memorandum of understanding

The FTC and CFPB have reauthorized their memorandum of understanding.  According to the FTC’s press release, “the agreement reflects the ongoing coordination between the two agencies under the terms of the Consumer Financial Protection Act, and is designed to coordinate efforts to protect consumers and avoid duplication of federal law enforcement and regulatory efforts.”

The first MOU, signed in 2012, had an initial term of three years, and was reauthorized in 2015 for an additional three-year term.  Although some definitional and organizational changes were made to the new MOU, it does not appear to have any material substantive differences from the 2015 MOU.  However, unlike the prior two MOUs which each had a three-year term, the new MOU provides that it “will remain in effect unless superseded by the signed, mutual agreement of the agencies.”



Taking its inspiration from Elvis Costello’s song lyrics, “peace, love and understanding” is how the FTC describes its “cooperative relationship” with the CFPB in a blog post about the reauthorization of the Memorandum of Understanding (“MOU”) entered into by the two agencies on January 20, 2012.

The MOU had an initial term of three years, and when it was signed, Chris Willis wrote about the MOU’s implications for nonbank entities.  Among the topics it addressed were enforcement, rulemaking and guidelines, supervision and examination (including, most notably, the sharing of examination reports and confidential supervisory information), consumer complaints, and information sharing and confidentiality.

The new MOU, which also has a three-year term, makes what the FTC describes as “a few small administrative tweaks” to the initial MOU.  The reauthorization of the MOU is not surprising since, as the FTC writes in its blog post, the two agencies are “in harmony” about consumer protection.

The long-anticipated Memorandum of Understanding between the state attorneys general and the CFPB to address information sharing seems to have hit a snag. It has been reported that a group of Republican state AGs have refused to  sign the MOU and that, to date, AGs from only 12 states (11 of whom are Democrats) have signed the MOU.   

The same report indicates that Republican state AGs from Oklahoma, South Carolina, Michigan and Kansas are planning to join a lawsuit that was filed this past June in federal court in Washington, D.C. challenging the constitutionality of Dodd-Frank.  The plaintiffs in that lawsuit are State National Bank of Big Spring, Texas and two non-profit organizations in the metropolitan Washington, D.C. area.

The CFPB and the FTC recently released their long-awaited Memorandum of Understanding (MOU), outlining how they plan to work together on non-bank enforcement, rulemaking and research in the consumer financial services market.  For non-banks subject to the CFPB’s jurisdiction, there is plenty of cause for concern in the MOU, principally arising from the sharing of information between the two agencies.

Most of the MOU is unremarkable.  The two agencies have agreed to consult with each other about investigations, enforcement actions, settlements, proposed new rules, and research projects.  In general, the MOU highlights the desire of the two agencies not to get in each other’s way with regard to these activities, and not to investigate or sue the same target at the same time. 

Where it gets worrisome is when the MOU turns to the subject of information sharing.  In particular, the CFPB has agreed that it “shall,” on request from the FTC, provide examination reports from its supervision of non-banks to the FTC.  Moreover, if the FTC requests any “Confidential Supervision Material” — which means information provided by a non-bank to the Bureau during an examination — the CFPB will provide it, unless it decides it has “good cause not to do so.”

The obvious import of this arrangement is to equip the FTC — an enforcement agency — with information developed during the Bureau’s examination process for the purpose of allowing the FTC to take enforcement actions.  Thus, a non-bank that becomes the subject of a CFPB examination must anticipate that the examination is the prelude to enforcement activity, and that either the CFPB or the FTC may decide to engage in enforcement as a result of the examination.  Even worse, the non-bank must assume that any information it shares with the Bureau will be shared not only with the Bureau’s massive enforcement staff, but also with the FTC.

In the abstract, it probably seems like a good idea to the Bureau to operate in this way, because it maximizes the enforcement opportunities arising from any particular examination.  And certainly, the idea of promoting ever-greater levels of government enforcement activity is consistent with the oft-repeated statements of both the FTC and the CFPB that more “cops on the beat” is a good thing.  We see that same sentiment evident in the CFPB’s decision to have its enforcement attorneys attend examinations of supervised entities.  But lost in this enthusiasm for enforcement is the reality that a more cooperative supervisory relationship between the CFPB and the non-banks would promote more openness and candor, and would allow consumer protection issues to be resolved more quickly and efficiently than through enforcement. By essentially inviting the FTC to access its examination materials on demand, the CFPB will undermine the basis for cooperation with non-banks and will make the resolution of issues more expensive and time-consuming.

The CFPB presented a report this past Monday trumpeting their accomplishments during the implementation period. And, they mention that they have a memorandum of understanding (MOU) in place with just about every transferor agency or other federal agency (i.e., the FTC) with whom they will be working.

Thanks to the misleadingly “open” design of the CFPB website, it is almost impossible to find their reports and documents and critical official bits and pieces—sprinkled as they are across the Blog, Press Center and a weird “Guidance” link. And, even then, I find I am often trolling through the Federal Register to find notices they have chosen not to provide links to yet.

That little diatribe aside, I have been looking and waiting for these MOUs because I am interested to see how detailed they are and what they reveal about the CFPB’s relationships with each agency. But, I have come up empty-handed so far—I cannot find them anywhere.

Here are the MOUs that are supposedly in place, and which I cannot find in any of the usual locations . . . please comment if you know where to find them, although I have a sneaking suspicion that the CFPB may just have decided to invoke some sort of governmental privilege and not make them public (do we have to resort to FOIA already?):

MOUs for the purpose of sharing non-public information in connection with their responsibilities related to or affecting the establishment of the Bureau with the OTS, OCC, NCUA, HUD, Federal Reserve Board, and FDIC.

Another MOU with the FFIEC for the purpose of safeguarding the confidentiality of information provided by the FFIEC to the CFPB.

One more MOU that permits the CFPB to access FinCEN’s BSA database and to obtain information such as money services business registration data and SARs submitted to FinCEN by financial institutions, which will be used to assist in supervision and enforcement.

And, MOUs put in place for the purpose of sharing information related to the agencies’ fair lending investigations, screening procedures, and investigative techniques with the Department of Justice, HUD, and the FTC.