Magazine article American Banker

CFPB Clarifies How It Will Use Civil Penalty Fund

Magazine article American Banker

CFPB Clarifies How It Will Use Civil Penalty Fund

Article excerpt

Byline: Rachel Witkowski

WASHINGTON -- The Consumer Financial Protection Bureau issued a rule Friday attempting to clarify how it would use its Civil Penalty Fund, which holds money it collects as a result of fines against financial companies.

The agency's final rule is meant to address ongoing concerns from lawmakers and the industry on how exactly it would distribute the Funds. The Dodd-Frank Act required the CFPB to form the fund from money penalties against financial companies and use it to compensate victims of fraud and support consumer education and financial literacy programs. But there was little detail given in how the agency would manage or distribute the proceeds. The CFPB is hoping the rule clears the air in who will be compensated, how and when.

"Congress directed the bureau to establish the Civil Penalty Fund in order to compensate people who were harmed by illegal actions," said CFPB Director Richard Cordray. "Today's rule will allow us to do this in a transparent, responsible way."

The rule requires the agency to allocate funds to "eligible" victims every six months and to post a schedule of allocations online. The amount distributed to victims will depend on the circumstance of each case and whether those victims received compensation from other sources, the CFPB said.

The rule specifies, however, that victims will be paid from the fund "only to the extent practicable" and amounts will be based on the terms of the order against a financial company. …

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