Tomorrow the CFPB will issue an interim final rule that will increase the maximum amount of civil penalties that the CFPB and certain other enforcers can obtain for various consumer protection violations. The maximum amount for most CFPB civil penalties will increase by about 8%.
A budget bill passed last year instructed federal agencies, including the CFPB, to make a one-time “catch-up” inflation adjustment to the civil penalties that they impose, based on the Consumer Price Index (CPI) in October of the “year during which the amount of such civil monetary penalty was established or [last] adjusted….” This will be followed by regular inflation adjustments by January 15 of every year.
Most CFPB civil penalties for violations of the various laws that the CFPB administers are assessed under Section 1055(c) of the Dodd-Frank Act. Because the Dodd-Frank Act was enacted in 2010, the CFPB takes the position that the baseline for the “catch up” should be the CPI in October 2010. This will result in an 8.475% increase, meaning that that maximum amount will be $5,437 for any “Tier 1” violation; $27,186 for any “Tier 2” violation, which requires recklessness; or $1,087,450 for any “Tier 3” violation, which requires knowledge. These amounts are calculated “for each day during which such violation continues.” The CFPB is also adjusting certain other civil penalty authorities that are less commonly used.
Notably, the interim final rule provides that the adjustments “shall apply to civil penalties assessed after [the effective date], regardless of when the violation for which the penalty is assessed occurred.” The effective date is scheduled to be July 14, 2016. Thus, the CFPB takes the position that the increased civil penalties will be available for violations that have already occurred, even if they occurred several years ago.