Both the Credit Union National Association and the National Association of Federally-Insured Credit Unions on Friday submitted letters to the Consumer Financial Protection Bureau urging numerous changes to the bureau's civil investigative demands processes.

The CFPB issues CIDs when it suspects a financial institution is violating consumer protection laws. According to CUNA and NAFCU, CIDs should be made more clear, especially by making them less broad and more specific. In addition, both trades requested changes to the time allotted to financial institutions to respond to CIDs, and asked the bureau to protect confidentiality in certain instances.

The two major credit union trade associations were responding to a CFPB request for information issued in January.

Mick Mulvaney, acting CFPB director.
Mick Mulvaney, acting CFPB director. Bloomberg News

NAFCU makes 3 suggestions

Alexander Monterrubio, NAFCU’s director of regulatory affairs, offered what he described as “potential improvements” in three categories of the CID process:

  • Specific information on purpose and scope: Monterrubio said contrary to principles for regulating the U.S. financial system, the CFPB has in the past used CIDs "as a means to request materials in an ambiguous manner" by issuing broad statements of purpose for its investigations. NAFCU recommended the bureau amend its CIDs procedures to ensure specific details of the acts and practices under investigation are included, and include the specific scope of materials the financial institution under investigation should turn over to the bureau along with an explanation of how the materials are related to allegations and the investigation.
  • Appeals and modifications of CIDs: Under current processes, Monterrubio noted institutions have a limited timeframe to request to modify a CID and confidentiality is not guaranteed if a CID is petitioned, representing a reputational threat. NAFCU recommended the bureau work to protect confidentiality so institutions can challenge potentially erroneous or unlawful premises of a CID and also allow petitions to be filed at any point during an investigation to ensure a fair process.
  • Bolster meet-and-confer processes: "The CID process is an invasive and burdensome action on the part of the federal government. It should be used thoughtfully and deliberate manner [sic]," Monterrubio wrote. NAFCU recommended meet-and-confer policies be amended to ensure productive, mutually beneficial discussions between the CFPB and institutions regarding CID modifications.

With these changes, NAFCU said, the CFPB’s CIDs could be “updated, streamlined or revised so the bureau can better meet its statutory and regulatory objectives, while also minimizing existing burdens.”
CUNA asks CUs be protected from ‘unwarranted government intrusion’

Elizabeth Eurgubian, CUNA’s deputy chief advocacy officer and senior counsel, wrote in her letter, “CUNA recognizes that aggressive use of CIDs may be necessary to investigate activities of profit-driven financial institutions and individuals that are engaging in fraud or other serious violations.”

“However, credit unions genuinely wish to meet or exceed regulatory requirements designed to protect consumers and will cooperate with reasonable bureau inquiries,” CUNA argued. “Current bureau CID processes do not have policies or procedures that protect legitimate financial institutions, such as credit unions, from unwarranted government intrusion.”

CUNA’s arguments to the CFPB included:

  • While it is reasonable to require that a CID recipient contact CFPB investigators within 10 days of receiving a CID, institutions cannot meaningfully meet and confer about the CID’s specific requests within 10 days. This leads to inefficiency in the investigations and waste of resources;
  • CID statements of basis and purpose of investigations can be improved by requiring the CID to:
    • Identify the institutional product lines under review;
    • Specify applicable enumerated statutes;
  • Articulate the specific conduct under investigation--particularly when the Bureau is relying upon theories of unfair, deceptive, or abusive acts or practices;
  • Specify when substantially-assisting the violations of another covered person is at issue; and
  • Specify when the Bureau is investigating as to whether an individual director or officer may be personally liable for violations.
  • Neither the meet and confer process, nor the Petition to Modify or Set Aside processes provide CID recipients a meaningful opportunity to challenge administratively a CID that:
    • Exceeds Bureau jurisdiction; Asks for information that is irrelevant to the violations investigated; or
    • Seeks information that is indefinite.
  • The bureau deprives CID recipients of due process when it makes public CID recipients’ Petitions to Modify or Set Aside a CID.

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