Rules Relating to Investigations, 39101-39112 [2012-14047]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 77, Number 126 (Friday, June 29, 2012)]
[Rules and Regulations]
[Pages 39101-39112]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14047]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1080

[Docket No.: CFPB-2011-0007]
RIN 3170-AA03


Rules Relating to Investigations

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: After considering the public comments on its interim final 
rule for the Rules Relating to Investigations, the Bureau of Consumer 
Financial Protection (Bureau), pursuant to the Dodd-Frank Wall Street 
Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), is making 
revisions to its procedures for investigations under section 1052 of 
the Dodd-Frank Act.

DATES: The final rule is effective June 29, 2012.

FOR FURTHER INFORMATION CONTACT: Peter G. Wilson, Office of the General 
Counsel, Consumer Financial Protection Bureau, 1700 G Street NW., 
Washington, DC 20552, (202) 435-7585.

SUPPLEMENTARY INFORMATION:

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (Dodd-Frank Act) was signed into law on July 21, 2010. Title X of 
the Dodd-Frank Act established the Bureau of Consumer Financial 
Protection (Bureau) to regulate the offering and provision of consumer 
financial products or services under the Federal consumer financial 
laws. The Dodd-Frank Act transferred to the Bureau the consumer 
financial protection functions formerly carried out by the Federal 
banking agencies, as well as certain authorities formerly carried out 
by the Department of Housing and Urban Development (HUD) and the 
Federal Trade Commission (FTC). As required by section 1062 of the 
Dodd-Frank Act, 12 U.S.C. 5582, the Secretary of the Treasury selected 
a

[[Page 39102]]

designated transfer date and the Federal banking agencies' functions 
and authorities transferred to the Bureau on July 21, 2011.
    The Dodd-Frank Act authorizes the Bureau to conduct investigations 
to ascertain whether any person is or has been engaged in conduct that, 
if proved, would constitute a violation of any provision of Federal 
consumer financial law. Section 1052 of the Dodd-Frank Act sets forth 
the parameters that govern these investigations. 12 U.S.C. 5562. 
Section 1052 became effective immediately upon transfer on July 21, 
2011 and did not require rules to implement its provisions. On July 28, 
2011, the Bureau issued the interim final rule for the Rules Relating 
to Investigations (Interim Final Rule) to provide parties involved in 
Bureau investigations with clarification on how to comply with the 
statutory requirements relating to Bureau investigations.

II. Summary of the Final Rule

    Consistent with section 1052 of the Dodd-Frank Act, the final rule 
for the Rules Relating to Investigations (Final Rule) describes a 
number of Bureau policies and procedures that apply in an 
investigational, nonadjudicative setting. Among other things, the Final 
Rule sets forth (1) the Bureau's authority to conduct investigations, 
and (2) the rights of persons from whom the Bureau seeks to compel 
information in investigations.
    Like the Interim Final Rule, the Final Rule is modeled on 
investigative procedures of other law enforcement agencies. For 
guidance, the Bureau reviewed the procedures currently used by the FTC, 
the Securities and Exchange Commission (SEC), and the prudential 
regulators, as well as the FTC's recently proposed amendments to its 
nonadjudicative procedures. In light of the similarities between 
section 1052 of the Dodd-Frank Act and section 20 of the Federal Trade 
Commission Act (FTC Act), 15 U.S.C. 41 et seq., the Bureau drew most 
heavily from the FTC's nonadjudicative procedures in constructing the 
rules.
    The Final Rule lays out the Bureau's authority to conduct 
investigations before instituting judicial or administrative 
adjudicatory proceedings under Federal consumer financial law. The 
Final Rule authorizes the Director, the Assistant Director of the 
Office of Enforcement, and the Deputy Assistant Directors of the Office 
of Enforcement to issue civil investigative demands (CIDs) for 
documentary material, tangible things, written reports, answers to 
questions, or oral testimony. The demands may be enforced in district 
court by the Director, the General Counsel, or the Assistant Director 
of the Office of Enforcement. The Final Rule also details the authority 
of the Bureau's investigators to conduct investigations and hold 
investigational hearings pursuant to civil investigative demands for 
oral testimony.
    Furthermore, the Final Rule sets forth the rights of persons from 
whom the Bureau seeks to compel information in an investigation. 
Specifically, the Final Rule describes how such persons should be 
notified of the purpose of the Bureau's investigation. It also details 
the procedures for filing a petition for an order modifying or setting 
aside a CID, which the Director is authorized to rule upon. And it 
describes the process by which persons may obtain copies of or access 
to documents or testimony they have provided in response to a civil 
investigative demand. In addition, the Final Rule describes a person's 
right to counsel at investigational hearings.

III. Legal Authority

    As noted above, section 1052 of the Dodd-Frank Act outlines how the 
Bureau will conduct investigations and describes the rights of persons 
from whom the Bureau seeks information in investigations. This section 
became effective immediately upon the designated transfer date, July 
21, 2011, without any requirement that the Bureau first issue 
procedural rules. Nevertheless, the Bureau believes that the 
legislative purpose of section 1052 will be furthered by the issuance 
of rules that specify the manner in which persons can comply with its 
provisions.
    Section 1022 of the Dodd-Frank Act authorizes the Director to 
prescribe rules as may be necessary or appropriate for the Bureau to 
administer and carry out the purposes and objectives of Federal 
consumer financial laws and to prevent evasion of those laws. 12 U.S.C. 
5512. The Bureau believes that the Final Rule will effectuate the 
purpose of section 1052 and facilitate compliance with Bureau 
investigations.

IV. Overview of Public Comments on the Interim Final Rule

    After publication of the Interim Final Rule on July 28, 2011, the 
Bureau accepted public comments until September 26, 2011. During the 
comment period, the Bureau received seven comments. Two of the comments 
were submitted by individual consumers. Four trade associations and a 
mortgage company also submitted comments. The trade associations 
represent credit unions, banks, consumer credit companies, members of 
the real estate finance industry, and other financial institutions.
    The commenters generally support the Interim Final Rule. Most 
sections of the Interim Final Rule received no comment and are being 
finalized without change. The comments did, however, contain questions 
and recommendations for the Bureau.
    Several of the commenters expressed concern that the Interim Final 
Rule appeared to provide staff-level Bureau employees with unchecked 
authority to initiate investigations and issue CIDs, or that the 
Interim Final Rule otherwise did not provide sufficient oversight for 
particular actions.
    A number of commenters expressed concern about sections of the 
Interim Final Rule that relate to CIDs. One trade association 
recommended that a statement of ``the purpose and scope'' of a Bureau 
investigation--in addition to a notification of the nature of the 
conduct constituting the alleged violation under investigation and the 
applicable provisions of law--be included in CIDs. A commenter 
suggested that the Bureau require a conference between CID recipients 
and the Assistant Director of the Office of Enforcement to negotiate 
the terms of compliance with the demand. Three of the trade 
associations noted concern with the statement that extensions of time 
are disfavored for petitions to modify or set aside CIDs. Two 
commenters questioned who would rule on such petitions without a 
confirmed Director. One trade association commented that witnesses 
should be permitted to object to questions demanding information 
outside of the scope of the investigation during an investigational 
hearing pursuant to a CID for oral testimony.
    A number of commenters expressed concern about maintaining the 
confidentiality of demand material, sharing information with other 
State and Federal agencies, and the duties of the custodians of those 
materials. For example, one trade association and the mortgage company 
recommended that investigations should remain confidential in all 
circumstances. Another trade association asserted that the Bureau is 
not permitted to engage in joint investigations with State attorneys 
general.
    The Bureau reviewed all of the comments on its Interim Final Rule 
thoroughly and addresses the significant issues they raise herein. 
Although most sections of the Interim Final Rule received no comment 
and are being finalized without change, the Bureau has made several 
changes to the Interim Final Rule based on the comments it received. 
The comments and these

[[Page 39103]]

changes are discussed in more detail in parts V and VI of the 
SUPPLEMENTARY INFORMATION.

