[Federal Register Volume 85, Number 213 (Tuesday, November 3, 2020)]
[Rules and Regulations]
[Pages 69482-69485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22360]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X


Statement of Policy on Applications for Early Termination of 
Consent Orders

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Policy statement.

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SUMMARY: The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) provides that the Bureau of Consumer Financial 
Protection (Bureau) may enter into administrative consent orders 
(Consent Orders) where the Bureau has identified violations of Federal 
consumer financial law. The Bureau recognizes that there may be 
exceptional circumstances where it is appropriate to terminate a 
Consent Order before its original expiration date. To facilitate such 
early terminations where appropriate, this policy statement sets forth 
a process by which an entity subject to a Consent Order may apply for 
early termination and articulates the standards that the Bureau intends 
to use when evaluating early termination applications.

DATES: This policy statement is applicable on October 8, 2020.

FOR FURTHER INFORMATION CONTACT: Mehul Madia, Division of Supervision, 
Enforcement, and Fair Lending, at (202) 435-7104. If you require this 
document in an alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Where the Bureau has found that an entity has violated Federal 
consumer financial law, the Dodd-Frank Act provides that the Bureau may 
settle its claims against that entity by entering into an 
administrative Consent Order.\1\ Consent Orders describe the Bureau's 
findings and conclusions concerning the identified violations and 
generally impose injunctive relief, monetary relief such as redress and 
civil money penalties, and reporting, recordkeeping, and cooperation 
requirements.\2\ Consent Orders are negotiated by the Bureau and the 
entity (or entities) subject to them and generally have a five-year 
term, although in some instances the Bureau may impose a longer term 
when, in its view, the circumstances warrant it. Bureau staff monitor 
whether entities subject to Consent Orders are complying

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with the terms of those orders, and when appropriate the Bureau takes 
action against those who fail to comply with a Consent Order.\3\
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    \1\ See 12 U.S.C. 5563; see also 12 CFR 1081.120(d). The Bureau 
may also enter into settlements that are filed in Federal court and 
must be approved by the court. See 12 U.S.C. 5564(c). The Bureau may 
enter into settlements with any ``person,'' which includes both 
individuals (i.e., natural persons) and various kinds of entities. 
See 12 U.S.C. 5481(19). As discussed further below, this policy 
applies to entities subject to Consent Orders, and not to 
individuals. This policy therefore generally refers to ``entities'' 
when discussing Bureau Consent Orders.
    \2\ See 12 U.S.C. 5565; see also Consumer Financial Protection 
Bureau, Enforcement Actions, https://www.consumerfinance.gov/policy-compliance/enforcement/actions/.
    \3\ The Bureau may seek to enforce compliance with Consent 
Orders administratively or in court. See, e.g., 12 U.S.C. 5563(a), 
(b), (c), (d), 5564(a). In addition to being a violation of the 
Consent Order itself, a failure to comply with the terms of a 
Consent Order is a violation of the Dodd-Frank Act. See 12 U.S.C. 
5536(a)(1)(A) (making it unlawful for a covered person or service 
provider to ``commit any act or omission in violation of a Federal 
consumer financial law''); 12 U.S.C. 5481(14) (defining ``Federal 
consumer financial law'' to include an ``order prescribed by the 
Bureau'').
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    Consent Orders play an essential role in the Bureau's enforcement 
work by providing a public, enforceable mechanism to provide relief for 
consumers and to deter future violations, and the Bureau believes that 
in most instances Consent Orders should run for their full negotiated 
terms. At the same time, the Bureau recognizes that Consent Orders can 
impose burdens on the entities subject to them. For example, the 
reporting and record-keeping requirements imposed by Consent Orders can 
be costly and resource-intensive. In addition, in some circumstances, 
the existence of an open Bureau Consent Order can impact whether a 
depository institution supervised by a prudential regulator is 
permitted to open new branches or to merge with or acquire other 
financial institutions--which can burden the institution and 
potentially limit the choices available to consumers. Monitoring 
Consent Orders can also pose a burden for the Bureau itself.
    The Bureau believes there may be exceptional circumstances when 
early termination of a Consent Order against an entity is appropriate 
and can be accomplished in a manner that minimizes the risk of new 
violations of law or harm to consumers. To facilitate such early 
terminations, this policy statement sets forth a process by which an 
entity subject to a Consent Order may apply for early termination and 
articulates the standards that the Bureau intends to use when 
evaluating early termination applications. Under this policy, which is 
not binding on the Bureau, the Bureau's Director intends to retain 
complete discretion and sole authority to terminate Consent Orders.
    In addition to reducing the burdens associated with Consent Orders 
when they are no longer necessary, this policy provides entities with 
an incentive to fully and promptly comply with Bureau Consent Orders 
and to improve their compliance management systems to avoid additional 
violations. This policy also provides guidance to those subject to 
Bureau Consent Orders regarding the circumstances in which the Bureau 
may grant applications for early termination of a Consent Order.

