The Consumer Financial Protection Bureau on Friday published a policy statement in the Federal Register describing how it will address criminally liable regulatory offenses, in response to an Executive Order issued by President Donald Trump last month. Criminal referrals for violations of consumer finance laws have historically been rare.
Why it matters: This marks the first time the CFPB has formally outlined its approach to potential criminal violations of the laws it enforces, which is a move that could impact how companies think about compliance with consumer financial protection rules.
The big picture:
- The CFPB administers and enforces civil consumer finance laws, such as the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), the Electronic Fund Transfer Act (EFTA), and the Consumer Financial Protection Act (CFPA).
- Some regulations under these laws carry criminal penalties. For example, willful violations of TILA or EFTA can result in fines or imprisonment under federal law.
What the CFPB said: The Bureau outlined when and how it may refer criminal matters to the Department of Justice. Referrals will be evaluated based on:
- Harm or risk of harm caused by the offense, be they monetary or otherwise
- Potential gain to the alleged offender
- The offender’s specialized knowledge or licensing status
- Evidence of the offender’s awareness of the conduct’s unlawfulness or familiarity with the regulation
What’s next: The CFPB committed to the following actions as part of its compliance with the executive order:
- Reporting: Within 365 days, the CFPB will submit a report to the Office of Management and Budget and post it on its website. The report will list all criminal regulatory offenses under its jurisdiction, the potential penalties, and the applicable standards.
- Ongoing review: The Bureau will consider whether an offense is on this list when deciding whether to refer cases to the DOJ or its own Inspector General.
- Standardization: The CFPB, in consultation with the Attorney General, will determine whether a default mens rea standard should apply across its rules, unless otherwise stated. A follow-up report will assess the appropriateness of current standards and propose any changes.
- Future rulemakings: All proposed or final rules published in the Federal Register that include criminal penalties will contain statements identifying:
- That the rule is criminally enforceable
- The authorizing statute
- The mens rea required for each element of the offense
What they’re saying: The policy statement notes that this action does not create new legal obligations or modify any existing ones. Instead, it “articulates considerations relevant to the Bureau’s exercise of its authorities.”