V. General Comments

    Some comments on the Interim Final Rule were not directed at a 
specific section but rather concerned issues of general applicability. 
The Bureau addresses those comments in this section and addresses 
comments related to specific sections of the Interim Final Rule in part 
VI.
    One commenter asked the Bureau to specify who would rule on 
petitions to set aside or modify CIDs while the Bureau lacked a 
Director. This commenter also asked who would review requests to the 
Attorney General under Sec.  1080.12 for authority to immunize 
witnesses and to order them to testify or provide other information. 
The President appointed a Director of the Bureau on January 4, 2012. 
Therefore, both questions posed by this commenter are moot. The 
Director or any official to whom the Director has delegated his 
authority pursuant to 12 U.S.C. 5492(b) will rule on petitions to set 
aside or modify CIDs. Furthermore, the Bureau has revised Sec.  1080.12 
to clarify that only the Director has the authority to request approval 
from the Attorney General for the issuance of an order immunizing 
witnesses.
    A commenter asserted that section 1052(c)(1) of the Dodd-Frank Act 
prohibits the Bureau from issuing CIDs after the institution of any 
proceedings under Federal consumer financial laws, including 
proceedings initiated by a State or a private party. The commenter 
argued that a CID should be accompanied by a certification that the 
demand will have no bearing on any ongoing proceeding. Section 
1052(c)(1) provides, in relevant part, that ``the Bureau may, before 
the institution of any proceedings under the Federal consumer financial 
law, issue in writing, and cause to be served upon such person, a civil 
investigative demand.'' The language ``before the institution of any 
proceeding under Federal consumer financial law'' refers to the 
institution of proceedings by the Bureau. It does not limit the 
Bureau's authority to issue CIDs based upon the commencement of a 
proceeding by other parties.
    Another commenter requested that the Bureau exempt all credit 
unions from Bureau investigations. The Bureau believes that granting an 
exemption from the Bureau's enforcement authority through the Final 
Rule would be inappropriate and that there is an insufficient record to 
support such an exemption.
    A commenter recommended that covered persons be allowed to recover 
attorneys' fees and costs incurred by defending against an 
investigation that is shown to be without merit. The Dodd-Frank Act 
does not provide the right to recover fees and costs by defending 
against an investigation. Further, as explained below, the Bureau 
believes that the procedures for petitioning to modify or set aside a 
CID set forth in Sec.  1080.6(d) of the Interim Final Rule (now 
1080.6(e) of the Final Rule) provide sufficient protections to a 
recipient of a demand it believes lacks merit.

VI. Section-by-Section Summary

Section 1080.1 Scope

    This section describes the scope of the Interim Final Rule. It 
makes clear that these rules only apply to investigations under section 
1052 of the Dodd-Frank Act. The Bureau received no comment on Sec.  
1080.1 of the Interim Final Rule and is adopting it as the Final Rule 
without change.

Section 1080.2 Definitions

    This section of the Interim Final Rule defines several terms used 
throughout the rules. Many of these definitions also may be found in 
section 1051 of the Dodd-Frank Act.
    A commenter questioned the breadth of the definition of the term 
``Assistant Director of the Division of Enforcement.'' The commenter 
argued that because that term was defined to include ``any Bureau 
employee to whom the Assistant Director of the Division of Enforcement 
has delegated authority to act under this part,'' the Interim Final 
Rule could give Bureau employees inappropriately broad authority to 
take certain actions, such as issuing CIDs.
    The Bureau has revised the Final Rule in response to these 
comments. The Final Rule identifies those with authority to take 
particular actions under each section of the Final Rule. Sections 
1080.4 (initiating and conducting investigations) and 1080.6 (civil 
investigative demands) of the Final Rule clarify that the authority to 
initiate investigations and issue CIDs cannot be delegated by the 
identified officials. The Final Rule also changes the defined term 
``Division of Enforcement'' to ``Office of Enforcement'' to reflect the 
Bureau's current organizational structure.

Section 1080.3 Policy as to Private Controversies

    This section of the Interim Final Rule states the Bureau's policy 
of pursuing investigations that are in the public interest. Section 
1080.3 is consistent with the Bureau's mission to protect consumers by 
investigating potential violations of Federal consumer financial law. 
The Bureau received no comments on Sec.  1080.3 of the Interim Final 
Rule and is adopting it as the Final Rule without change.

Section 1080.4 Initiating and Conducting Investigations

    This section of the Interim Final Rule explains that Bureau 
investigators are authorized to conduct investigations pursuant to 
section 1052 of the Dodd-Frank Act.
    A commenter observed that this section of the Interim Final Rule 
did not explicitly provide a procedure for senior agency officials to 
authorize the opening of an investigation. The commenter argued that 
only senior agency officials should decide whether to initiate 
investigations. The commenter questioned whether staff-level employees 
could open investigations and issue CIDs without sufficient 
supervision, and noted that the FTC's analogous rule specifically lists 
the senior officials to whom the Commission has delegated, without 
power of redelegation, the authority to initiate investigations.
    A commenter also expressed concern that the FTC's analogous rule 
explicitly provides that FTC investigators must comply with the laws of 
the United States and FTC regulations. According to the commenter, such 
language is necessary to ensure that the Bureau complies with the Right 
to Financial Privacy Act (RFPA) to the extent that statute applies to 
the Bureau. The commenter also believes that this language is needed to 
guard against investigations undertaken for what the commenter 
characterized as the impermissible purpose of aiding State attorneys 
general or State regulators. The commenter suggested that the Bureau 
add a statement to this section of the Interim Final Rule similar to 
the FTC's rule requiring compliance with Federal law and agency 
regulations.
    The Final Rule clarifies that only the Assistant Director or any 
Deputy Assistant Director of the Office of Enforcement has the 
authority to initiate investigations. The Bureau has significant 
discretion to determine whether and when to open an investigation, and 
the public benefits from a process whereby the Bureau can open and 
close investigations efficiently. But the Bureau did not intend its 
rules to be interpreted so broadly as to suggest that any staff-level 
employee could unilaterally open an investigation or issue a CID. The 
Final

[[Page 39104]]

Rule also provides that Bureau investigators will perform their duties 
in accordance with Federal law and Bureau regulations.

Section 1080.5 Notification of Purpose

    This section of the Interim Final Rule specifies that a person 
compelled to provide information to the Bureau or to testify in an 
investigational hearing must be advised of the nature of the conduct 
constituting the alleged violation under investigation and the 
applicable provisions of law. This section of the Interim Final Rule 
implements the requirements for CIDs described in section 1052(c)(2) of 
the Dodd-Frank Act.
    Commenters noted that although the Dodd-Frank Act and the FTC Act 
both require CIDs to state ``the nature of the conduct constituting the 
alleged violation which is under investigation and the provision of law 
applicable to such violation,'' the two agencies' implementing 
regulations on this topic differ. Both agencies' regulations require a 
statement of the nature of the conduct at issue and the relevant 
provisions of law, but the FTC rule also requires that the recipient of 
the CID be advised of ``the purpose and scope'' of the investigation. 
Commenters argued that the Bureau should add this phrase to its rule 
because excluding it would lead to requests for materials outside the 
scope of an investigation. One commenter argued that only senior agency 
officials should authorize investigations to ensure that CIDs are 
relevant to the purpose and scope of the Bureau's investigations.
    The language in Sec.  1080.5 of the Interim Final Rule mirrors the 
language of the Dodd-Frank Act, which provides that ``[e]ach civil 
investigative demand shall state the nature of the conduct constituting 
the alleged violation which is under investigation and the provision of 
law applicable to such violation.'' The Bureau believes that the 
information covered by this statutory language provides sufficient 
notice to recipients of CIDs. As discussed above, Sec.  1080.4 
(initiating and conducting investigations) of the Final Rule limits the 
authority to open investigations to the Assistant Director or any 
Deputy Assistant Director of the Office of Enforcement. Similarly, 
Sec.  1080.6 of the Final Rule (civil investigative demands) limits the 
authority to issue CIDs to the Director of the Bureau, the Assistant 
Director of the Office of Enforcement, and the Deputy Assistant 
Directors of the Office of Enforcement. Thus, one of these identified 
officials will review and approve the initiation of all investigations 
and the issuance of all CIDs. In addition, to the extent recipients of 
CIDs consider the demands to be for an unauthorized purpose or outside 
the scope of the investigation, they will have an opportunity to 
negotiate the terms of compliance pursuant to Sec.  1080.6(c) of the 
Interim Final Rule (now Sec.  1080.6(d) of the Final Rule) or to 
petition to set aside or modify the demand pursuant to Sec.  1080.6(d) 
of the Interim Final Rule (now Sec.  1080.6(e) of the Final Rule).
    The Bureau therefore adopts this section of the Interim Final Rule 
as the Final Rule without change.

