CFPB Enforcement Picking Up After Supreme Court Cloud Cleared

The Consumer Financial Protection Bureau has started to revive its enforcement efforts now that the US Supreme Court has largely settled questions over its existence, but the pace under Director Rohit Chopra still lags previous administrations.

Public enforcement actions mostly grounded to a halt ahead of the high court’s May decision in CFPB v. Community Financial Services Association of America. In the months since the justices upheld the agency’s independent funding through the Federal Reserve, the CFPB’s enforcement unit has awoken from its slumber, according to Bloomberg Law’s review of enforcement actions through Sept. 30.

But the numbers still aren’t approaching levels seen under Chopra’s predecessors appointed by Donald Trump and Barack Obama.

Some of that may reflect the agency focusing more on supervision and larger, more impactful targets.

Companies are also more attuned to the rules that the CFPB has put in place in the 13 years since it opened its doors, said Jonathan Pompan, the chair of Venable LLP’s consumer financial services practice group.

“After a decade, enhancements and improvements are likely netting a degree of value to the organizations and the consumer marketplace,” he said.

At the same time, there’s a a sense that the CFPB is pursuing more aggressive legal theories that companies are willing to push back against, Pompan, whose practice focuses on the CFPB, said.

“The CFPB continues to have both big eyes and a big stomach,” he said.

The agency defended its record.

“Our enforcement efforts not only protect consumers but also help to create a fair marketplace where law-abiding companies can thrive without having to compete against those who cut corners or break rules for unfair advantage,” a CFPB spokesperson said.

Perking Up

The CFPB filed 11 enforcement actions from May 17—the day after the Supreme Court’s ruling—through the end of this year’s third quarter.

Units of Fifth Third Bancorp and Toronto-Dominion Bank, and the Pennsylvania Higher Education Association are among the companies that have either settled with the CFPB or faced a new lawsuit during that period.

The CFPB has also resolved or won court victories in seven existing actions since the high court’s decision. For instance, the CFPB and Massachusetts Attorney General Andrea Campbell (D) on Sept. 30 won a $20 million civil money penalty and $30 million in restitution in a case against Key Credit Repair.

And more actions should be in the offing, said Chris Willis, the co-leader of Troutman Pepper Hamilton Sanders LLP’s consumer financial services regulatory practice group.

“The CFPB has started to do a little bit more in terms of opening new investigations and moving cases forward,” he said.

The agency has also been on a hiring binge, adding enforcement attorneys and other staff members in recent months, with more hiring expected in the future.

“These additional resources keep the momentum going for the agency to enforce the law to hold financial institutions accountable, stop unlawful conduct, and put money back in the hands of consumers,” the CFPB spokesperson said.

The enforcement staffing uptick is coupled with a renewed focus on supervision, particularly over nonbank companies, said Allyson Baker, a former CFPB enforcement attorney.

“There is enforcement activity, but the enforcement activity is often accompanied by some supervisory process,” Baker, now the global co-chair of Paul Hastings LLP’s investigations and white collar defense practice.

The increased supervision means some issues can be resolved without an enforcement action. It also allows agency examiners to share information with enforcement attorneys as they gear up to bring cases, Baker said.

‘Very Strategic and Deliberate’

But even with the added bodies in enforcement and the focus on supervision, the numbers aren’t as high and the targets aren’t as hard as some agency watchers had been expecting.

To Baker, also a former federal prosecutor, the slow pace reflects the CFPB taking a “very strategic and deliberate” approach to its work and that it takes a long time to put together a good case.

“When you’re trained at DOJ, there’s only one way to put your shoes on,” she said.

There are other factors potentially slowing CFPB enforcement.

First, some defendants are making the case that the CFPB still isn’t properly funded, even after the Supreme Court ruling. The argument is based on a reading of the 2010 Dodd-Frank Act that says the CFPB receives its funding from the Fed’s “earnings.”

To CFPB opponents, the agency shouldn’t have any funding because the Fed has been essentially running at a loss for several years amid high interest rates. The CFPB and others have disputed this idea, but all it takes is one judge to rule in favor of a defendant for the agency to face another potential funding crisis.

The delay may also be a sign that some companies, such as Rent-a-Center affiliate Acima, are challenging the CFPB’s more aggressive legal theories in court, having adjusted to its typical actions policing consumer financial markets.

On the CFPB’s side, getting a lawsuit ready for action can take longer than getting a settlement done, Pompan said.

“It’s reflective of the fact that the CFPB is willing to litigate and not settle,” he said.