II. Policy on Applications for Early Termination of Consent Orders

A. Conditions for Granting Early Termination

    The Bureau intends to grant applications for early termination of 
Consent Orders if it determines, in its sole discretion, that:
     The entity meets all of the eligibility criteria set forth 
below;
     The entity has complied with the terms and conditions of 
the Consent Order; and
     The entity's compliance position is ``satisfactory'' in 
the institutional product line (IPL) or compliance area (e.g., fair 
lending) for which the Order was issued.
    When an entity applies for termination, its application should 
demonstrate that these conditions are satisfied.
1. Eligibility To Apply for Early Termination
    In order to protect consumers from unwarranted early terminations 
and preserve the resources of potential applicants and the Bureau, the 
Bureau only intends to consider applications for early termination 
under this policy from entities that meet certain threshold eligibility 
criteria.
    First, the entity must be subject to a Consent Order the Bureau 
issued using its authority to conduct administrative adjudication 
proceedings.\4\ This policy does not apply to settlements approved and 
ordered by a court, which can only be terminated early by court order. 
In general, the Bureau does not believe it is an appropriate use of its 
resources to seek to alter the status of settlements entered by courts. 
This policy also does not apply to court orders entered as a result of 
litigation (e.g., after trial or summary judgment), which similarly can 
only be lifted by a court.
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    \4\ See 12 U.S.C. 5563; 12 CFR 1081.120(d).
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    Second, only entities are eligible to apply for early termination 
under this policy.\5\ Individuals (i.e., natural persons) are not 
eligible. As described further below, the Bureau only intends to grant 
early termination where, among other things, an entity demonstrates 
that its compliance management system is ``satisfactory'' in the 
institutional product line in which the Consent Order was issued. The 
Bureau believes it would be impractical to undertake a comparable 
review of whether individuals are likely to comply with the law in the 
future.
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    \5\ For purposes of this policy, an entity is any ``person'' 
under 12 U.S.C. 5481(19) other than an individual.
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    Third, entities may not apply for early termination under this 
policy within the first year after the entry of the Consent Order, or 
until at least six months after all compliance and redress plans 
required under the Consent Order have been fully implemented, whichever 
is later. This eligibility requirement is intended to discourage 
premature applications for termination of Consent Orders and to 
preserve Bureau resources.
    Fourth, entities are not eligible for early termination under this 
policy when the Consent Order imposes a ban on participating in a 
certain industry (e.g., the mortgage industry or debt-relief industry), 
when the Consent Order at issue involves violations of an earlier 
Bureau Order, or when there has been any criminal action related to the 
violations found in the Consent Order.\6\ In each of these situations, 
the Bureau believes that the risk of future violations and harm to 
consumers is heightened and that considering applications for early 
termination of a Consent Order would not be a productive use of Bureau 
resources.
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    \6\ For purposes of this policy, a related criminal action is 
any Federal, State, or local criminal action involving the conduct 
described in the Consent Order in which the entity or any of its 
affiliates, officers, employees, or agents have been named as a 
defendant or as an unindicted co-conspirator, regardless of whether 
there has been a conviction in the action.
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    Finally, absent extraordinary circumstances, the Bureau does not 
intend to consider more than one request from an entity for termination 
of the same Consent Order. This eligibility requirement is intended to 
incentivize entities to submit complete applications at an appropriate 
time following the issuance of a Consent Order, and to discourage 
serial requests that could pose a resource challenge for the Bureau.
2. Compliance With the Consent Order
    When an entity applies for early termination, its application 
should demonstrate its full compliance with the Consent Order, 
including whether the entity has, when required, corrected violations 
of Federal consumer financial law; paid redress, civil money penalties, 
or other monetary relief; adopted appropriate policies and procedures 
to ensure future compliance; submitted adequate reports; and maintained 
required records. The entity's application may reference or attach 
prior submissions to the Bureau relevant to demonstrating its 
compliance with

[[Page 69484]]