Section 1080.6 Civil Investigative Demands

    This section of the Interim Final Rule lays out the Bureau's 
procedures for issuing CIDs. It authorizes the Assistant Director of 
the Office of Enforcement to issue CIDs for documentary material, 
tangible things, written reports, answers to questions, and oral 
testimony. This section of the Interim Final Rule details the 
information that must be included in CIDs and the requirement that 
responses be made under a sworn certificate. Section 1080.6 of the 
Interim Final Rule also authorizes the Assistant Director of the Office 
of Enforcement to negotiate and approve the terms of compliance with 
CIDs and grant extensions for good cause. Finally, this section of the 
Interim Final Rule describes the procedures for seeking an order to 
modify or set aside a CID, which the Director is authorized to rule 
upon.
    One commenter argued that Sec.  1080.6(a) permits almost any Bureau 
employee to issue CIDs without sufficient supervision. The commenter 
stated that this lack of oversight is problematic and does not reflect 
Congress' intent when it enacted the Act.
    Section 1080.6(a) of the Final Rule limits the authority to issue 
CIDs to the Director, the Assistant Director of the Office of 
Enforcement, and the Deputy Assistant Directors of the Office of 
Enforcement. This change to the Final Rule balances the efficiency of 
the Bureau's investigative process with appropriate supervision and 
oversight.
    A commenter suggested that the Bureau require a conference between 
the CID recipient and the Assistant Director of the Office of 
Enforcement within ten days of service of the CID to negotiate and 
approve the terms of compliance. The commenter envisioned a conference 
analogous to a discovery planning conference under the Federal Rules of 
Civil Procedure, during which the parties could discuss requests for 
information, appropriate limitations on the scope of requests, issues 
related to electronically stored information (ESI), issues related to 
privilege and confidential information, and a reasonable time for 
compliance. The commenter stated that this type of conference would 
better ensure prompt and efficient production of material and 
information related to the investigation.
    The Bureau agrees that a conference between the parties within ten 
calendar days of serving a CID is likely to improve the efficiency of 
investigations, and Sec.  1080.6(c) of the Final Rule provides for such 
a conference. The Final Rule does not, however, adopt the suggestion 
that the Assistant Director of the Office of Enforcement preside over 
all such conferences.
    Several commenters also noted concern with the statement in Sec.  
1080.6(d) of the Interim Final Rule disfavoring extensions of time for 
petitioning for an order modifying or setting aside CIDs. One commenter 
argued that the 20-day period to file petitions, for which extensions 
of time are disfavored, is inconsistent with the ``reasonable'' period 
of time for compliance with the CID set forth in Sec.  1080.6(a). The 
commenter also argued that this timeframe leaves a short period for the 
CID recipient to decide which documents are privileged or otherwise 
protected and to file a petition articulating privilege and scope 
objections. Another commenter noted that the analogous FTC rules do not 
include a provision disfavoring extensions for petitions to modify or 
set aside a CID. These commenters recommended that the Bureau delete 
the sentence related to disfavoring extensions. One commenter 
recommended that the rules be corrected to provide an independent 
review if a covered person believes a CID is without merit.
    Like the Interim Final Rule, the Final Rule includes a provision 
disfavoring extensions of time for petitions to modify or set aside a 
CID. The Bureau believes its policy of disfavoring extensions is 
appropriate in light of its significant interest in promoting an 
efficient process for seeking materials through CIDs. By disfavoring 
extensions, the Bureau means to prompt recipients to decide within 20 
days whether they intend to comply with the CID. The Final Rule also 
clarifies that this 20-day period should be computed with calendar 
days.
    The Bureau notes that Sec.  1080.6(d) of the Interim Final Rule 
(now Sec.  1080.6(e) of the Final Rule) only provides the due date for 
a petition for an order modifying or setting aside a CID. It does not 
require recipients to comply fully

[[Page 39105]]

with CIDs within 20 days. In addition, the Final Rule provides several 
options to recipients of CIDs that need additional time to respond. For 
example, the recipient may negotiate for a reasonable extension of time 
for compliance or a rolling document production schedule pursuant to 
Sec.  1080.6(c) of the Interim Final Rule (now Sec.  1080.6(d) of the 
Final Rule).
    Section 1080.6(e) of the Final Rule clarifies that recipients of 
CIDs should not assert claims of privilege through a petition for an 
order modifying or setting aside a CID. Instead, when privilege is the 
only basis for withholding particular materials, they should utilize 
the procedures set forth in Sec.  1080.8 (withholding requested 
material) of the Final Rule. Section 1080.6(e) of the Final Rule also 
lays out the authority of Bureau investigators to provide to the 
Director a reply to a petition seeking an order modifying or setting 
aside a CID. Specifically, the Final Rule states that Bureau 
investigators may provide the Director with a statement setting forth 
any factual and legal responses to a petition. The Bureau will not make 
these statements or any other internal deliberations part of the 
Bureau's public records. Section 1080.6(g) of the Final Rule clarifies 
that the Bureau, however, will make publicly available both the 
petition and the Director's order in response. Section 1080.6(g) of the 
Final Rule also clarifies that if a CID recipient wants to prevent the 
Director from making the petition public, any showing of good cause 
must be made no later than the time the petition is filed. The Final 
Rule also adds a provision clarifying how the Bureau will serve the 
petitioner with the Director's order.
    Finally, the Bureau believes the procedures for petitions to modify 
or set aside a CID set forth in the Final Rule adequately protect a 
covered person who believes a CID is without merit, and that an 
additional independent review is unnecessary.

Section 1080.7 Investigational Hearings

    This section of the Interim Final Rule describes the procedures for 
investigational hearings initiated pursuant to a CID for oral 
testimony. It also lays out the roles and responsibilities of the 
Bureau investigator conducting the investigational hearing, which 
include excluding unauthorized persons from the hearing room and 
ensuring that the investigational hearing is transcribed, the witness 
is duly sworn, the transcript is a true record of the testimony, and 
the transcript is provided to the designated custodian.
    A commenter argued that the Bureau is not authorized to conduct 
joint investigations with State attorneys general under the Dodd-Frank 
Act and, correspondingly, State attorneys general cannot attend an 
investigational hearing as a representative of an agency with whom the 
Bureau is conducting a joint investigation. The commenter argued that 
Congress distinguished between State attorneys general and State 
regulatory agencies in section 1042 of the Dodd-Frank Act and that 
State attorneys general are therefore not ``agencies'' with whom the 
Bureau can partner. The commenter also asserted that the Bureau cannot 
share a copy of the transcript of an investigational hearing with 
another agency without the consent of the witness.
    Another commenter argued that representatives of agencies with 
which the Bureau is conducting a joint investigation may be present at 
an investigational hearing only with the witness's consent. This 
commenter stated that the Bureau should recognize in the rules that a 
witness who does not consent to the presence of a representative of 
another agency at an investigational hearing should not be presumed 
guilty.
    The Dodd-Frank Act states that the Bureau ``may engage in joint 
investigations and requests for information, as authorized under this 
title.'' This statutory language permits the Bureau to engage in joint 
investigations with State or Federal law enforcement agencies, 
including State attorneys general, with jurisdiction that overlaps with 
the Bureau's. The Bureau's disclosure rules also permit the Bureau to 
share certain confidential information, including investigational 
hearing transcripts, with Federal or State agencies to the extent the 
disclosure is relevant to the exercise of an agency's statutory or 
regulatory authority. See 12 CFR 1070.43(b). In addition, neither the 
Dodd-Frank Act nor the rules require the consent of the witness to 
permit a representative of an agency with which the Bureau is 
conducting a joint investigation to be present at the hearing. Consent 
is required only when people other than those listed in the rule are 
included.
    Thus, the Bureau adopts Sec.  1080.7 of the Interim Final Rule as 
the Final Rule without change.

