The Consumer Finance Protection Bureau is asking Congress to create a whistleblower program that would offer rewards and confidentiality for whistleblowers who report violations of federal consumer finance law.
The CFPB submitted draft legislation to Congress last week that would amend the Dodd-Frank Act to allow the CFPB to reward whistleblowers who provide information to the CFPB that results in enforcement actions where monetary sanctions exceed $1 million.
The CFPB wants to “incentivize whistleblowers to contact us if they believe their employer is not complying with the law,” said CFPB Director Kathleen L. Kraninger in a statement.
CFPB whistleblower rewards
CFPB whistleblowers would be awarded 10 percent to 30 percent of the sanctions collected if Congress enacted the proposed legislation, just as Securities and Exchange Commission whistleblowers and Commodity Futures Trading Commission whistleblowers are.
However, unlike the SEC and CFTC whistleblower programs, the CFPB whistleblower program would limit whistleblower awards to a maximum of $10 million.
The Securities and Exchange Commission is considering a defacto cap on SEC whistleblower awards, but the SEC postponed a decision on the matter following strong opposition from whistleblower attorneys and whistleblower advocates, including Sen. Chuck Grassley (R-IA).
Phillips & Cohen attorneys and others have said a defacto cap would discourage high-level and highly paid corporate insiders from coming forward with detailed information about huge corporate wrongdoing because the risks to their careers would be too great compared to the potential reward.
The proposed CFPB legislation also would set a minimum whistleblower award in cases where the CFPB collects less than $1 million. In such cases, CFPB whistleblowers would receive $50,000 or 10 percent of the amount recovered, whichever is greater.
CFPB and whistleblower confidentiality
The CFPB would keep whistleblowers’ identities confidential to the extent allowed under the law under the proposed legislation. Whistleblowers could file their information anonymously through an attorney. In those cases, whistleblowers would have to disclose their identities to the CFPB prior to receiving a whistleblower award.
The SEC whistleblower program has been very successful, with more than $2 billion in sanctions ordered as a result of whistleblower information. The program is considered an important tool for SEC enforcement. Former SEC chair Mary Jo White called the SEC whistleblower program a “game changer” for fraud enforcement.
The smaller CFTC whistleblower program has collected more than $800 million as a result of whistleblower cases.
Current CFPB whistleblower program
The CFPB currently has a whistleblower program in place, but it does not offer whistleblower rewards. It began accepting whistleblower tips through a hotline and email in 2011.
Under Dodd-Frank, CFPB whistleblowers are entitled to protection that shields them from retaliation by their employers. Whistleblowers may not be terminated or discriminated against for:
- providing information to their employer, the CFPB, or any other state, local or federal government authority or law enforcement agency relating to a violation of federal consumer financial law;
- testifying about a potential violation;
- filing any lawsuit or other proceeding under any federal consumer financial law; or
- objecting to or refusing to participate in violations of federal consumer financial laws.
The CFPB is tasked with overseeing banks, securities firms and certain lenders, regulating various consumer financial products including mortgages, credit cards, loan and mortgage servicing.
About Phillips & Cohen LLP
Phillips & Cohen is the most successful law firm representing whistleblowers, with recoveries from our cases totaling over $12.3 billion. We have been recognized for our work by numerous national awards. Our attorneys and cases have been in The New York Times, The Wall Street Journal, the Financial Times and other news media. Three of our cases were featured in the CBS series, “Whistleblower.” Phillips & Cohen’s roster includes former federal prosecutors, the first head of the SEC Office of the Whistleblower, a former deputy administrator of the Centers for Medicare and Medicaid Services, the author of a leading treatise on the False Claims Act and attorneys with decades of experience representing whistleblowers.