On December 6, 2012, the CFPB and the Department of Justice (“DOJ”) executed a Memorandum of Understanding (“MOU”) aimed at strengthening their coordination in connection with fair lending investigations. The MOU also seeks to avoid duplication of the agencies’ respective enforcement efforts, particularly with regard to coordinating investigations of alleged violations of the Equal Credit Opportunity Act (“ECOA”).
Both the CFPB and DOJ have authority under ECOA. Moreover, under Dodd-Frank, the CFPB is authorized to conduct joint investigations with the DOJ in matters relating to fair lending and has independent authority to institute investigative or enforcement actions against members of the consumer financial services industry if the CFPB believes a fair lending violation has occurred.
According to the CFPB, the goal of the MOU is to “promote consistent, efficient, and effective enforcement of federal fair lending laws.” In its press release announcing the MOU, the CFPB outlined the MOU’s general framework as follows:
Sharing information and preserving confidentiality – The agencies will share information in connection with their fair lending investigations. Such shared information is subject to strict confidentiality provisions set forth in the MOU.
Joint investigations and coordination – The MOU promotes joint and collaborative investigations between the DOJ and CFPB. The agencies will meet quarterly to discuss their pending fair lending efforts, as well as to explore opportunities for coordination. However, each agency retains “independent authority to proceed in the manner that it determines is appropriate.”
Referrals and notifications between the agencies – The MOU requires the CFPB to refer matters to the DOJ when the CFPB has reason to believe that a creditor engaged in a “pattern or practice of discrimination.” While a referral to the DOJ does not ultimately dispense with the CFPB’s authority to investigate such allegations, the MOU calls on both agencies to coordinate their enforcement efforts to avoid unnecessarily duplicative actions. The agencies also agreed to notify each other of key stages of their investigative work, such as opening an investigation or filing a lawsuit.
Although the CFPB’s press release seems to paint a picture of clarity, our review of the MOU itself left us with a sense of confusion. For example, while the agencies agreed to cooperate and coordinate their respective enforcement efforts, the MOU does not actually speak in any certain terms as to how the agencies plan to actually accomplish this goal. Rather, the MOU states that the agencies will collaborate and conduct joint investigations “when appropriate” but does not elaborate as to “when” it will be “appropriate” for such coordination to occur. The MOU also states that when a joint investigation is conducted by the agencies, they will “work closely together to coordinate their investigations in a manner that is consistent and complementary,” but the MOU provides no further detail. Examples of what can only be characterized as undefined aspirations between the two agencies are peppered throughout the MOU and, in our opinion, leave the industry wondering if any meaningful coordination will actually occur or whether the industry will face duplicative parallel investigations because the agencies, for whatever reason, did not deem the circumstances to be “appropriate” for coordination. In contrast to its stated purpose, the MOU does not appear to offer any certainty when it comes to the CFPB’s fair lending enforcement activities and how those efforts will or will not be impacted by the efforts of others.