Section 1080.8 Withholding Requested Material

    This section of the Interim Final Rule describes the procedures 
that apply when persons withhold material responsive to a CID. It 
requires the recipient of the CID to assert a privilege by the 
production date and, if so directed in the CID, also to submit a 
detailed schedule of the items withheld. Section 1080.8 also sets forth 
the procedures for handling the disclosure of privileged or protected 
information or communications.
    The Bureau received no comment on Sec.  1080.8 of the Interim Final 
Rule and is adopting it as the Final Rule without substantive change.

Section 1080.9 Rights of Witnesses in Investigations

    This section of the Interim Final Rule describes the rights of 
persons compelled to submit information or provide testimony in an 
investigation. It details the procedures for obtaining a copy of 
submitted documents or a copy of or access to a transcript of the 
person's testimony. This section of the Interim Final Rule also 
describes a witness's right to make changes to his or her transcript 
and the rules for signing the transcript.
    Section 1080.9 of the Interim Final Rule lays out a person's right 
to counsel at an investigational hearing and describes his or her 
counsel's right to advise the witness as to any question posed for 
which an objection may properly be made. It also describes the 
witness's or counsel's rights to object to questions or requests that 
the witness is privileged to refuse to answer. This section of the 
Interim Final Rule states that counsel for the witness may not 
otherwise object to questions or interrupt the examination to make 
statements on the record but may request that the witness have an 
opportunity to clarify any of his or her answers. Finally, this section 
of the Interim Final Rule authorizes the Bureau investigator to take 
all necessary action during the course of the hearing to avoid delay 
and to prevent or restrain disorderly, dilatory, obstructionist, or 
contumacious conduct, or contemptuous language.
    A commenter noted that under the Interim Final Rule witnesses could 
not object during an investigational hearing on the ground that a 
question was outside the scope of the investigation. The commenter 
argued that a covered person's inability to raise such objections might 
allow ``a fishing expedition.'' The commenter recommended amending 
Sec.  1080.9(b) to allow objections based on scope.
    Section 1052(c)(13)(D)(iii) of the Dodd-Frank Act states, in 
relevant part:

    [a]n objection may properly be made, received, and entered upon 
the record when it is claimed that such person is entitled to

[[Page 39106]]

refuse to answer the question on grounds of any constitutional or 
other legal right or privilege, including the privilege against 
self-incrimination, but the person shall not otherwise object to or 
refuse to answer any question, and such person or attorney shall not 
otherwise interrupt the oral examination.

Thus, to the extent the scope objection was grounded in a witness's 
constitutional or other legal right, it would be a proper objection.

    The Final Rule clarifies that counsel may confer with a witness 
while a question is pending or instruct a witness not to answer a 
question only if an objection based on privilege or work product may 
properly be made. The Final Rule also describes counsel's limited 
ability to make additional objections based on other constitutional or 
legal rights. The Final Rule provides that if an attorney has refused 
to comply with his or her obligations in the rules of this part, or has 
allegedly engaged in disorderly, dilatory, obstructionist, or 
contumacious conduct, or contemptuous language during an 
investigational hearing, the Bureau may take further action, including 
action to suspend or disbar the attorney from further participation in 
the investigation or further practice before the Bureau pursuant to 12 
CFR 1081.107(c). The Final Rule also includes other nonsubstantive 
changes, including clarifying that the 30-day period that the witness 
has to sign and submit his or her transcript should be computed using 
calendar days.

Section 1080.10 Noncompliance With Civil Investigative Demands

    This section of the Interim Final Rule authorizes the Director, the 
Assistant Director of the Office of Enforcement, and the General 
Counsel to initiate an action to enforce a CID in connection with the 
failure or refusal of a person to comply with, or to obey, a CID. In 
addition, they are authorized to seek civil contempt or other 
appropriate relief in cases where a court order enforcing a CID has 
been violated.
    The Bureau received no comment on Sec.  1080.10 of the Interim 
Final Rule and is adopting it as the Final Rule without substantive 
change.

Section 1080.11 Disposition

    This section of the Interim Final Rule explains that an enforcement 
action may be instituted in Federal or State court or through 
administrative proceedings when warranted by the facts disclosed by an 
investigation. It further provides that the Bureau may refer 
investigations to appropriate Federal, State, or foreign government 
agencies as appropriate. This section of the Interim Final Rule also 
authorizes the Assistant Director of the Office of Enforcement to close 
the investigation when the facts of an investigation indicate an 
enforcement action is not necessary or warranted in the public 
interest.
    One commenter indicated that the Bureau's authority to refer 
investigations to other law enforcement agencies should be limited to 
circumstances when it is expressly authorized to do so by the Dodd-
Frank Act, an enumerated consumer financial law, or other Federal law, 
because of potential risks to the confidentiality of the investigatory 
files.
    The Bureau's ability to refer matters to appropriate law 
enforcement agencies is inherent in the Bureau's authority and is a 
corollary to the Bureau's statutorily recognized ability to conduct 
joint investigations. The documentary materials and tangible things 
obtained by the Bureau pursuant to a CID are subject to the 
requirements and procedures relating to disclosure of records and 
information in part 1070 of this title. These procedures for sharing 
information with law enforcement agencies provide significant and 
sufficient protections for these materials.
    The Bureau has amended Sec.  1080.11 to clarify that the Assistant 
Director and any Deputy Assistant Director of the Office of Enforcement 
are authorized to close investigations.
    The Bureau adopts Sec.  1080.11 of the Interim Final Rule with the 
changes discussed above.

Section 1080.12 Orders Requiring Witnesses To Testify or Provide Other 
Information and Granting Immunity

    This section of the Interim Final Rule authorizes the Assistant 
Director of the Office of Enforcement to request approval from the 
Attorney General for the issuance of an order requiring a witness to 
testify or provide other information and granting immunity under 18 
U.S.C. 6004. The Interim Final Rule also sets forth the Bureau's right 
to review the exercise of these functions and states that the Bureau 
will entertain an appeal from an order requiring a witness to testify 
or provide other information only upon a showing that a substantial 
question is involved, the determination of which is essential to serve 
the interests of justice. Finally, this section of the Interim Final 
Rule describes the applicable rules and time limits for such appeals.
    A commenter questioned whether this section of the Interim Final 
Rule would permit any Bureau employee to request that the Attorney 
General approve the issuance of an order granting immunity under 18 
U.S.C. 6004 and requiring a witness to testify or provide information. 
The commenter noted that the Dodd-Frank Act authorizes the Bureau, with 
the Attorney General's permission, to compel a witness to testify under 
18 U.S.C. 6004 if the witness invokes his or her privilege against 
self-incrimination. The commenter argued that this section should 
delegate the authority to seek permission to compel testimony to a 
specific individual to provide accountability and ensure that 
information is not disclosed to the Attorney General in a manner that 
violates the Right to Financial Privacy Act. The commenter noted that 
the FTC's analogous rule specifically lists the senior agency officials 
who are authorized to make such requests to the Attorney General, and 
identifies a liaison officer through whom such requests must be made. 
The commenter also suggested that Sec.  1080.12(b) of the Interim Final 
Rule, which provides that the Assistant Director's exercise of this 
authority is subject to review by ``the Bureau,'' specify who will 
conduct this review.
    The Final Rule provides that only the Director of the Bureau has 
the authority to request approval from the Attorney General for the 
issuance of an order requiring a witness to testify or provide other 
information and granting immunity under 18 U.S.C. 6004. This change 
addresses the concern that requests for witness immunity would be made 
without oversight. Limiting this authority to the Director provides 
sufficient accountability.

