On Monday, October 5, the Consumer Financial Protection Bureau (Bureau) issued a policy statement on early termination of consent orders. Recognizing that there may be “exceptional circumstances” where it is appropriate to terminate a consent order before its expiration date, the policy statement explains the process by which an entity subject to a consent order can apply for early termination and the criteria that the Bureau will consider in assessing such an application.
As a threshold matter, the entity must (of course) have actually complied with the terms and conditions of the consent order. But certain persons and orders are de facto ineligible for early termination. If the consent order imposes a ban on participating in a certain industry or involves violations of an earlier Bureau order, for example, or when there has been any criminal action related to the violations in the order, then the order is excluded from the policy and cannot be terminated early. Additionally, because natural persons, unlike entities, cannot make the same demonstration about being in a “satisfactory” compliance position—and the Bureau believes it would be impractical to undertake a review of whether individuals are likely to comply with the law in the future—early termination is not an option for individuals who have settled with the Bureau.
Early termination under the policy is only going to be available for orders issued through the administrative process, because the policy will not apply to court-approved orders, which can only be terminated early by court order. The Bureau says this is because it does not view it is an appropriate use of its resources to seek to alter the status of settlements entered by courts.
The Bureau’s consent orders typically have 5-year life spans, and entities will not be permitted to apply for early termination within the first year after the entry of the order, or until at least six months after all required compliance and redress plans have been fully implemented, whichever is later.
To discourage serial requests, the Bureau does not intend to consider more than one request for termination of the same order absent extraordinary circumstances, so any request should be as complete as possible before being submitted for consideration. In addition to demonstrating that it meets all of the above criteria, an entity also must demonstrate that it is in a satisfactory compliance position in the institutional product line (IPL) or compliance area (e.g., fair lending) for which the order was issued. This means that the entity needs to be able to demonstrate that the relevant IPL or compliance area would qualify for the equivalent of a “2” rating under the Uniform Interagency Consumer Compliance Rating System, where a 2 rating signifies that the entity’s compliance management system satisfactorily manages consumer compliance risk and limits violations of law and consumer harm.
As part of its application to the Bureau for early termination, an entity should submit evidence that it has satisfied these elements and should provide any additional documentation or information necessary to help the Bureau determine whether the entity maintains a satisfactory compliance management system. If applicable, the entity should provide prior supervisory conclusions from a Bureau examination or from other State or Federal regulators during the pendency of the consent order. Any factual assertions should be made under oath. Under the policy, Bureau staff will make recommendations to the Director regarding whether to grant applications for early termination, but ultimately the Director will retain complete discretion and sole authority to terminate consent orders.
Although somewhat limited in scope, the policy statement may be welcome news for many entities operating under the shadow of a five-year consent order, as it offers a clear statement of the Bureau’s policy and evaluation process for early termination.