The Consumer Financial Protection Bureau is embarking on a hiring spree, increasing the number of full-time employees in its enforcement division by 50% and hiring additional staff in its legal, operations and research, monitoring and regulations divisions.
CFPB Director Rohit Chopra has allocated about 75 new full-time employees to the enforcement division, according to an internal memo from Eric Halperin, the CFPB’s enforcement chief. The CFPB has roughly 150 enforcement attorneys and support staff. The hiring is one of the largest recruitment drives at the agency.
“These additional resources will enable us to open more investigations, including matters with significant market impact and against large market actors, consistent with the Bureau’s priorities,” Halperin wrote in the memo. “We also will be in a better position to meet resource demands from our increasing number of matters in contested litigation.”
The memo from Halperin was sent to employees on Sept. 21, roughly two weeks before the Supreme Court heard a case challenging the constitutionality of the CFPB’s funding structure. In the past year the CFPB has been sued by trade groups and financial institutions, and has faced pushback against its investigations and enforcement actions. After oral arguments were heard in the case on Tuesday, many legal experts said the CFPB appeared likely to prevail because many of the justices appeared skeptical of defunding the agency.
“I think they’re feeling good about the Supreme Court case and are letting people know what’s coming down the road,” said Joe Lynyak, a partner at Dorsey & Whitney.
Jonathan Pompan, a partner and chair of the consumer financial services practice group at Venable LLP, said the ramp-up in hiring would give the CFPB the capacity to take on 25 to 30 additional investigations, plus more enforcement actions and litigation stemming from exam findings.
“As an agency in its second decade, and despite a large swath of banks and nonbanks falling under supervision and examination authority, and having robust enforcement capacity, Chopra and his senior management team are no doubt aware that many financial institutions and service providers have not been scrutinized,” Pompan said.
Since last October, when an appeals court ruled that the bureau’s funding violated the Constitution’s structural separation of powers, many financial institutions have asked for enforcement actions to be put on hold. Others have sued the CFPB to halt rules from going into effect until the Supreme Court case is resolved.
For example, in July, a federal judge agreed to halt the bureau’s small-business data collection rule for members of the American Bankers Association and the Texas Bankers Association. Then in September, a federal district court in Kentucky prohibited the bureau from enforcing the same rule, known as 1071 for its section in the Dodd-Frank Act, until the high court issues an opinion, expected early next year.
While many financial institutions have been hoping the CFPB and all its past actions will be eliminated by the Supreme Court, Pompan said that “betting on the Bureau being obliterated is not a risk management strategy — except for entities that believe they are in the right yet find themselves being pushed into CFPB sue or settle territory for alleged past violations of law.
“For some companies and professionals, it is too easy to get distracted by optimistic or pessimistic hot takes, and lose sight of the importance of compliance,” Pompan continued. “While optimism and pessimism can be a driving force for believing the status quo will be blown up or continue, it must be tempered with a pragmatic commitment to compliance and continuing to call out the CFPB when they overreach or are wrong.”
In the memo, Halperin said the CFPB has filed nearly 20 public enforcement actions this year and resolved several lawsuits yielding billions of dollars in consumer relief and penalties.
“With more resources, we as an Office and as a Bureau can better serve consumers by expanding our footprint and strengthening the deterrent effect we have on the market,” Halperin wrote.
The CFPB’s staffing levels increased roughly 3% to 1,632 in fiscal 2022 from a year earlier, according to the bureau’s financial report.
The CFPB will begin recruiting and hiring new enforcement attorneys and staff this fall and into next year. The bureau plans to hire a litigation deputy, assistant litigation deputies, other support staff and will add a fifth litigation team, the memo stated. Some of the positions have already been posted online.
“The office will benefit from standing up a fifth litigation team that is as strong as the existing four teams,” Halperin wrote. “It will take several months to build the fifth litigation team and will involve both internal moves as well as new hiring.”
Chopra has said that the CFPB plans to crack down on large companies, repeat industry offenders and even individual executives. He has laid out a robust enforcement regime against large banks and other financial firms that he has described as corporate recidivists, breaking the law again and again with few additional sanctions. Many expect the enforcement actions will fall under the federal prohibition against “unfair, deceptive and abusive acts and practices,” known as UDAAP.
Lynyak said that one of the problems companies have with the CFPB’s enforcement is that it differs dramatically from other regulatory agencies such as the Office of the Comptroller of the Currency.
“The decision to take an enforcement action at the CFPB is outside of the legal division,” Lynyak said, “whereas at the OCC, the legal division follows policy. At the CFPB the enforcement attorneys often have the authority to overrule the examination team when the examination team decides not to take an enforcement action.”
“The key factor here is whether or not there’s really any underlying policy directive for purposes of taking additional enforcement action, and in the past that has always seemed to be sorely lacking, and this [added hiring] may simply exacerbate that problem,” he said.