The Federal Reserve’s Office of Inspector General (OIG) released an audit of the Consumer Financial Protection Bureau’s (CFPB) civil penalty fund, which was conducted between June 2013 and November 2013. The OIG identified opportunities for the bureau to improve on the controls it developed to implement the civil penalty fund.
Under the Dodd-Frank Act, the CFBP is authorized to collect civil penalties for violations of consumer protection laws.
The civil money penalties available to the bureau are extensive:
When the bureau takes an enforcement action against someone for violations of federal law, the agency requires the person or company to pay a penalty. That penalty goes into the civil penalty fund, which was established under the Dodd-Frank Act.
The money in the fund is used to compensate consumers who have been harmed by illegal activities. If a victim cannot be located, the CFPB is allowed to use the money for consumer education and financial literacy program.
In an August 2013 report, the CFPB said it had collected $61.5 million in penalties. In May 2013, the bureau made its first allocation from the civil penalty fund. The bureau took the $46.1 million that it collected from the cases that concluded as of March 31 and determined that only two cases, one involving Payday Loan Debt Solution Inc. and the other involving the Gordon Law Firm, had victims that had harm that was compensable from the penalty fund. The agency allocated $10.5 million to compensate victims in those two cases and then set aside $1.6 million for administrative expenses. It then allocated $13.4 million for consumer education and financial literacy programs.
The OIG conducted the audit to determine whether the bureau has controls in place to implement Dodd-Frank’s statutory provisions concerning the civil penalty fund. The audit contains information regarding the penalties the CFPB has collected so far and where it has allocated some of the funds.
The OIG found that the bureau has been implementing internal controls since June 2012 and has made civil penalty fund information available to the public. The audit found, however, that the procedures for the civil penalty fund administration should be better clarified. According to the OIG’s findings, the CFPB’s civil penalty fund procedures state that the fund administrator should meet with the Office of Enforcement to collect case-related data that will facilitate payments to victims. However, the OIG found that the fund administrator collected case-related information in writing, which is not required under the procedures. It recommended that the procedures should specifically state that the fund administrator must collect information in writing.
The OIG also found that the civil penalty fund information was not consolidated on the CFPB’s website, which the bureau subsequently fixed. Click here to read the entire audit.
Cover Story: