[Federal Register Volume 85, Number 55 (Friday, March 20, 2020)]
[Rules and Regulations]
[Pages 15917-15919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05505]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X


Responsible Business Conduct: Self-Assessing, Self-Reporting, 
Remediating, and Cooperating (CFPB BULLETIN 2020-01)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Bulletin.

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SUMMARY: In 2013, the Bureau of Consumer Financial Protection (Bureau) 
issued a Bulletin that identified several activities that businesses 
could engage in that could prevent and minimize harm to consumers, 
referring to these activities as ``responsible conduct.'' The Bureau is 
issuing this updated Bulletin to clarify its approach to responsible 
conduct and to reiterate the importance of such conduct.

DATES: This Bulletin is applicable on March 20, 2020.

FOR FURTHER INFORMATION CONTACT: Colin Reardon, Division of 
Supervision, Enforcement, and Fair Lending, at (202) 435-9668. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION: In executing its statutory responsibilities, 
the Bureau places primary emphasis on preventing harm to consumers. 
Preventing harm to consumers is among the most effective and efficient 
ways of ensuring consumer access to a fair, transparent, and 
competitive financial market. In 2013, the Bureau issued a Bulletin 
that identified several activities that individuals or businesses, 
collectively ``entities,'' could engage in that could prevent and 
minimize harm to consumers, referring to these activities as 
``responsible conduct.'' The Bureau is issuing this updated Bulletin to 
clarify its approach to responsible conduct and to reiterate the 
importance of such conduct.
    In the first instance, the Bureau's focus is on building a culture 
of compliance among entities, including covered persons and service 
providers, in order to minimize the likelihood of a violation of 
Federal consumer financial law, and thereby prevent harm to consumers. 
When a violation of law does occur, swift and effective actions taken 
by an entity to address the violation can minimize resulting harm to 
consumers. Specifically, an entity may self-assess its compliance with 
Federal consumer financial law, self-report to the Bureau when it 
identifies likely violations, remediate the harm resulting from these 
likely violations, and cooperate above and beyond what is required by 
law with any Bureau review or investigation.
    Such activities are in the public interest. Depending on its form 
and substance, responsible conduct can improve the Bureau's ability to 
promptly detect violations of Federal consumer financial law, increase 
the effectiveness and efficiency of its supervisory and enforcement 
work, enable the Bureau to focus its finite resources on their best use 
for the mission, and help more consumers in more matters promptly 
receive financial redress and additional meaningful remedies for any 
harm they experienced.
    Because responsible conduct is in the public interest, the Bureau 
seeks to encourage it. Accordingly, if an entity meaningfully engages 
in responsible conduct, the Bureau intends to favorably consider such 
conduct, along with other relevant factors, in addressing violations of 
Federal consumer financial law in supervisory and enforcement 
matters.\1\ Depending on the nature and extent of an entity's actions, 
the Bureau has a wide range of options available to properly account 
for responsible conduct. For example, in light of an entity's 
responsible conduct, the Bureau could exercise its discretion to close 
an enforcement investigation with no action or decide not to include 
Matters Requiring Attention in an exam report or supervisory letter. 
Even if the Bureau does take action, those who engage in responsible 
conduct may receive other types of credit for engaging in such 
behavior. For entities within the Bureau's supervisory authority, the 
Bureau's Division of Supervision, Enforcement, and Fair Lending makes 
determinations of whether violations should be resolved through non-
public supervisory action or a possible public enforcement action 
through its Action Review Committee (ARC) process. The ARC process 
includes factors that are closely aligned with the elements of 
responsible conduct. Thus, for entities under the Bureau's supervisory 
authority, responsible conduct could result in resolving violations 
non-publicly through the supervisory process. Responsible conduct also 
could result in the Bureau's reducing the number of violations pursued 
or reducing the sanctions or penalties sought by the Bureau in any 
public enforcement action. The Bureau intends to consider the extent 
and significance of an entity's responsible conduct, with more 
extensive and important responsible conduct leading to more substantial 
consideration.
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    \1\ Other factors the Bureau considers in determining how to 
resolve violations of Federal consumer financial law include, 
without limitation, (1) the nature, extent, and severity of the 
violations identified and any associated consumer harm; (2) an 
entity's demonstrated effectiveness and willingness to address the 
violations; and (3) the importance of deterrence, considering the 
significance and pervasiveness of the potential consumer harm.
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    This guidance, and its description of factors that may warrant 
favorable consideration, is not adopting any rule or formula to be 
applied in all matters. The importance of each factor in a given 
matter, and the way in which the Bureau evaluates each factor, will 
depend on the circumstances. The Bureau is not in any way limiting its 
discretion and responsibility to evaluate each matter individually on 
its own facts and circumstances. In short, the fact that an entity may 
argue it has satisfied some or even all of the factors set forth in 
this guidance will not necessarily foreclose the Bureau from bringing 
any enforcement action or

[[Page 15918]]

seeking any remedy if it believes such a course is necessary and 
appropriate.

