On March 28, CFPB Director Rohit Chopra warned that large, dominant banks and firms that repeatedly break the law “should be subject to the same consequences of enforcement actions as small firms.” Speaking before the University of Pennsylvania Law School as the 2022 Distinguished Lecturer on Regulation, Chopra told attendees that the current “double-standard” enforcement approach needs to end, and that the Bureau intends to establish dedicated units within its supervision and enforcement divisions to detect repeat offenders and corporate recidivists “to better hold them accountable.” This may mean that insured depository institutions lose access to federal deposit insurance or are put directly into receivership, Chopra stated, explaining that “[r]epeat offenses and, in particular, order violations, may be a sign that an institution’s condition or behavior is unsafe and unsound.”
Pointing out that penalties become meaningless if regulators are not willing to enforce them, Chopra stated that the Bureau needs “to move away from just monetary penalties and consider an arsenal of options that really work to stop repeat offenses.” To address this, Chopra outlined a new set of “bright-line structural remedies, rather than press-driven approaches” that the Bureau will consider when it discovers large entities are repeatedly committing the same types of violations. These include: (i) imposing limits or caps on size or growth; (ii) banning certain types of business practices; (iii) forcing companies to divest certain product lines; (iv) placing limitations on leverage or requirements to raise equity capital; and (v) revoking government granted privileges. Additionally, with respect to licensed nonbank institutions of all sizes that repeatedly violate the law, Chopra indicated that the Bureau will deepen its collaboration with state licensing officials to allow states to determine whether to suspend licenses or liquidate assets.
Chopra also raised the prospect of targeting individuals. “Agency and court orders bind officers and directors of the corporation, and so do the laws themselves, so there are multiple ways in which individuals are held accountable. Where individuals play a role in repeat offenses and order violations, it may be appropriate for regulatory agencies and law enforcers to charge these individuals and disqualify them. Dismissal of senior management and board directors, and lifetime occupational bans should also be more frequently deployed in enforcement actions involving large firms.” Chopra emphasized that “[w]hen it comes to individuals, we also need to pay close attention to executive compensation incentives. Important remedies for restoring law and order may include clawbacks, forfeitures, and other changes to executive compensation, including where we tie up compensation for longer periods of time and use that deferred compensation as the first pot of money to pay fines.”
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