Consumer Financial Civil Penalty Fund Rule Amendment

CONSUMER FINANCIAL PROTECTION BUREAU <CFR>12 CFR Part 1075</CFR> <DEPDOC>[Docket No. CFPB-2025-0021]</DEPDOC> <SUBJECT>Consumer Financial Civil Penalty Fund Rule Amendment</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Consumer Financial Protection Bureau. <HD SOURCE="HED">ACTION:</HD> Proposed rule; request for comment. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Consumer Financial Protection Bureau (Bureau or CFPB) is proposing to amend its 2013 rule implementing the provision of the Consumer Financial Protection Act of 2010 (CFPA or Act) that establishes a Consumer Financial Civil Penalty Fund (Civil Penalty Fund). Under the CFPA, the Civil Penalty Fund may be used for payments to victims of activities subject to civil penalties; to the extent victims cannot be located or payments are not practicable, the Bureau may use funds for consumer education and financial literacy programs. This proposed rule would remove references to allocating funds for consumer education and financial literacy programs. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before July 18, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit responsive information and other comments, identified by Docket No. CFPB-2025-0021, by any of the following methods: • <E T="03">Federal eRulemaking Portal: https://www.regulations.gov.</E> Follow the instructions for submitting comments. A brief summary of this document will be available at <E T="03">https://www.regulations.gov/docket/CFPB-2025-0021.</E> • <E T="03">Email: 2025-NPRM-CivilPenaltyFund@cfpb.gov.</E> Include Docket No. CFPB-2025-0021 in the subject line of the message. • <E T="03">Mail/Hand Delivery/Courier:</E> Comment Intake—Consumer Financial Civil Penalty Fund Rule Amendment, c/o Legal Division Docket Manager, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552. <E T="03">Instructions:</E> The Bureau encourages the early submission of comments. All submissions should include the agency name and docket number. Additionally, where the Bureau has asked for specific comment on a topic, commentors should seek to highlight the topic to which its comment is applicable. Because paper mail is subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to <E T="03">https://www.regulations.gov.</E> All submissions, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Submissions will not be edited to remove any identifying or contact information. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Dave Gettler, Paralegal Specialist, Office of Regulations at 202-435-7700. If you require this document in an alternative electronic format, please contact <E T="03">CFPB_Accessibility@cfpb.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Executive Summary</HD> The Bureau is proposing to revise its 2013 rule articulating procedures for allocations from the Civil Penalty Fund to rescind procedures related to allocations for consumer education and financial literacy programs. The Bureau now believes that the procedures outlined in the rule provide neither adequate guardrails for the agency's exercise of its discretion nor adequate transparency to the public regarding a potentially significant expenditure. <HD SOURCE="HD1">II. Legal Authority</HD> The CFPA established the Bureau with a mandate to regulate the offering and provision of consumer financial products and services under the Federal consumer financial laws. Public Law 111-203, sec. 1011(a) (2010), codified at 12 U.S.C. 5491(a). The CFPA authorizes the Bureau, among other things, to enforce Federal consumer financial law through judicial actions and administrative adjudication proceedings. 12 U.S.C. 5563, 5564. In those actions and proceedings, a court or the Bureau may require a party that has violated the law to pay a civil penalty. <E T="03">See, e.g.,</E> 12 U.S.C. 5565. Section 1017(d)(1) of the CFPA establishes a separate fund in the Federal Reserve, the “Consumer Financial Civil Penalty Fund” (Civil Penalty Fund), into which the Bureau must deposit civil penalties it collects from any person in any judicial or administrative action under Federal consumer financial laws. 12 U.S.C. 5497(d)(1). Under the Act, amounts in the Fund may be used “for payments to the victims of activities for which civil penalties have been imposed under the Federal consumer financial laws.” 12 U.S.C. 5497(d)(2). In addition, “[t]o the extent that such victims cannot be located or such payments are otherwise not practicable,” the Bureau may use amounts in the Fund for consumer education and financial literacy programs. <E T="03">Id.