The CFPB issued a rule last week that establishes a transparent process for the allocation of funds from the agency’s Civil Penalty Fund, which is used to compensate the victims of illegal financial schemes.
Dodd-Frank established the CFPB’s Civil Penalty Fund, which is funded by the civil penalties paid by individuals or companies subject to CFPB enforcement action.
“Congress directed the Bureau to establish the Civil Penalty Fund in order to compensate people who were harmed by illegal actions,” CFPB Director Richard Cordray said. “Today’s rule will allow us to do this in a transparent, responsible way.”
Under the rule, the fund amount provided to a victim by the CFPB will depend on whether the victim has received compensation from other sources, as well as the facts and circumstances of the individual case.
The CFPB is required to issue regular reports on the fund and will include information in both its semi-annual reports to Congress and quarterly budget reports.
The CFPB is required to allocate funds to eligible victims every six months, and the agency will post a schedule of fund allocation on ConsumerFinance.gov. Victims eligible for compensation will receive the inaugural allocation of funds by May 30.
If money remains in the fund after the CFPB has compensated eligible victims or if the agency has issues distributing payments to victims, the agency may allocate funds for consumer education and financial literacy programs to help future victims.
Though the rule is effective immediately, the CFPB will also publish a notice of proposed rulemaking seeking public comment on the rule and possible changes to it.