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CFPB proposes to issue final rule on annual civil penalty adjustments

The CFPB is proposing to issue a final rule on annual adjustments to the civil penalties within its jurisdiction.  Comments on the proposal must be received by November 13, 2018.

In November 2016, the CFPB published an interim final rule (IFR) to create 12 C.F.R. Part 1083 which sets forth the penalty amounts as adjusted annually.  The adjustments are required by the Federal Civil Penalties Inflation Adjustment Act of 1990 which, pursuant to a 2015 amendment (2015 Amendment), required federal agencies to adjust the civil penalties within their jurisdiction by July 1, 2016 and then to adjust them by January 15 every year thereafter.  The civil penalties adjusted annually by the CFPB are the Tier 1-3 penalties set forth in Section 1055 of Dodd-Frank, as well as the civil penalties in the Interstate Land Sales Full Disclosure Act, Real Estate Settlement Procedures Act, SAFE Act, and Truth in Lending Act.  The IFR provides that the adjusted penalty amounts “shall apply to civil penalties assessed after July 14, 2016, regardless of when the violation for which the penalty assessed occurred.”  (July 14, 2016 was the IFR’s effective date.)

The CFPB adjusted its civil penalty amounts through rules issued in 2017 and 2018that amended the maximum civil penalty amounts set forth in the IFR.  In the supplementary information accompanying the proposal, the CFPB states that in 2017, the OMB issued guidance which provided that “[f]or the 2018 annual adjustment, the new penalty amounts should apply to penalties assessed after the effective date of the annual 2018 adjustment—which shall be no later than January 15, 2018—including, if consistent with agency policy, assessments whose associated violations occurred on, or after, November 2, 2015.”  (November 2, 2015 was the date the 2015 Amendment was signed into law.)

Consistent with the OMB guidance, the Bureau is proposing to finalize the IFR to add language specifying that adjusted penalties will apply only to violations that occurred on or after November 2, 2015.  The Bureau is also proposing that the final rule would have an effective date no sooner than January 15, 2019 to coincide with, or occur after, the effective date of a 2019 annual adjustments by the Bureau.  The new language would provide that the 2019 adjustments “shall apply to civil penalties assessed after January 15, 2019, whose associated violations occurred on or after November 2, 2015.”

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About this Author

Barbara S. Mishkin, Ballard Spahr, Philadelphia, Deceptive Practices Lawyer, Fair Debt Collection Practices Act, Gramm Leach Bliley
Of Counsel

Barbara Mishkin focuses on consumer compliance and banking law. The federal laws with which Ms. Mishkin has dealt extensively include the Truth in Lending Act, Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, and Gramm-Leach-Bliley Act. She also has significant experience with state usury and lender licensing laws, as well as state laws prohibiting unfair and deceptive acts and practices.

American Bar Association, member, Consumer Financial Services Committee;...

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