Two years ago, when Wells Fargo & Co. agreed to pay $185 million to resolve claims connected to its sham accounts scandal, the Consumer Financial Protection Bureau trumpeted its $100 million piece of the settlement as the largest penalty the agency had ever assessed.
Packed into the bureau’s press release were detailed claims that Wells Fargo’s compensation incentives drove employees to open accounts without customers’ knowledge and how employees created phony email accounts to enroll customers in online banking services. The announcement was more than 800 words.
Two years later, the CFPB netted a new record-setting penalty from the same bank, as Wells Fargo agreed to pay $1 billion to resolve allegations tied to mortgage and auto lending practices. But, from a communications standpoint, Wells Fargo was not settling with the same CFPB. The length of the CFPB’s announcement: 195 words.
Under Trump-appointed interim director Mick Mulvaney, the CFPB has softened its public announcements of enforcement actions, departing from the length and level of detail that had drawn complaints from the financial industry. During the tenure of the bureau’s former director, Richard Cordray, firms often griped that the agency took license in press releases and mischaracterized settlement terms that had been carefully negotiated.
“It certainly is toned down from under Cordray,” said Davis Wright Tremaine partner Jonathan Engel, a former CFPB enforcement attorney. “It’s another example of the bureau responding to concerns of the industry.”
Indeed, the CFPB’s change in tune has almost certainly come as music to the ears of banks and other financial institutions.
“Without question, the press release can be the single most upsetting thing to a company or individuals when they settle these matters,” said Venable partner Allyson Baker, a former CFPB enforcement attorney. “It’s the thing we lawyers often get involved in in ways you wouldn’t expect. It’s so mission-critical to the way a company or individual can manage risk on a forward-going basis.”
In May, the American Bankers Association urged the CFPB to “be more scrupulous” when drafting press releases about settlements.
“In the past, bureau press releases have too often sensationalized consent orders, including mischaracterizations of the contents of the order,” the group wrote, in response to Mulvaney’s request for comments on the CFPB’s enforcement processes. The letter—signed by Virginia O’Neill, senior vice president of the ABA’s Center for Regulatory Compliance—described the wording of the CFPB’s press releases as a “persistent issue” and urged the agency to consider giving companies a chance to review settlement announcements before they’re publicly disseminated.
O’Neill said several other federal agencies—including the Federal Trade Commission, Securities and Exchange Commission and Office of the Comptroller of the Currency—“all do a better job than the bureau in summarizing, rather than characterizing, the official documents used in litigation and settlement.”
A CFPB spokesperson declined to comment Monday.
➤➤ Our weekly briefing Compliance Hot Spots provides the latest news and trends in compliance and enforcement—what regulators are up to and how firms and in-house counsel are crafting new strategies. Learn more and sign up here.
In the fiscal year that ended Sept. 30, 2015, the bureau’s internal watchdog reviewed press releases from the final six months of 2014 in response to industry complaints. The CFPB ombudsman’s office concluded that the agency’s announcements “generally do reflect the language in the consent order.”
The CFPB has reached three settlements under Mulvaney’s tenure. The most recent came Friday, when the agency announced—in three paragraphs—a settlement with Citibank N.A. The bureau said Citi would pay $335 million in restitution to credit card consumers whose annual percentage rates should have been reevaluated and reduced.
In its announcement, the CFPB said it was not assessing a civil penalty, in part, because Citi had “self-reported the violations to the bureau.” The agency’s statement was short on details about the alleged offense.
“Based on the small sample of enforcement actions under Mick Mulvaney, even its now-terse enforcement press releases fail to explain the wrongdoer’s violations and the consumer harms they result in,” said Mike Litt, director of the U.S. Public Interest Research Group’s campaign to defend the CFPB.
The CFPB last month reached a settlement with Security Group Inc. that required the South Carolina-based company to pay a $5 million penalty to resolve claims that it made improper attempts to collect debts. Mulvaney was not quoted in the announcements of that settlement or the one with Citi. In the Wells Fargo press release, Mulvaney was quoted thanking the OCC for its role in the settlement negotiations. “As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here,” he said.
Chris Peterson, director of financial services at the Consumer Federation of America, said the CFPB’s muted tone runs the risk of undermining enforcement efforts.
“The press releases are very different now,” he said. “They have much less detail, and it’s almost like they’re bending over backwards to frame the beneficence of the companies both in the consent decree and press release,” he said.
Businesses routinely weigh risks to brand reputation—for any alleged law violation—when designing a new product or applying a fee or developing policies and procedures, said Peterson, a former CFPB attorney who is also a professor at the University of Utah’s S.J. Quinney College of Law.
“Going forward, if the bureau refuses to criticize companies that break the law, it will blunt the deterrent effect of its law enforcement actions,” he said.