applications to be approved:
1. Threshold Eligibility Criteria
· Entity must be subject to a Consent Order the Bureau issued using its authority to conduct administrative adjudication proceedings
· Only entities, not individuals, are eligible
· Entities may not apply within the first year after entry of the Consent Order, or at least six months after all compliance and redress plans required under the Consent Order have been fully implemented, whichever is later
· Entities are not eligible when:
o the Consent Order imposes a ban on participating in a certain industry (e.g., the mortgage industry or debt relief industry), and/or
o the Consent Order at issue involves violations of an earlier Bureau Order, and/or
o when there has been any criminal action related to the violations found in the Consent Order
· The Bureau does not intend to consider more than one request from an entity for termination of the same Consent Order
2. Compliance with the Consent Order
· The entity’s application should demonstrate full compliance with the Consent Order, including that the entity has (as applicable) :
o corrected any violations,
o paid redress, civil money penalties, or other monetary relief,
o adopted appropriate policies and procedures to ensure future compliance,
o submitted adequate reports, and
o maintained required records.
· If applicable, the entity’s application should reference the results of any supervisory work conducted by the Bureau to assess the entity’s Consent Order compliance
· The Bureau intends to expeditiously review the entity’s compliance with the Consent Order and conduct follow-up work as needed to determine the entity’s compliance within six months of receiving an application
3. Satisfactory Compliance System for the IPL or Compliance Area
· The entity also must demonstrate that its compliance management system for the IPL or compliance area at issue is at least “satisfactory,” or the equivalent of a “2” rating,
· If applicable, the entity should identify any supervisory rating or conclusion regarding its compliance management system in the relevant IPL or compliance area that it has received from any other regulators during the pendency of the Consent Order
An entity’s application should be submitted to the Bureau point of contact identified in the “Notices” section of the Consent Order. Prior to submitting an application, an entity should contact the Bureau point of contact established in the Consent Order for additional guidance on the form of such a request. Under this policy, Bureau staff intend to make recommendations to the Director regarding whether to grant applications for early termination. The Director’s orders granting or denying termination applications will be posted on the Bureau’s online administrative docket and distributed to the entity. Prior to the Director’s decision, an entity may withdraw its application at any time.
Garris Horn LLP frequently assists clients in defending against CFPB enforcement actions. Given the CFPB’s policy statement, and current trends, entities must carefully weigh the various consideration in any particular situation prior to deciding whether to request early termination of a consent order.
For more information, contact Troy Garris at 301-461-8952 or troy@garrishorn.com.