Section 1080.13 Custodians

    This section of the Interim Final Rule describes the procedures for 
designating a custodian and deputy custodian for material produced 
pursuant to a CID in an investigation. It also states that these 
materials are for the official use of the Bureau, but, upon notice to 
the custodian, must be made available for examination during regular 
office hours by the person who produced them.
    A commenter suggested that the Bureau should detail the particular 
duties of custodians designated under this section and that, without an 
enumerated list of duties, the custodian would not have any 
responsibilities regarding CID materials. The commenter noted that the 
FTC Act requires the custodian to take specific actions, while the 
Dodd-Frank Act does not. The commenter suggested specifying a series of 
custodial duties, including (1) taking and maintaining custody of all 
materials submitted pursuant to CIDs or subpoenas that the Bureau 
issues,

[[Page 39107]]

including transcripts of oral testimony taken by the Bureau; (2) 
maintaining confidentiality of those materials as required by 
applicable law; (3) providing the materials to either House of Congress 
upon request, after ten days notice to the party that owns or submitted 
the materials; (4) producing any materials as required by a court of 
competent jurisdiction; and (5) complying at all times with the Trade 
Secrets Act.
    Section 1052 of the Dodd-Frank Act sets forth the duties of the 
Bureau's custodian. Sections 1052(c)(3) through (c)(6) of the Dodd-
Frank Act give the custodian responsibility for receiving documentary 
material, tangible things, written reports, answers to questions, and 
transcripts of oral testimony given by any person in compliance with 
any CID. Section 1052(d) of the Dodd-Frank Act, as well as the Bureau's 
Rules for Disclosure of Records and Information in part 1070 of this 
title, outline the requirements for the confidential treatment of 
demand material. Section 1052(g) addresses custodial control and 
provides that a person may file, in the district court of the United 
States for the judicial district within which the office of the 
custodian is situated, a petition for an order of such court requiring 
the performance by the custodian of any duty imposed upon him by 
section 1052 of the Dodd-Frank Act or by Bureau rule. These duties and 
obligations do not require additional clarification by rule.
    The Final Rule clarifies that the custodian has the powers and 
duties of both section 1052 of the Dodd-Frank Act and 12 CFR 1070.3.
    The Bureau adopts Sec.  1080.13 of the Interim Final Rule with the 
changes discussed above.

Section 1080.14 Confidential Treatment of Demand Material and Non-
Public Nature of Investigations

    Section 1080.14 of the Interim Final Rule explains that documentary 
materials, written reports, answers to questions, tangible things, or 
transcripts of oral testimony received by the Bureau in any form or 
format pursuant to a CID are subject to the requirements and procedures 
relating to disclosure of records and information in part 1070 of this 
title. This section of the Interim Final Rule also states that 
investigations generally are non-public. A Bureau investigator may 
disclose the existence of an investigation to the extent necessary to 
advance the investigation.
    A commenter recommended that the Bureau revise this section to 
mandate that Bureau investigations remain confidential. The commenter 
noted the potential reputation risk to an entity if an investigation is 
disclosed to the public. In addition, the commenter argued that failing 
to conduct investigations confidentially will increase litigation risk. 
One commenter recommended that the Bureau issue a public absolution of 
a company if the Bureau does not maintain the confidentiality of an 
investigation.
    Section 1080.14 of the Interim Final Rule provides that 
investigations generally will not be disclosed to the public, but 
permits Bureau investigators to disclose the existence of an 
investigation when necessary to advance the investigation. The Interim 
Final Rule does not contemplate publicizing an investigation, but 
rather disclosing the existence of the investigation to, for example, a 
potential witness or third party with potentially relevant information 
when doing so is necessary to advance the investigation. This limited 
exception sufficiently balances the concerns expressed by the commenter 
with the Bureau's need to obtain information efficiently.
    Thus, the Bureau adopts Sec.  1080.14 of the Interim Final Rule as 
the Final Rule without change.

VII. Section 1022(b)(2) Provisions

    In developing the Final Rule, the Bureau has considered the 
potential benefits, costs, and impacts, and has consulted or offered to 
consult with the prudential regulators, HUD, the SEC, the Department of 
Justice, and the FTC, including with regard to consistency with any 
prudential, market, or systemic objectives administered by such 
agencies.\1\
---------------------------------------------------------------------------

    \1\ Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the 
consideration of the potential benefits and costs of regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas. Section 
1022(b)(2)(B) addresses consultation between the Bureau and other 
Federal agencies during the rulemaking process. The manner and 
extent to which these provisions apply to procedural rules and 
benefits, costs and impacts that are compelled by statutory changes 
rather than discretionary Bureau action is unclear. Nevertheless, to 
inform this rulemaking more fully, the Bureau performed the 
described analyses and consultations.
---------------------------------------------------------------------------

    The Final Rule neither imposes any obligations on consumers nor is 
expected to have any appreciable impact on their access to consumer 
financial products or services. Rather, the Final Rule provides a 
clear, efficient mechanism for investigating compliance with the 
Federal consumer financial laws, which benefits consumers by creating a 
systematic process to protect them from unlawful behavior.
    The Final Rule imposes certain obligations on covered persons who 
receive CIDs in Bureau investigations. Specifically, as described 
above, the Final Rule sets forth the process for complying with or 
objecting to CIDs for documentary material, tangible things, written 
reports or answers to questions, and oral testimony. Most obligations 
in the Final Rule stem from express language in the Dodd-Frank Act and 
do not impose additional burdens on covered persons.
    To the extent that the Final Rule includes provisions not expressly 
required by statute, these provisions benefit covered persons by 
providing clarity and certainty. In addition, the Final Rule vests the 
Bureau with discretion to modify CIDs or extend the time for compliance 
for good cause. This flexibility benefits covered persons by enabling 
the Bureau to assess the cost of compliance with a civil investigative 
demand in a particular circumstance and take appropriate steps to 
mitigate any unreasonable compliance burden.
    Moreover, because the Final Rule is largely based on section 20 of 
the FTC Act and its corresponding regulations, it should present an 
existing, stable model of investigatory procedures to covered persons. 
This likely familiarity to covered persons should further reduce the 
compliance costs for covered persons.
    The Final Rule provides that requests for extensions of time to 
file petitions to modify or set aside CIDs are disfavored. This may 
impose a burden on covered entities in some cases, but it may also lead 
to a more expeditious resolution of matters, reducing uncertainty. 
Furthermore, the Final Rule has no unique impact on insured depository 
institutions or insured credit unions with less than $10 billion in 
assets as described in section 1026(a) of the Dodd-Frank Act. Nor does 
the Final Rule have a unique impact on rural consumers.
    A commenter suggested that the Bureau conduct a nonpublic study of 
the impact of complying with a CID on the entities who have been 
subjected to them by other agencies, with specific focus on those that 
were found not to have violated the law. As the commenter implicitly 
recognizes, such data does not currently exist and thus was not 
reasonably available to the Bureau in finalizing the Interim Final 
Rule. Moreover, as explained above, most of the costs associated with 
complying with a CID result from the Dodd-Frank Act, which authorizes 
the Bureau to issue such demands.
    A commenter asserted that disfavoring extensions of petitions to

[[Page 39108]]

modify or set aside CIDs will require the recipient to conduct a full 
review of the demanded material within the normal 20-day period in 
order to comply with the deadline for filing a petition. Under the 
Final Rule, recipients of a CID are not required to comply fully within 
twenty days; rather, they are required simply to decide whether they 
will comply with the demand at all. The Assistant Director of the 
Office of Enforcement and the Deputy Assistant Directors of the Office 
of Enforcement have the discretion to negotiate and approve the terms 
of satisfactory compliance with CIDs and, for good cause shown, may 
extend the time prescribed for compliance. Thus, the Final Rule 
provides reasonable steps to mitigate compliance burden while 
simultaneously protecting the Bureau's law enforcement interests.
    Another commenter stated that the four interim final rules that the 
Bureau promulgated together on July 28, 2011 failed to satisfy the 
rulemaking requirements under section 1022 of the Dodd-Frank Act. 
Specifically, the commenter stated that ``the CFPB's analysis of the 
costs and benefits of its rules does not recognize the significant 
costs the CFPB imposes on covered persons.'' The Bureau believes that 
it appropriately considered the benefits, costs, and impacts of the 
Interim Final Rule pursuant to section 1022. Notably, the commenter did 
not identify any specific costs to covered persons that are not 
discussed in Part C of the SUPPLEMENTARY INFORMATION to the Interim 
Final Rule.

