The Consumer Financial Protection Bureau (CFPB) issued a statement on Oct. 5 detailing the process and criteria for the early termination of consent orders.
While consent orders usually have a five-year term, entities subject to them can apply for early termination should they meet appropriate criteria. According to the policy and the released statement, the sole authority to terminate a consent order still rests with the bureau’s director and is at their complete discretion.
“The bureau recognizes that there may be exceptional circumstances where it is appropriate to terminate a consent order before its original expiration date,” the bureau stated. “To facilitate such early terminations where appropriate, this policy statement sets forth a process by which an entity subject to a consent order may apply for early termination and articulates the standards that the bureau intends to use when evaluating early termination applications.”
Consent orders are issued when the bureau finds violations of federal consumer financial law. The orders describe the bureau’s findings and conclusions and impose injunctive and/or monetary relief; penalties; and reporting, recordkeeping, and cooperation requirements. They are negotiated by the bureau and the entity, or entities, involved, and generally last five years, though can be longer if the bureau believes it is warranted.
“In addition to reducing the burdens associated with consent orders when they are no longer necessary, this policy provides entities with an incentive to fully and promptly comply with bureau consent orders and to improve their compliance management systems to avoid additional violations,” the bureau stated.
In order to apply for early termination, an entity subject to a consent order must demonstrate it has fully complied with the terms and conditions of the consent order and the entity’s compliance position is “satisfactory” in the institutional product line or compliance area for which the order was issued.
Entities also need to meet certain threshold criteria:
- The entity must be subject to a consent order the bureau issued using its authority to conduct administrative adjudication proceedings;
- Only entities are eligible to apply for early termination, no individuals; and
- Entities may not apply within the first year after the consent order is entered, or at least six months after all compliance and redress plans have been fully implemented, whichever is later.
Entities are not eligible for early termination when:
- The consent order imposes a ban on participating in a certain industry;
- The order at issue involves violations of a previous order; or
- When there has been any criminal action related to the violations found in the consent order.
For entities looking to apply, it is important to note that, unless there are extraordinary circumstances, the bureau said it does not intend to consider more than one termination request per consent order. This is to discourage serial requests, and to encourage complete applications.
When an entity is filing for early termination, the application should be submitted to the bureau contact specified in the consent order. Staff will then review the application and make a recommendation, to be submitted to the director. Once the application is received, the bureau intends to complete its compliance review within six months.