Senator Catherine Cortez Masto recently introduced the Financial Compensation for Consumer Financial Protection Bureau (CFPB) Whistleblowers Act, which would require the Consumer Financial Protection Bureau to provide rewards to whistleblowers who report original information relating to a violation of consumer financial law resulting in monetary sanctions exceeding $1 million. Awards would range from 10% to 30% of the collected monetary sanctions, and in cases where the CFPB is unable to collect at least $1 million of the imposed sanctions, the CFPB would award a whistleblower 10% of the amount collected or $50,000, whichever is greater.
The bill is cosponsored by Chairman of the Senate Banking, Housing, and Urban Affairs Committee Senator Sherrod Brown (D-Ohio) and Senators Dick Durbin (D-Ill.), Elizabeth Warren (D-Mass.), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), and Tina Smith (D-Minn.).
The Financial Compensation for CFPB Whistleblowers Act is similar to the SEC whistleblower reward program that has proven a successful tool to protect investors and strengthens capital markets. When Congress created the CFPB, it included a strong whistleblower protection provision but did not authorize awards to whistleblowers.
A whistleblower reward program at the CFPB could significantly augment enforcement of consumer financial protection laws, including laws barring unfair, deceptive, or abusive acts and practices. The CFPB has authority over a broad array of consumer financial products and services, including mortgages, deposit taking, credit cards, loan servicing, check guaranteeing, collection of consumer report data, debt collection associated with consumer financial products and services, real estate settlement, money transmitting, and financial data processing.
Through 2020, the CFPB has secured approximately $12.9 billion in consumer relief (monetary compensation, principal reductions, canceled debts, and other consumer relief ordered as a result of enforcement actions) and $1.6 billion in penalties (money penalties ordered as a result of enforcement actions). A whistleblower reward program would enable the CFPB to detect violations more promptly and lead to significant enforcement actions on a faster timetable, thereby protecting harmed consumers and deterring unfair, deceptive, or abusive consumer financial acts and practices.
Proposed CFPB Whistleblower Reward Program
The proposed CFPB whistleblower rewards law is modeled on the Dodd-Frank SEC whistleblower reward program. Key facets of the proposed program include:
A whistleblower could report anonymously if they are represented by counsel.
The CFPB would be prohibited from disclosing information which could reasonably be expected to reveal the identity of a whistleblower.
The CPFB would deny an award to a whistleblower (1) convicted of a criminal violation related to the administrative proceeding or court action for which the whistleblower otherwise could receive an award; (2) found to be liable for the conduct in the administrative proceeding or court action; or (3) who planned and initiated the conduct at issue.
Arbitration agreements and non-disclosure agreements would not bar whistleblowers from disclosing information to the CFPB.
Awards would be paid from the Consumer Financial Civil Penalty Fund, which was created in the CFPA to authorize the CFPB to use civil penalties imposed in enforcement actions to pay the victims of activities for which the penalties were imposed.
To determine the amount of an award, the CFPB would consider the following factors: (i) the significance of the information provided by the whistleblower to the successful enforcement of the administrative proceeding or court action; (ii) the degree of assistance provided by the whistleblower and any legal representative of the whistleblower in an administrative proceeding or court action; (iii) the programmatic interest of the Bureau in deterring violations of federal consumer financial law (including applicable regulations) by making awards to whistleblowers who provide information that leads to the successful enforcement of such laws; and (iv) such additional relevant factors as the Bureau may establish by rule or regulation.
Congress should act swiftly to enact the Financial Compensation for Consumer Financial Protection Bureau (CFPB) Whistleblowers Act. And for the reasons identified in a persuasive proposal to expand the scope of whistleblower programs, Congress should apply the SEC whistleblower program “model more widely by authorizing or requiring more whistleblower programs in more federal agencies.”