Factors Used To Evaluate and Acknowledge Responsible Conduct

    As noted previously, the Bureau principally considers four 
categories of conduct when evaluating whether some form of credit is 
warranted in an enforcement investigation or supervisory matter: Self-
assessing, self-reporting, remediating, and cooperating. However, if an 
entity engages in another type of activity particular to its situation 
that is both substantial and meaningful, the Bureau may take that 
activity into consideration.
    Listed below are some of the factors the Bureau intends to consider 
in determining whether and how much to take into account responsible 
conduct. This list is not exhaustive, and some of the factors 
identified may relate to more than one category of responsible conduct.

Self-Assessing

    This factor, which can also be described as self-monitoring or 
self-auditing, reflects a proactive commitment by an entity to use 
resources for the prevention and early detection of violations of 
Federal consumer financial law. The Bureau recognizes that a robust 
compliance management system appropriate for the size and complexity of 
an entity's business will not prevent all violations, but it will 
reduce the risk of violations, and it will often facilitate early 
detection of likely violations, which can limit the size and scope of 
consumer harm. Questions the Bureau intends to consider in determining 
whether to provide favorable consideration for self-assessing activity 
include:
    1. What resources does the entity devote to compliance? How robust 
and effective is its compliance management system? Is it appropriate 
for the size and complexity of the entity's business?
    2. Has the entity taken steps to improve its compliance management 
system when deficiencies have been identified either by itself or 
external regulators? Did the entity ignore obvious deficiencies in 
compliance procedures? Does the entity have a culture of compliance?
    3. Considering the nature of the violation, did the entity identify 
the issue? What is the nature of the violation or likely violation and 
how did it arise? Was the conduct pervasive or an isolated act? How 
long did it last? Did senior personnel participate in, or turn a blind 
eye toward, obvious indicia of misconduct?
    4. How was the violation detected and who uncovered it? If 
identified by the entity, how did the entity identify the issue (e.g., 
from customer complaints, audits or monitoring based on routine risk 
assessments, or whistleblower activity)? Was the identification the 
result of a robust and effective compliance management system including 
adequate internal audit, monitoring, and complaint review processes? 
Was identification prompted by an impending exam or an investigation by 
a regulator?
    5. What self-assessment mechanisms were in place to effectively 
prevent, identify, or limit the conduct that occurred, elevate it 
appropriately, and preserve relevant information? In what ways, if any, 
were the entity's self-assessing mechanisms particularly noteworthy and 
effective?

Self-Reporting

    This factor substantially advances the Bureau's protection of 
consumers and enhances its mission by reducing the resources it must 
expend to identify violations and making those resources available for 
other significant matters. Prompt self-reporting of likely violations 
also represents concrete evidence of an entity's commitment to 
responsibly address the conduct at issue. Conversely, efforts to 
conceal a likely violation from the Bureau represent concrete evidence 
of the entity's lack of commitment to responsibly address the conduct 
at issue. For these reasons, the Bureau considers this factor in its 
evaluation of an entity's overall conduct. Of note, however, an 
entity's self-reporting of a potential issue does not require it to 
concede that it has violated the law. Questions the Bureau intends to 
examine in determining whether to provide favorable consideration for 
self-reporting of likely violations of Federal consumer financial law 
include:
    1. Did the entity completely and effectively disclose the existence 
of the conduct to the Bureau, to other regulators, and, if applicable, 
to self-regulatory organizations? Did the entity report any additional 
related misconduct likely to have occurred?
    2. Did the entity report the conduct to the Bureau without 
unreasonable delay? If it delayed, what justification, if any, existed 
for the delay? How did the delay affect the preservation of relevant 
information, the ability of the Bureau to conduct its review or 
investigation, or the interests of affected consumers?
    3. Did the entity proactively self-report, or wait until discovery 
or disclosure was likely to happen anyway, for example due to impending 
supervisory activity, public company reporting requirements, the 
emergence of a whistleblower, consumer complaints or actions, or the 
conduct of a Bureau investigation?

