The CFPB’s announcement that it will institute an “Early Warning Notice” process has generally been welcomed in the financial community as an opportunity for pre-litigation communications with the Office of Enforcement. The process, described in CFPB Bulletin 2011-08 [Enforcement] which includes a sample advance notice letter, appears to virtually mirror the SEC’s well-established Wells notice.
The process is discretionary, leaving the Office of Enforcement free to institute an action without first sending the notice when it deems necessary. The sample letter contemplates that, if the CFPB decides to give notice, an enforcement attorney will call the subject of the investigation to let it know that the CFPB is considering legal action against it and to describe the violations the CFPB would allege and what relief it would seek. The call would be followed by a letter repeating that information and inviting a written response (under oath, if facts are included) explaining why an enforcement action should not be pursued, which response is to be filed within 14 days.
One of the more widely recognized benefits of the SEC’s nearly identical Wells notice process is that it often results in informal, but meaningful, settlement discussions before a complaint is filed or enforcement is pursued. Because the CFPB’s Early Warning Notice process can achieve similar benefits, we hope the CFPB will use the process in all but the most extraordinary of circumstances.