The CFPB has issued a "Statement of Policy on Applications for Early Termination of Consent Orders." The statement is applicable as of today.
The policy statement outlines the application process for an entity seeking the early termination of an administrative consent order and the standards that the Bureau will use when evaluating such applications. Administrative consent orders typically have a five-year term. The Bureau emphasizes that early termination will only be appropriate in "exceptional circumstances" and that the policy statement, which is not binding on the Bureau, is intended to facilitate early terminations when exceptional circumstances exist.
For the Bureau to grant an application for the early termination of a consent order, an entity must demonstrate, and the Bureau must determine in its sole discretion, that the entity (1) meets all of the eligibility criteria set forth in the Policy Statement, (2) has complied with all of the consent order's terms and conditions, and (3) has a compliance management system (CMS) for the institutional product line (IPL) or compliance area for which the consent order was issued that is "satisfactory" or merits the equivalent of a "2" rating under the Uniform Interagency Compliance Rating System (Compliance Rating System).
Eligibility. To be eligible for early termination, an entity:
- Must be subject to an administrative consent order. The policy statement does not apply to court-approved consent orders or court orders entered as result of litigation.
- Must be other than an individual.
- Must not be within the first year after entry of the consent order and must have fully implemented all compliance and redress plans required under the consent order at least six months before applying.
- Must not be subject to a consent order that bans the entity's participation in a particular industry, involves violations of an earlier Bureau order, or as to which there has been a criminal action related to the violations found in the consent order.
- Must not have made a prior request for early termination (absent extraordinary circumstances).
Compliance with consent order. The entity must demonstrate full compliance with the consent order, including that, when required, it has corrected violations of federal consumer financial law; paid redress, civil money penalties, or other monetary relief; adopted appropriate policies and procedures to ensure future compliance; submitted adequate reports; and maintained required records. The Bureau generally intends to complete its compliance review within six months of receiving a complete application.
Satisfactory compliance. The entity must demonstrate that its CMS for the IPL or compliance area at issue under the consent order is "satisfactory" or merits the equivalent of a "2" rating under the Compliance Rating System by submitting evidence that it has satisfied the elements of such a rating. If applicable, an entity should reference prior supervisory conclusions from a Bureau examination and any supervisory rating or conclusion from a state or other federal regulator during the pendency of the consent order as to the entity's CMS for the IPL or compliance area at issue.
We would expect that, even without the policy statement, the CFPB would give due consideration to requests for early termination of an administrative consent order. Nevertheless, we view it as a positive step for the CFPB to make clear its standards for early termination (particularly since we are not aware of any other agencies that have issued similar policies). At the same time, we are disappointed that the policy statement takes an entirely "hands off" approach to court-approved consent orders. While such consent orders can only be terminated early by court order, the CFPB could urge a court to terminate a consent order under circumstances where the CFPB would be willing to grant a request for early termination of a comparable administrative consent order. For that reason, we would encourage the CFPB to consider expanding the policy statement to apply to court-approved consent orders.
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