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Republican senators accused the Consumer Financial Protection Bureau on Tuesday of invading consumers' privacy while gathering massive amounts of data from financial companies.
April 23 -
The Consumer Financial Protection Bureau issued its second enforcement action on Monday, hitting Discover with a $200 million fine. Observers said it was clear violations will carry a steep price tag.
September 24 -
A fund for penalties collected by the CFPB has its first $25 million, and lots of people are waiting to see how it will be spent.
August 3
WASHINGTON — The Consumer Financial Protection Bureau issued a rule Friday attempting to clarify how it would use its Civil Penalty Fund, which holds money it collects as a result of fines against financial companies.
The agency's final rule is meant to address ongoing concerns from lawmakers and the industry on how exactly it would distribute the Funds. The Dodd-Frank Act required the CFPB to form the fund from money penalties against financial companies and use it to compensate victims of fraud and support consumer education and financial literacy programs. But there was little detail given in how the agency would manage or distribute the proceeds. The CFPB is hoping the rule clears the air in who will be compensated, how and when.
"Congress directed the bureau to establish the Civil Penalty Fund in order to compensate people who were harmed by illegal actions," said CFPB Director Richard Cordray. "Today's rule will allow us to do this in a transparent, responsible way."
The rule requires the agency to allocate funds to "eligible" victims every six months and to post a schedule of allocations online. The amount distributed to victims will depend on the circumstance of each case and whether those victims received compensation from other sources, the CFPB said.
The rule specifies, however, that victims will be paid from the fund "only to the extent practicable" and amounts will be based on the terms of the order against a financial company. If an amount can't be determined by the order, the agency will look at the victim's out-of-pocket loss, unless it's "impractical to determine," the rule says.
The rule also establishes a single "administrator" to manage that fund and a governance board of senior CFPB officials appointed by the director to advise the fund's administrator.
The rule requires the agency to issue regular reports on the fund to lawmakers as well as report its quarterly budget reports online.
Republicans have long voiced concerns about the fund and more recently, the CFPB's spending on consultants in their attempt to restructure the agency's single leadership. But some industry observers also became concerned about the fund after the CFPB assessed its first money penalty of $24 million against Capital One last year.
The agency said Friday that it plans to allocate the first funds by May 30 and then distribute it to victims on a case-by-case basis.
If there are remaining funds, the CFPB said it may set aside money for consumer education, financial literacy programs or future victims. It will also publish criteria to select particular programs, using the federal procurement process, if there are excess funds.
The rule is final and effective immediately but the CFPB is seeking public comment for possible revisions as well as suggestions on how to categorize victims and determine amounts each group should receive. The public has 60 days to comment.
