CFPB Explains Use Of Civil Penalty Fund

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On April 26, the CFPB issued a final rule that (i) establishes the governance structure of the Civil Penalty Fund, including the position of Civil Penalty Fund Administrator, (ii) identifies categories of victims who may receive funds and the amounts they may receive, (iii) establishes procedures for allocating funds for payments to victims and for consumer education and financial literacy programs, and for distributing allocated funds to individual victims, (iv) describes the circumstances in which payments to certain victims or classes of victims will be deemed impracticable, and (v) requires the Administrator to issue regular reports. While the CFPB issued the rule without a notice and comment period because the rule is exempt from the Administrative Procedures Act and other rulemaking requirements, it also issued a related proposal in which the CFPB seeks comment on, among other things, (i) whether it should make payments to victims of any type of “activities” for which it has imposed civil penalties, even if no enforcement action imposed a civil penalty for the particular “activities” that harmed the victim, (ii) whether it should limit payments to a share of the civil penalties collected for the particular violations that harmed a consumer, as opposed to using general Civil Penalty Fund dollars, and (iii) alternatives to the allocation procedures to be used when sufficient funds are not available to compensate fully the uncompensated harm of all victims to whom it is practicable to make payments. Comments on the proposal are due within 60 days of its publication in the Federal Register.