3 Ways to Decrease Your Risk in the New CFPB Enforcement Era

February 8, 2024

The CFPB enforcement team is on a roll and set to get supercharged in 2024.  

In a blog post last week, the Bureau covered highlights of the 29 enforcement actions brought in 2023, which resulted in more than 3 billion dollars in consumer compensation and almost half a billion in civil penalties. The post also announced that they would be “significantly expanding [their] enforcement capacity in 2024.” That expansion will reportedly increase the enforcement staff by 50% and create an additional litigation team.  

So, what can you do to decrease your chances of becoming one of the recipients of this increased attention? The obvious answer is to prevent, detect, and proactively address any risk of customer harm. But, of course, that is easier said than done. After all, the vast majority of FIs already do their best to comply with the law and to do right by their customers.  

Below are 3 concrete, practical strategies you can adopt to catch potential danger spots that may be flying under your radar.  

  1. Look for “common denominator” issues. The CFPB has long made clear that customer complaints are a key part of their enforcement prioritization process, which means they should also be a key part of your own issue prioritization. You should pay special attention to any areas where there is a sizable volume of complaints with the same or very similar fact patterns that are determined to be “customer error” in the initial review. These can often turn out to be latent tech bugs, process gaps, unclear instruction or disclosure language, and other hidden problems that, even if unintentional on the part of the FI, can rise to the level of enforceable violations. That risk is highest if they are left undetected and unfixed despite frequent related complaints, which the Bureau may treat as willful ignorance. So, if you see that many customers share the same specific misunderstanding or are making the exact same “error” as they go through a product flow on your site, remember it is less likely to be one giant coincidence and more likely to be a common denominator problem. Think of it as you would if dozens or hundreds of customers tripped over the exact same square foot of carpet at one of your branches over a couple of months. Their shoes are unlikely to be the issue. You may want to call maintenance to take a look.  
  1. Learn from others’ mistakes. The CFPB publishes each of their public enforcement actions, usually accompanied by the actual court document setting out their claims, or the draft document in the case of a settlement. Every time someone in your corner of the industry is the subject of enforcement you should look at the allegations supporting each count and ensure that your FI does not have any of the same issues addressed in that action. If you do, looking into those should be your immediate priority. Even if the allegations involve conduct that may have once been thought of as “industry standard,” that gives you no safe haven. If it is in the complaint, it is because the Bureau finds that standard to be unlawful. There is absolutely no safety in numbers in this context.  In fact, the Bureau has openly stated that they prioritize the most common industry practices causing customer harm to get the most message-sending bang out of their proverbial enforcement buck. So, make sure you don’t fall prey to the “they can’t sue us all” mentality. You don’t want to become the cautionary tale. Also, remember that various other regulators with overlapping authority as well as plaintiffs’ lawyers mine CFPB actions for potential issues, and there is indeed enough of them to sue us all.  
  1. Take a hint. In addition to their formal enforcement announcements the Bureau frequently publishes Supervisory Highlights, bulletins, white papers, speeches, and other public materials that give strong signals as to what they are concerned about and where they are likely to focus their efforts. Often these are positioned as just informative reports or informal suggestions. However, you should see them as the advance warnings they often prove to be, and make sure you take a careful look at how you fare in the areas they mention, particularly if you have any significant complaint volume in those areas. As the Bureau has explained in past reports, the enforcement, markets/research, and consumer response (complaints) teams work closely together. The fact that the Bureau is investing resources putting out content on a topic may signal that they are preparing to address it in other ways. Don’t wait for the second warning to look at where they’re pointing.

If you’re interested in improving your complaint analysis and issue detection tools, Vectari can help. Our proprietary technology makes it possible to identify and categorize those needle-in-a-haystack hidden issues that may otherwise remain undetected in the “no bank error” pile. You can read about our available solutions here. 

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