VIII. Procedural Requirements

    As noted in publishing the Interim Final Rule, under the 
Administrative Procedure Act, 5 U.S.C. 553(b), notice and comment is 
not required for rules of agency organization, procedure, or practice. 
As discussed in the preamble to the Interim Final Rule, the Bureau 
confirms its finding that this is a procedural rule for which notice 
and comment is not required. In addition, because the Final Rule 
relates solely to agency procedure and practice, it is not subject to 
the 30-day delayed effective date for substantive rules under section 
553(d) of the Administrative Procedure Act, 5 U.S.C. 551 et seq. 
Because no notice of proposed rulemaking is required, the requirements 
of the Regulatory Flexibility Act, 5 U.S.C. 601(2) do not apply. 
Finally, the Bureau has determined that this Final Rule does not impose 
any new recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would be collections of 
information requiring approval under 44 U.S.C. 3501. et seq.

List of Subjects in 12 CFR Part 1080

    Administrative practice and procedure, Banking, Banks, Consumer 
protection, Credit, Credit unions, Investigations, Law enforcement, 
National banks, Savings associations, Trade practices.

    For the reasons set forth in the preamble, the Bureau of Consumer 
Financial Protection revises part 1080 to Chapter X in Title 12 of the 
Code of Federal Regulations to read as follows:

PART 1080--RULES RELATING TO INVESTIGATIONS

Sec.
1080.1 Scope.
1080.2 Definitions.
1080.3 Policy as to private controversies.
1080.4 Initiating and conducting investigations.
1080.5 Notification of purpose.
1080.6 Civil investigative demands.
1080.7 Investigational hearings.
1080.8 Withholding requested material.
1080.9 Rights of witnesses in investigations.
1080.10 Noncompliance with civil investigative demands.
1080.11 Disposition.
1080.12 Orders requiring witnesses to testify or provide other 
information and granting immunity.
1080.13 Custodians.
1080.14 Confidential treatment of demand material and non-public 
nature of investigations.

    Authority:  Pub. L. 111-203, Title X, 12 U.S.C. 5481 et seq.


Sec.  1080.1  Scope.

    The rules of this part apply to Bureau investigations conducted 
pursuant to section 1052 of the Dodd-Frank Act, 12 U.S.C. 5562.


Sec.  1080.2  Definitions.

    For the purposes of this part, unless explicitly stated to the 
contrary:
    Bureau means the Bureau of Consumer Financial Protection.
    Bureau investigation means any inquiry conducted by a Bureau 
investigator for the purpose of ascertaining whether any person is or 
has been engaged in any conduct that is a violation.
    Bureau investigator means any attorney or investigator employed by 
the Bureau who is charged with the duty of enforcing or carrying into 
effect any Federal consumer financial law.
    Custodian means the custodian or any deputy custodian designated by 
the Bureau for the purpose of maintaining custody of information 
produced pursuant to this part.
    Director means the Director of the Bureau or a person authorized to 
perform the functions of the Director in accordance with the law.
    Documentary material means the original or any copy of any book, 
document, record, report, memorandum, paper, communication, tabulation, 
chart, log, electronic file, or other data or data compilation stored 
in any medium, including electronically stored information.
    Dodd-Frank Act means the Dodd-Frank Wall Street Reform and Consumer 
Financial Protection Act of 2010, as amended, Public Law 111-203 (July 
21, 2010), Title X, codified at 12 U.S.C. 5481 et seq.
    Electronically stored information (ESI) means any information 
stored in any electronic medium from which information can be obtained 
either directly or, if necessary, after translation by the responding 
party into a reasonably usable form.
    Office of Enforcement means the office of the Bureau responsible 
for enforcement of Federal consumer financial law.
    Person means an individual, partnership, company, corporation, 
association (incorporated or unincorporated), trust, estate, 
cooperative organization, or other entity.
    Violation means any act or omission that, if proved, would 
constitute a violation of any provision of Federal consumer financial 
law.


Sec.  1080.3  Policy as to private controversies.

    The Bureau shall act only in the public interest and will not 
initiate an investigation or take other enforcement action when the 
alleged violation is merely a matter of private controversy and does 
not tend to affect adversely the public interest.


Sec.  1080.4  Initiating and conducting investigations.

    The Assistant Director of the Office of Enforcement and the Deputy 
Assistant Directors of the Office of Enforcement have the nondelegable 
authority to initiate investigations. Bureau investigations are 
conducted by Bureau investigators designated and duly authorized under 
section 1052 of the Dodd-Frank Act, 12 U.S.C. 5562, to conduct such 
investigations. Bureau investigators are authorized to exercise and 
perform their duties in accordance with the laws of the United States 
and the regulations of the Bureau.


Sec.  1080.5  Notification of purpose.

    Any person compelled to furnish documentary material, tangible 
things, written reports or answers to questions, oral testimony, or any 
combination of

[[Page 39109]]

such material, answers, or testimony to the Bureau shall be advised of 
the nature of the conduct constituting the alleged violation that is 
under investigation and the provisions of law applicable to such 
violation.


Sec.  1080.6  Civil investigative demands.

