CFPB Reorganizes to Prioritize Supervision over Enforcement

A recent internal memorandum circulated at the Consumer Financial Protection Bureau (CFPB) introduced a major internal reorganization that would remove the Office of Enforcement’s autonomy to open investigations and issue civil investigative demands. It was introduced by Bryan Schneider, who directs the CFPB Division housing its enforcement, fair-lending, and supervision functions.

The memorandum would reduce Enforcement’s role in deciding if violations discovered during examinations should be transferred to enforcement attorneys. Those decisions will be made by a new unit, the Office of SEFL (Supervision, Enforcement, and Fair Lending) Policy and Strategy.

SEFL’s Office of Supervision will be eliminated in the reorganization, but current head Peggy Twohig will be promoted to lead the new unit. She will determine strategic planning for SEFL Offices and conduct the Office of Enforcement’s investigation pipeline.

“As the long-time head of SEFL’s Office of Supervision Policy, Peggy Twohig is already deeply involved in deciding whether a bank or company supervised by the CFPB should be referred to enforcement or whether violations of law are best handled within the supervision division,” said Alan Kaplinsky, the Chair of Ballard Spahr’s Consumer Financial Services Group.

“For there to be consistency in how the CFPB decides when to use enforcement for a company not subject to CFPB supervision, it makes sense that Peggy should be the primary decision maker,” he continued.

These changes within the Bureau align with director Kathy Kraninger’s view of supervision as the CFPB’s primary regulatory tool and her belief that enforcement should only be a last resort. “I have reiterated my view that supervision is the heart of this agency,” she said in a speech in April 2019.

The reorganization is anticipated to take roughly six months, so the results of the recent Presidential election are likely to modify the proposed changes.