Repeat Violators Risk Losing Licenses, Chopra Warns

The Consumer Financial Protection Bureau is planning to establish dedicated units aimed at detecting repeat offenses and corporate recidivism “to better hold them accountable” while also laying out a series of enforcement options that the regulator will consider when it finds financial services organizations committing the same types of violations over and over again, Rohit Chopra, the CFPB’s Director, said during a speech yesterday.

While aimed at the largest participants in the financial services industry — big banks that are considered too big to fail, or “too big to jail” as Chopra put it — his speech should serve as a wake-up call to anyone in the financial services industry that has been the subject of an enforcement action. Chopra said in his remarks that small institutions often face having to go out of business when caught violating the law, while large firms view such penalties as line items on their expense statements. To correct that, Chopra said the CFPB is taking steps to create “bright-line structural remedies, rather than press-driven approaches.” Among the penalties that may now be on the table are:

  • Imposing limits or caps on how big companies can become
  • Banning companies from engaging in certain types of business practices
  • Forcing companies to divest themselves of certain product lines
  • Limiting a company’s leverage or requirements to raise equity capital
  • Revoking government-granted privileges

With respect to licensed, non-bank institutions, the CFPB will be working more closely with state licensing officials, Chopra said, to give states the decision whether to suspend licenses or liquidate assets.

“In the end, large dominant firms should be subject to the same consequences of enforcement actions as small firms,” Chopra said in his remarks, which were given virtually to students at the University of Pennsylvania. “We need to end double-standard enforcement that exists. We need to move away from just monetary penalties and consider an arsenal of options that really work to stop repeat offenses.

“More importantly, when the public perceives that powerful actors in the economy and society live by a different set of rules, this deeply undermines the promise of the rule of law and our market system. We can and must change course on this.”

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