    (a) In general. In accordance with section 1052(c) of the Act, the 
Director of the Bureau, the Assistant Director of the Office of 
Enforcement, and the Deputy Assistant Directors of the Office of 
Enforcement, have the nondelegable authority to issue a civil 
investigative demand in any Bureau investigation directing the person 
named therein to produce documentary material for inspection and 
copying or reproduction in the form or medium requested by the Bureau; 
to submit tangible things; to provide a written report or answers to 
questions; to appear before a designated representative at a designated 
time and place to testify about documentary material, tangible things, 
or other information; and to furnish any combination of such material, 
things, answers, or testimony.
    (1) Documentary material. (i) Civil investigative demands for the 
production of documentary material shall describe each class of 
material to be produced with such definiteness and certainty as to 
permit such material to be fairly identified, prescribe a return date 
or dates that will provide a reasonable period of time within which the 
material so demanded may be assembled and made available for inspection 
and copying or reproduction, and identify the custodian to whom such 
material shall be made available. Documentary material for which a 
civil investigative demand has been issued shall be made available as 
prescribed in the civil investigative demand.
    (ii) Production of documentary material in response to a civil 
investigative demand shall be made under a sworn certificate, in such 
form as the demand designates, by the person to whom the demand is 
directed or, if not a natural person, by any person having knowledge of 
the facts and circumstances relating to such production, to the effect 
that all of the documentary material required by the demand and in the 
possession, custody, or control of the person to whom the demand is 
directed has been produced and made available to the custodian.
    (2) Tangible things. (i) Civil investigative demands for tangible 
things shall describe each class of tangible things to be produced with 
such definiteness and certainty as to permit such things to be fairly 
identified, prescribe a return date or dates which will provide a 
reasonable period of time within which the things so demanded may be 
assembled and submitted, and identify the custodian to whom such things 
shall be submitted.
    (ii) Submissions of tangible things in response to a civil 
investigative demand shall be made under a sworn certificate, in such 
form as the demand designates, by the person to whom the demand is 
directed or, if not a natural person, by any person having knowledge of 
the facts and circumstances relating to such production, to the effect 
that all of the tangible things required by the demand and in the 
possession, custody, or control of the person to whom the demand is 
directed have been submitted to the custodian.
    (3) Written reports or answers to questions. (i) Civil 
investigative demands for written reports or answers to questions shall 
propound with definiteness and certainty the reports to be produced or 
the questions to be answered, prescribe a date or dates at which time 
written reports or answers to questions shall be submitted, and 
identify the custodian to whom such reports or answers shall be 
submitted.
    (ii) Each reporting requirement or question in a civil 
investigative demand shall be answered separately and fully in writing 
under oath. Responses to a civil investigative demand for a written 
report or answers to questions shall be made under a sworn certificate, 
in such form as the demand designates, by the person to whom the demand 
is directed or, if not a natural person, by any person responsible for 
answering each reporting requirement or question, to the effect that 
all of the information required by the demand and in the possession, 
custody, control, or knowledge of the person to whom the demand is 
directed has been submitted to the custodian.
    (4) Oral testimony. (i) Civil investigative demands for the giving 
of oral testimony shall prescribe a date, time, and place at which oral 
testimony shall be commenced, and identify a Bureau investigator who 
shall conduct the investigation and the custodian to whom the 
transcript of such investigation shall be submitted. Oral testimony in 
response to a civil investigative demand shall be taken in accordance 
with the procedures for investigational hearings prescribed by 
Sec. Sec.  1080.7 and 1080.9 of this part.
    (ii) Where a civil investigative demand requires oral testimony 
from an entity, the civil investigative demand shall describe with 
reasonable particularity the matters for examination and the entity 
must designate one or more officers, directors, or managing agents, or 
designate other persons who consent to testify on its behalf. Unless a 
single individual is designated by the entity, the entity must 
designate the matters on which each designee will testify. The 
individuals designated must testify about information known or 
reasonably available to the entity and their testimony shall be binding 
on the entity.
    (b) Manner and form of production of ESI. When a civil 
investigative demand requires the production of ESI, it shall be 
produced in accordance with the instructions provided by the Bureau 
regarding the manner and form of production. Absent any instructions as 
to the form for producing ESI, ESI must be produced in the form in 
which it is ordinarily maintained or in a reasonably usable form.
    (c) Meet and confer. The recipient of a civil investigative demand 
shall meet and confer with a Bureau investigator within 10 calendar 
days after receipt of the demand or before the deadline for filing a 
petition to modify or set aside the demand, whichever is earlier, to 
discuss and attempt to resolve all issues regarding compliance with the 
civil investigative demand. The Assistant Director of the Office of 
Enforcement and the Deputy Assistant Directors of the Office of 
Enforcement may authorize the waiver of this requirement for routine 
third-party civil investigative demands or in other circumstances where 
he or she determines that a meeting is unnecessary. The meeting may be 
in person or by telephone.
    (1) Personnel. The recipient must make available at the meeting 
personnel with the knowledge necessary to resolve any issues relevant 
to compliance with the demand. Such personnel could include individuals 
knowledgeable about the recipient's information or records management 
systems and/or the recipient's organizational structure.
    (2) ESI. If the civil investigative demand seeks ESI, the recipient 
shall ensure that a person familiar with its ESI systems and methods of 
retrieval participates in the meeting.
    (3) Petitions. The Bureau will not consider petitions to set aside 
or modify a civil investigative demand unless the recipient has 
meaningfully engaged in the meet and confer process described in this 
subsection and will consider only issues raised during the meet and 
confer process.
    (d) Compliance. The Assistant Director of the Office of Enforcement 
and the Deputy Assistant Directors of the Office of Enforcement are 
authorized to negotiate and approve the terms of satisfactory 
compliance with civil investigative demands and, for good

[[Page 39110]]

cause shown, may extend the time prescribed for compliance.
    (e) Petition for order modifying or setting aside demand--in 
general. Any petition for an order modifying or setting aside a civil 
investigative demand shall be filed with the Executive Secretary of the 
Bureau with a copy to the Assistant Director of the Office of 
Enforcement within 20 calendar days after service of the civil 
investigative demand, or, if the return date is less than 20 calendar 
days after service, prior to the return date. Such petition shall set 
forth all factual and legal objections to the civil investigative 
demand, including all appropriate arguments, affidavits, and other 
supporting documentation. The attorney who objects to a demand must 
sign any objections.
    (1) Statement. Each petition shall be accompanied by a signed 
statement representing that counsel for the petitioner has conferred 
with counsel for the Bureau pursuant to section 1080.6(c) in a good-
faith effort to resolve by agreement the issues raised by the petition 
and has been unable to reach such an agreement. If some of the matters 
in controversy have been resolved by agreement, the statement shall 
specify the matters so resolved and the matters remaining unresolved. 
The statement shall recite the date, time, and place of each such 
meeting between counsel, and the names of all parties participating in 
each such meeting.
    (2) Extensions of time. The Assistant Director of the Office of 
Enforcement and the Deputy Assistant Directors of the Office of 
Enforcement are authorized to rule upon requests for extensions of time 
within which to file such petitions. Requests for extensions of time 
are disfavored.
    (3) Bureau investigator response. Bureau investigators may, without 
serving the petitioner, provide the Director with a statement setting 
forth any factual and legal response to a petition for an order 
modifying or setting aside the demand.
    (4) Disposition. The Director has the authority to rule upon a 
petition for an order modifying or setting aside a civil investigative 
demand. The order may be served on the petitioner via email, facsimile, 
or any other method reasonably calculated to provide notice of the 
order to the petitioner.
    (f) Stay of compliance period. The timely filing of a petition for 
an order modifying or setting aside a civil investigative demand shall 
stay the time permitted for compliance with the portion challenged. If 
the petition is denied in whole or in part, the ruling will specify a 
new return date.
    (g) Public disclosure. All such petitions and the Director's orders 
in response to those petitions are part of the public records of the 
Bureau unless the Bureau determines otherwise for good cause shown. Any 
showing of good cause must be made no later than the time the petition 
is filed.


Sec.  1080.7  Investigational hearings.

    (a) Investigational hearings, as distinguished from hearings in 
adjudicative proceedings, may be conducted pursuant to a civil 
investigative demand for the giving of oral testimony in the course of 
any Bureau investigation, including inquiries initiated for the purpose 
of determining whether or not a respondent is complying with an order 
of the Bureau.
    (b) Investigational hearings shall be conducted by any Bureau 
investigator for the purpose of hearing the testimony of witnesses and 
receiving documentary material, tangible things, or other information 
relating to any subject under investigation. Such hearings shall be 
under oath or affirmation and stenographically reported, and a 
transcript thereof shall be made a part of the record of the 
investigation. The Bureau investigator conducting the investigational 
hearing also may direct that the testimony be recorded by audio, 
audiovisual, or other means, in which case the recording shall be made 
a part of the record of the investigation as well.
    (c) In investigational hearings, the Bureau investigators shall 
exclude from the hearing room all persons except the person being 
examined, his or her counsel, the officer before whom the testimony is 
to be taken, any investigator or representative of an agency with which 
the Bureau is engaged in a joint investigation, and any individual 
transcribing or recording such testimony. At the discretion of the 
Bureau investigator, and with the consent of the person being examined, 
persons other than those listed in this paragraph may be present in the 
hearing room. The Bureau investigator shall certify or direct the 
individual transcribing the testimony to certify on the transcript that 
the witness was duly sworn and that the transcript is a true record of 
the testimony given by the witness. A copy of the transcript shall be 
forwarded promptly by the Bureau investigator to the custodian 
designated in section 1080.13.


Sec.  1080.8  Withholding requested material.