the Consent Order as appropriate. Additionally, if applicable, the 
entity's application should reference the results of any supervisory 
work conducted by the Bureau to assess the entity's Consent Order 
compliance and provide any additional information relevant to assessing 
its compliance with the Consent Order.
    Where appropriate, the Bureau will work with the entity to ensure 
that the entity has provided adequate documentation to demonstrate 
compliance. If it has not already done so, the Bureau intends to 
expeditiously review the entity's compliance with the Consent Order and 
conduct follow-up work as needed to determine the entity's compliance. 
The Bureau generally intends to complete this compliance review within 
six months of receiving an application that the Bureau determines is 
complete, although the Bureau retains discretion over when to conduct 
the review to determine compliance with Consent Order provisions given 
the Bureau's other supervisory and enforcement priorities.
3. Satisfactory Compliance System for the IPL or Compliance Area
    In the application for early termination of the Consent Order, the 
entity shall also demonstrate that its compliance management system for 
the IPL or compliance area at issue under the Order is 
``satisfactory,'' or the equivalent of a ``2'' rating under the Uniform 
Interagency Consumer Compliance Rating System. Under that rating 
system, a 2 rating signifies that the entity ``maintains a [compliance 
management system] that is satisfactory at managing consumer compliance 
risk in the institution's products and services and at substantially 
limiting violations of law and consumer harm.'' As part of its 
application to the Bureau for early termination, an entity should 
submit evidence that it has satisfied these elements. If applicable, 
the entity should reference prior supervisory conclusions from a Bureau 
examination regarding the entity's compliance management system for the 
IPL or compliance area at issue.\7\ In addition, if applicable, the 
entity should identify any supervisory rating or conclusion regarding 
its compliance management system in the relevant IPL or compliance area 
that it has received from other State or Federal regulators during the 
pendency of the Consent Order. The entity should also provide the 
Bureau with any additional documentation or information that the Bureau 
considers necessary to determine whether the entity maintains a 
satisfactory compliance management system in the subject IPL.\8\
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    \7\ If, during the pendency of the Consent Order, Bureau 
supervisory staff have already concluded through supervisory work 
that the entity's compliance management system for the IPL or 
compliance area at issue is satisfactory or better, the entity may 
reference that exam and that supervisory conclusion in this portion 
of its application and need not provide additional documentation 
regarding its compliance management system.
    \8\ When evaluating applications, the Bureau does not intend to 
assign a numerical compliance rating under the Consumer Compliance 
Rating System to the entity that has applied for early termination. 
The Bureau assigns such ratings in the normal course of its 
supervisory process, and it intends to continue to do so in the 
context of scheduled examinations of consent order compliance.
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    The Bureau believes that requiring an entity to satisfy this 
condition should help ensure that the entity's compliance position is 
sustainable after the Consent Order is terminated.

B. Process for Submission and Review of Early Termination Applications

    Unless otherwise directed in writing by the Bureau, an entity's 
termination application should be submitted to the Bureau point of 
contact identified in the ``Notices'' section of the Consent Order. 
Prior to submitting an application for order termination, an entity 
should contact the Bureau point of contact established in the Consent 
Order for additional guidance on the form of such a request.\9\ In 
general, the entity's application should demonstrate that the entity 
has satisfied all of the conditions set forth above. The application 
may include exhibits and may reference prior written submissions to the 
Bureau as appropriate. Any factual assertions an entity makes in its 
application should be made under oath (such as in a sworn affidavit) by 
someone with personal knowledge of such facts.
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    \9\ Any other questions regarding submission of an application 
for early termination should also be directed to the designated 
point of contact for the Consent Order.
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    Bureau staff intend to review the application and any supporting 
documentation when considering whether to recommend that the Director 
grant an application to terminate a Consent Order. As noted above, the 
Bureau may request additional information from the entity when 
evaluating the application. The Bureau may also consider any other 
information available to it regarding the entity, including information 
obtained from other government agencies or through other supervisory 
and enforcement activities involving the entity.
    Under this policy, Bureau staff intend to make recommendations to 
the Bureau's Director regarding whether to grant applications for early 
termination. The Bureau's Director intends to retain complete 
discretion and sole authority to terminate Consent Orders. The 
Director's orders granting or denying termination applications will be 
posted on the Bureau's online administrative docket \10\ and 
distributed to the entity. Prior to the Director's decision, an entity 
may withdraw its application at any time.\11\
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    \10\ See https://www.consumerfinance.gov/administrative-adjudication-proceedings/administrative-adjudication-docket/.
    \11\ Prior to the Director's decision, Bureau staff may inform 
the entity if staff intend to recommend denying an application for 
early termination. If an entity withdraws its application, the 
Bureau would still consider the application to constitute the 
entity's one application for early termination for purposes of the 
eligibility criteria set forth in section II.A.1.
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III. Regulatory Requirements

    This Policy Statement constitutes a general statement of policy 
that is exempt from the notice and comment rulemaking requirements of 
the Administrative Procedure Act.\12\ It is intended to provide 
information regarding the Bureau's general plans to exercise its 
discretion and does not impose any legal requirements on external 
parties, nor does it create or confer any substantive rights on 
external parties that could be enforceable in any administrative or 
civil proceeding. Because no notice of proposed rulemaking is required, 
the Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis. The Bureau has also determined that 
this Policy Statement 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 approval by the Office of Management and Budget 
under the Paperwork Reduction Act.
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    \12\ 5 U.S.C. 553(b). However, this is not a ``statement of 
policy'' as that term is specifically used in Regulation X, 12 CFR 
1024.4(a)(1)(ii).
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    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).

IV. Signing Authority

    The Director of the Bureau, having reviewed and approved this 
document,

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is delegating the authority to electronically sign this document to 
Laura Galban, a Bureau Federal Register Liaison, for purposes of 
publication in the Federal Register.

    Dated: October 5, 2020.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-22360 Filed 11-2-20; 8:45 am]
BILLING CODE 4810-AM-P