Tips for Successfully Navigating A CFPB Enforcement Action: Perspectives from a Former Enforcement Attorney
Companies often ask how they should approach a Consumer Financial Protection Bureau (“CFPB,” the “Bureau”) Enforcement matter if it lands on their desk. Because the industry and its professionals are still trying to figure out how the Bureau operates, they are concerned about making a misstep during the course of an investigation. Sidley Austin Banking and Financial Services lawyer Maria Earley – a former CFPB Enforcement lawyer for nearly three years – has identified 10 essential tips for successfully navigating a CFPB Enforcement investigation while positioning your company for the best outcome.
- The First Meet and Confer Must Occur within 10 Days. Enforcement rules provide that a company must meet and confer with the CFPB within 10 days after receiving a Civil Investigative Demand (“CID”). While this doesn’t allow much time, it is imperative that companies get a general sense of what the CID requires and what may be responsive. Companies should be prepared to engage in meaningful discussions about potentially responsive information and production timeframes at that initial meeting.
- Be Judicious and Act Fast if You File Petition to Quash. Petitions to quash must be filed within 20 days of service of a CID; thus far, most have been unsuccessful. Companies should carefully consider whether filing a petition is necessary and, if so, consider ways to protect business interests while complying with the CID. One such approach is to file a petition concerning only the outstanding requests the parties could not agree upon within the 20 day deadline with the understanding that it may be withdrawn when the parties complete meet and confer discussions.
- Explain How Your Business Operates. It is often useful to provide basic background information about your company early in the meet and confer process. In most cases, Enforcement staff suspects there may be issues, but knows very little about how your company actually operates. Take the time to explain your business to Enforcement staff and let them ask questions. This may help Enforcement staff realize their suspicions are wrong and the investigation should be narrowed or even closed.
- Engage in Meaningful Dialogue to Narrow the Scope of the CID. Enforcement CIDs may appear broad, and preparing a response can be overwhelming. However, it is best to focus on strategic objections and avoid protracted debates over potentially less significant issues, such as form definitions. Instead, consider describing the categories of potentially relevant documents (however voluminous) and, if appropriate, offer to send examples. This approach will help Enforcement staff narrow the scope of the production through informed choices.
- Be Ready to Produce Documents Quickly. Many CIDs require production of documents and information very quickly, often within 30 days, and extensions of time are generally disfavored by Enforcement staff. Companies should make every effort to quickly understand the universe of potentially responsive information and establish a rolling production schedule that strives for completion as close to the CID deadline as possible. Enforcement staff is generally willing to grant extensions for certain sets of information if a company has produced some documents by the original deadline.
- Make Sure Your Production Conforms to CFPB Requirements. The CFPB has strict and exacting production standards that it expects companies to understand. Enforcement staff often invite CFPB IT personnel to the first meet and confer to field questions about those requirements; companies should follow suit and make an IT person available for that meeting. It is imperative that companies dedicate adequate IT resources to Enforcement matters and ask questions if something is unclear.
- Communicate Promptly and Often. Investigations are fluid and can change quickly and without warning. Contact Enforcement staff promptly when this happens and, if appropriate, offer possible solutions or alternatives when you encounter issues. This will allow Enforcement staff to explain any changes to supervisors and obtain necessary approvals to alter the timing or scope of the investigation.
- Do Not Treat Investigational Hearings Like Depositions. There are several ways in which investigational hearings differ from depositions. First, there are no time limits on investigational hearings. They may last longer than seven hours and span multiple days. Second, CFPB rules do not permit a witness’s counsel to lodge objections unless they are preserving a constitutional or other legal privilege; form and other standard objections are not permitted. Third, the CFPB may have more than one individual asking the witness questions during examination. Finally, witnesses do not have an automatic right to receive a copy of the transcript; they may review it but must be granted permission from Enforcement staff to obtain a copy.
- Be Detailed in Your NORA Response. Enforcement staff may use an early warning process – referred to as NORA (notice and opportunity to respond and advise) – to notify a company of alleged violations. As an initial matter, companies should carefully consider whether filing a response makes sense strategically. In situations where it does, the NORA response should spell out, with specificity, how and why the company has not violated the law as suspected. Enforcement staff may have missed or misunderstood key information that mitigates against taking action, so it is imperative that you identify specific documents and information that tells your company’s good story.
- Earn the Respect of Enforcement Staff. The CFPB is still a very new agency. Enforcement staff generally are not familiar with lawyers in the defense bar or the companies they represent. Companies should earn the trust and respect of the Enforcement staff by behaving in a professional and responsive manner. Enforcement staff wield a considerable amount of influence on the outcome of investigations so earning their trust and respect may facilitate a positive outcome.
If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work or
James A. Huizinga
David E. Teitelbaum
John Van De Weert
Sidley Banking and Financial Services Practice
Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
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