    (a) Any person withholding material responsive to a civil 
investigative demand or any other request for production of material 
shall assert a claim of privilege not later than the date set for the 
production of material. Such person shall, if so directed in the civil 
investigative demand or other request for production, submit, together 
with such claim, a schedule of the items withheld which states, as to 
each such item, the type, specific subject matter, and date of the 
item; the names, addresses, positions, and organizations of all authors 
and recipients of the item; and the specific grounds for claiming that 
the item is privileged. The person who submits the schedule and the 
attorney stating the grounds for a claim that any item is privileged 
must sign it.
    (b) A person withholding material solely for reasons described in 
this subsection shall comply with the requirements of this subsection 
in lieu of filing a petition for an order modifying or setting aside a 
civil investigative demand pursuant to section 1080.6(e).
    (c) Disclosure of privileged or protected information or 
communications produced pursuant to a civil investigative demand shall 
be handled as follows:
    (1) The disclosure of privileged or protected information or 
communications shall not operate as a waiver with respect to the Bureau 
if:
    (i) The disclosure was inadvertent;
    (ii) The holder of the privilege or protection took reasonable 
steps to prevent disclosure; and
    (iii) The holder promptly took reasonable steps to rectify the 
error, including notifying a Bureau investigator of the claim of 
privilege or protection and the basis for it.
    (2) After being notified, the Bureau investigator must promptly 
return, sequester, or destroy the specified information and any copies; 
must not use or disclose the information until the claim is resolved; 
must take reasonable steps to retrieve the information if he or she 
disclosed it before being notified; and, if appropriate, may sequester 
such material until such time as a hearing officer or court rules on 
the merits of the claim of privilege or protection. The producing party 
must preserve the information until the claim is resolved.
    (3) The disclosure of privileged or protected information or 
communications shall waive the privilege or protection with respect to 
the Bureau as to undisclosed information or communications only if:
    (i) The waiver is intentional;
    (ii) The disclosed and undisclosed information or communications 
concern the same subject matter; and
    (iii) They ought in fairness to be considered together.

[[Page 39111]]

Sec.  1080.9  Rights of witnesses in investigations.

    (a) Any person compelled to submit documentary material, tangible 
things, or written reports or answers to questions to the Bureau, or to 
testify in an investigational hearing, shall be entitled to retain a 
copy or, on payment of lawfully prescribed costs, request a copy of the 
materials, things, reports, or written answers submitted, or a 
transcript of his or her testimony. The Bureau, however, may for good 
cause deny such a request and limit the witness to inspection of the 
official transcript of the testimony. Upon completion of transcription 
of the testimony of the witness, the witness shall be offered an 
opportunity to read the transcript of his or her testimony. Any changes 
by the witness shall be entered and identified upon the transcript by 
the Bureau investigator with a statement of the reasons given by the 
witness for making such changes. The transcript shall then be signed by 
the witness and submitted to the Bureau unless the witness cannot be 
found, is ill, waives in writing his or her right to signature, or 
refuses to sign. If the signed transcript is not submitted to the 
Bureau within 30 calendar days of the witness being afforded a 
reasonable opportunity to review it, the Bureau investigator, or the 
individual transcribing the testimony acting at the Bureau 
investigator's direction, shall sign the transcript and state on the 
record the fact of the waiver, illness, absence of the witness, or the 
refusal to sign, together with any reasons given for the failure to 
sign.
    (b) Any witness compelled to appear in person at an investigational 
hearing may be accompanied, represented, and advised by counsel as 
follows:
    (1) Counsel for a witness may advise the witness, in confidence and 
upon the initiative of either counsel or the witness, with respect to 
any question asked of the witness where it is claimed that a witness is 
privileged to refuse to answer the question. Counsel may not otherwise 
consult with the witness while a question directed to the witness is 
pending.
    (2) Any objections made under the rules in this part shall be made 
only for the purpose of protecting a constitutional or other legal 
right or privilege, including the privilege against self-incrimination. 
Neither the witness nor counsel shall otherwise object or refuse to 
answer any question. Any objection during an investigational hearing 
shall be stated concisely on the record in a nonargumentative and 
nonsuggestive manner. Following an objection, the examination shall 
proceed and the testimony shall be taken, except for testimony 
requiring the witness to divulge information protected by the claim of 
privilege or work product.
    (3) Counsel for a witness may not, for any purpose or to any extent 
not allowed by paragraphs (b)(1) and (2) of this section, interrupt the 
examination of the witness by making any objections or statements on 
the record. Petitions challenging the Bureau's authority to conduct the 
investigation or the sufficiency or legality of the civil investigative 
demand shall be addressed to the Bureau in advance of the hearing in 
accordance with Sec.  1080.6(e). Copies of such petitions may be filed 
as part of the record of the investigation with the Bureau investigator 
conducting the investigational hearing, but no arguments in support 
thereof will be allowed at the hearing.
    (4) Following completion of the examination of a witness, counsel 
for the witness may, on the record, request that the Bureau 
investigator conducting the investigational hearing permit the witness 
to clarify any of his or her answers. The grant or denial of such 
request shall be within the sole discretion of the Bureau investigator 
conducting the hearing.
    (5) The Bureau investigator conducting the hearing shall take all 
necessary action to regulate the course of the hearing to avoid delay 
and to prevent or restrain disorderly, dilatory, obstructionist, or 
contumacious conduct, or contemptuous language. Such Bureau 
investigator shall, for reasons stated on the record, immediately 
report to the Bureau any instances where an attorney has allegedly 
refused to comply with his or her obligations under the rules in this 
part, or has allegedly engaged in disorderly, dilatory, obstructionist, 
or contumacious conduct, or contemptuous language in the course of the 
hearing. The Bureau will thereupon take such further action, if any, as 
the circumstances warrant, including actions consistent with those 
described in 12 CFR 1081.107(c) to suspend or disbar the attorney from 
further practice before the Bureau or exclude the attorney from further 
participation in the particular investigation.


Sec.  1080.10  Noncompliance with civil investigative demands.

    (a) In cases of failure to comply in whole or in part with Bureau 
civil investigative demands, appropriate action may be initiated by the 
Bureau, including actions for enforcement.
    (b) The Director, the Assistant Director of the Office of 
Enforcement, and the General Counsel of the Bureau are authorized to:
    (1) Institute, on behalf of the Bureau, an enforcement proceeding 
in the district court of the United States for any judicial district in 
which a person resides, is found, or transacts business, in connection 
with the failure or refusal of such person to comply with, or to obey, 
a civil investigative demand in whole or in part if the return date or 
any extension thereof has passed; and
    (2) Seek civil contempt or other appropriate relief in cases where 
a court order enforcing a civil investigative demand has been violated.


Sec.  1080.11  Disposition.

    (a) When the facts disclosed by an investigation indicate that an 
enforcement action is warranted, further proceedings may be instituted 
in Federal or State court or pursuant to the Bureau's administrative 
adjudicatory process. Where appropriate, the Bureau also may refer 
investigations to appropriate Federal, State, or foreign governmental 
agencies.
    (b) When the facts disclosed by an investigation indicate that an 
enforcement action is not necessary or would not be in the public 
interest, the investigational file will be closed. The matter may be 
further investigated, at any time, if circumstances so warrant.
    (c) The Assistant Director of the Office of Enforcement and the 
Deputy Assistant Directors of the Office of Enforcement are authorized 
to close Bureau investigations.


Sec.  1080.12  Orders requiring witnesses to testify or provide other 
information and granting immunity.

    The Director has the nondelegable authority to request approval 
from the Attorney General of the United States for the issuance of an 
order requiring a witness to testify or provide other information and 
granting immunity under 18 U.S.C. 6004.


Sec.  1080.13  Custodians.

    (a) The Bureau shall designate a custodian and one or more deputy 
custodians for material to be delivered pursuant to a civil 
investigative demand in an investigation. The custodian shall have the 
powers and duties prescribed by 12 CFR 1070.3 and section 1052 of the 
Act, 12 U.S.C. 5562. Deputy custodians may perform all of the duties 
assigned to custodians.
    (b) Material produced pursuant to a civil investigative demand, 
while in the custody of the custodian, shall be for the official use of 
the Bureau in accordance with the Act; but such material shall upon 
reasonable notice to the custodian

[[Page 39112]]

be made available for examination by the person who produced such 
material, or his or her duly authorized representative, during regular 
office hours established for the Bureau.


Sec.  1080.14  Confidential treatment of demand material and non-public 
nature of investigations.

    (a) Documentary materials, written reports, answers to questions, 
tangible things or transcripts of oral testimony the Bureau receives in 
any form or format pursuant to a civil investigative demand are subject 
to the requirements and procedures relating to the disclosure of 
records and information set forth in part 1070 of this title.
    (b) Bureau investigations generally are non-public. Bureau 
investigators may disclose the existence of an investigation to 
potential witnesses or third parties to the extent necessary to advance 
the investigation.

    Dated: June 4, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-14047 Filed 6-28-12; 8:45 am]
BILLING CODE 4810-AM-P