Remediating

    When violations of Federal consumer financial law have occurred, 
the Bureau's remedial priorities include obtaining full redress for 
those injured by the violations, ensuring that the entity who violated 
the law implements measures designed to prevent the violations from 
recurring, and, when appropriate, effectuating changes in the entity's 
future conduct for the protection and/or benefit of consumers. 
Questions the Bureau intends to examine in determining whether to 
provide favorable consideration for remediation activity regarding 
likely violations of Federal consumer financial law include:
    1. What steps did the entity take upon learning of the violation? 
Did it immediately stop the violation? How long after the violation was 
uncovered did it take to implement an effective response?
    2. What steps did the entity take to discipline the individuals 
responsible for the violation and to prevent the individuals from 
repeating the same or similar conduct?
    3. Did the entity conduct an analysis to determine the number of 
affected consumers and the extent to which they were harmed? Were 
consumers made whole through compensation and other appropriate relief, 
as applicable? Did affected consumers receive appropriate information 
related to the violations within a reasonable period of time?
    4. What assurances are there that the violation (or a similar 
violation) is unlikely to recur? Did the entity take measures, such as 
a root-cause analysis, to ensure that the issues were addressed and 
resolved in a manner likely to prevent and minimize future violations? 
Similarly, have the entity's business practices, policies, and 
procedures changed to remove harmful incentives and encourage proper 
compliance?

Cooperating

    Unlike self-assessing and remediating, which may occur with or 
without Bureau involvement, cooperating relates to the quality of an 
entity's interactions with the Bureau after the Bureau becomes aware of 
a likely violation of Federal consumer financial law, either through an 
entity's self-reporting or the Bureau's own efforts. Credit for 
cooperating in this context depends on the extent to which an entity 
takes steps above and beyond what the law requires

[[Page 15919]]

in its interactions with the Bureau. Simply meeting those legal 
obligations is not a factor that the Bureau intends to give any special 
consideration in a supervisory review or enforcement investigation. Of 
note, the Bureau does not consider an entity's good faith assertion of 
privilege in an enforcement investigation to be a lack of cooperation; 
an entity asserting privileges in good faith remains eligible for 
potential favorable consideration for cooperating. Questions the Bureau 
intends to examine in determining whether to provide favorable 
consideration for cooperating in a Bureau matter include:
    1. Did the entity cooperate promptly and completely with the Bureau 
and other appropriate regulatory and law enforcement bodies? Was that 
cooperation present throughout the course of the review and/or 
investigation?
    2. Did the entity take proper steps to develop the facts quickly 
and completely and to fully share its findings with the Bureau? Did it 
undertake a thorough review of the nature, extent, origins, and 
consequences of the violation and related behavior? Who conducted the 
review and did they have a vested interest or bias in the outcome? Were 
scope limitations placed on the review? If so, why and what were they?
    3. Did the entity promptly make available to the Bureau the results 
of its review and provide sufficient documentation reflecting its 
response to the situation? Did it provide evidence with sufficient 
precision and completeness to facilitate, among other things, 
appropriate actions against others who violated the law? Did the entity 
produce a complete and thorough written report detailing the findings 
of its review? Did it voluntarily disclose material information not 
directly requested by the Bureau or that otherwise might not have been 
uncovered? Did the entity provide all relevant, non-privileged 
information and make assertions of privilege in good faith?
    4. Did the entity direct its employees to cooperate with the Bureau 
and make reasonable efforts to secure such cooperation? Did it make the 
most appropriate person(s) available for interviews, consultation, and/
or sworn statements?
    The Bureau intends for this guidance to encourage entities subject 
to the Bureau's supervisory and enforcement authority to engage in more 
``responsible conduct,'' as defined herein. Such an outcome, the Bureau 
believes, would benefit both consumers and providers of consumer 
financial products and services, is in the public interest, and 
supports the Bureau's efforts to prevent consumer harm.

Regulatory Requirements

    This Bulletin is a non-binding general statement of policy 
articulating considerations relevant to the Bureau's exercise of its 
supervisory and enforcement authority. It is therefore exempt from 
notice and comment rulemaking requirements under the Administrative 
Procedure Act pursuant to 5 U.S.C. 553(b). Because no notice of 
proposed rulemaking is required, the Regulatory Flexibility Act does 
not require an initial or final regulatory flexibility analysis. 5 
U.S.C. 603(a), 604(a). The Bureau has determined that this Bulletin 
does not impose any new or revise any existing recordkeeping, 
reporting, or disclosure requirements on covered entities or members of 
the public that would be collections of information requiring OMB 
approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
    Pursuant to the Congressional Review Act, 5 U.S.C. 801 et seq., the 
Bureau will submit a report containing this policy statement and other 
required information to the United States Senate, the United States 
House of Representatives, and the Comptroller General of the United 
States prior to its applicability date. The Office of Information and 
Regulatory Affairs has designated this policy statement as not a 
``major rule'' as defined by 5 U.S.C. 804(2).

    Dated: March 6, 2020.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2020-05505 Filed 3-19-20; 8:45 am]
 BILLING CODE 4810-AM-P