</E> The Bureau is issuing this rule pursuant to its authority under section 1022(b)(1) of the CFPA, which authorizes the Bureau to prescribe rules as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of Federal consumer financial law, 12 U.S.C. 5512(b)(1); and under section 1017(d) of the CFPA, which establishes the Civil Penalty Fund and authorizes the Bureau to use amounts in that Fund for payments to victims and for consumer education and financial literacy programs. <HD SOURCE="HD1">III. Discussion of Proposal</HD> On May 7, 2013, the Bureau published a rule (2013 Rule) that stated its interpretation of what kinds of payments to victims are appropriate and established procedures for allocating such funds to both victims and to consumer education and financial literacy programs. First, it described the roles of Bureau officials involved in managing the Civil Penalty Fund, including by establishing the position of Civil Penalty Fund Administrator (Fund Administrator) and providing that the Civil Penalty Fund Governance Board—the body comprised of senior Bureau officials established by the Director to advise on matters relating to the Civil Penalty Fund—may advise or direct the Fund Administrator on the administration of the Civil Penalty Fund. Second, the 2013 Rule identified the category of victims who may receive payments from the Civil Penalty Fund and set forth the amounts they may receive. Third, the 2013 Rule established a two-stage procedure for expending money in the Civil Penalty Fund, pursuant to which, based on six-month periods, the Fund Administrator will first allocate funds for payments to classes of victims and, if appropriate, for consumer education and financial literacy programs, then designate a payments administrator to distribute allocated funds to individual victims in the classes to which funds have been allocated. Fourth, the 2013 Rule set forth several circumstances in which it will be deemed impracticable to make payments to victims or to classes of victims. Finally, the 2013 Rule required the Fund Administrator to issue regular reports on the disposition of funds in the Civil Penalty Fund. <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>  The most recent report is available at <E T="03">https://files.consumerfinance.gov/f/documents/cfpb_financial-report-fy-2024.pdf.</E> </FTNT> The 2013 Rule provided limited information on how the Bureau was to exercise its discretion to use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs, should such funds remain available after allocations to victims. The preamble stated only that “the Bureau has adopted criteria—not contained in this rule—for selecting the particular consumer education or financial literacy programs to be funded” and referred to a page on the Bureau's website. The regulatory text's discussion of funding consumer education or financial literacy programs consisted, in its entirety, of two bare recitations of the phrase “allocating funds to consumer education and financial literacy programs,”  <SU>2</SU> <FTREF/> one provision parroting the statutory grant of discretionary authority to make allocations, <SU>3</SU> <FTREF/> and two provisions clarifying the authority of the Fund Administrator with respect to such allocations. <SU>4</SU> <FTREF/> <FTNT> <SU>2</SU>  12 CFR 1075.100 (“This part also establishes procedures and guidelines for allocating funds from the Consumer Financial Civil Penalty Fund to classes of victims and distributing such funds to individual victims, <E T="03">and for allocating funds to consumer education and financial literacy programs.</E> ”); § 1075.105(a) (“The Fund Administrator will allocate Civil Penalty Fund funds specified in paragraph (c) of this section to classes of victims <E T="03">and to consumer education and financial literacy programs as appropriate</E> according to the schedule established in paragraph (b) of this section and the guidelines established in §§ 1075.106 and 1075.107.”) (emphasis added). </FTNT> <FTNT> <SU>3</SU>  12 CFR 1075.107(a) (“If funds available under § 1075.105(c) remain after the Fund Administrator allocates funds as described in § 1075.106(a), the Fund Administrator may allocate those remaining funds for consumer education and financial literacy programs.”). </FTNT> <FTNT> <SU>4</SU>  12 CFR 1075.106(d)(2) (“If, in allocating funds during a given time period described in § 1075.105(b)(2), the Fund Administrator exercises her discretion under paragraph (d)(1) of this section, she may allocate funds to consumer education and financial literacy programs under 1075.107 during that time period only to the same extent she could have absent that exercise of discretion.”); § 1075.107(b) (“The Fund Admi ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 21k characters. 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