Consumer Financial Civil Penalty Fund, 26489-26504 [2013-10320]
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Federal Register / Vol. 78, No. 88 / Tuesday, May 7, 2013 / Rules and Regulations
Sickles, APHIS’ Information Collection
Coordinator, at (301) 851–2908.
List of Subjects in 9 CFR Part 71
Animal diseases, Livestock, Poultry
and poultry products, Quarantine,
Reporting and recordkeeping
requirements, Transportation.
Accordingly, we are amending 9 CFR
part 71 as follows:
PART 71—GENERAL PROVISIONS
1. The authority citation for part 71
continues to read as follows:
■
Authority: 7 U.S.C. 8301–8317; 7 CFR 2.22,
2.80, and 371.4.
2. Section 71.20 is amended as
follows:
■ a. By revising paragraph (a)(7) to read
set forth below.
■ b. In paragraph (a)(8), by removing the
words ‘‘and 85’’ and adding the words
‘‘85, and 86’’ in their place.
■ c. In the OMB citation at the end of
the section, by removing the words
‘‘number 0579–0258’’ and adding the
words ‘‘numbers 0579–0258 and 0579–
0342’’ in their place.
■
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§ 71.20
facility under this section by signing a
listing agreement.
*
*
*
*
*
(5) The management of the
slaughtering or rendering establishment
agrees that weight tickets, sales slips,
and records of origin, identification, and
destination that relate to livestock that
are in, or have been in, the
establishment will be maintained by the
establishment. For poultry and swine,
such documents must be kept for at
least 2 years, and for cattle and bison,
sheep and goats, cervids, and equines,
for at least 5 years. APHIS, APHIS
contractors, and State animal health
representatives will be permitted to
review and copy or scan these
documents during normal business
hours.
*
*
*
*
*
Done in Washington, DC, this 2nd day of
May 2013.
Kevin Shea,
Acting Administrator, Animal and Plant
Health Inspection Service.
[FR Doc. 2013–10825 Filed 5–6–13; 8:45 am]
BILLING CODE 3410–34–P
Approval of livestock facilities.
(a) * * *
(7) Documents such as weight tickets,
sales slips, and records of origin,
identification, and destination that
related to livestock that are in, or that
have been in, the facility shall be
maintained by the facility. For poultry
and swine, such documents must be
kept for at least 2 years, and for cattle
and bison, sheep and goats, cervids, and
equines, for at least 5 years. APHIS
representatives and State
representatives shall be permitted to
review and copy those documents
during normal business hours.
*
*
*
*
*
■ 3. Section 71.21 is amended as
follows:
■ a. By redesignating paragraphs (a)(l),
(a)(2), and (a)(3) as paragraphs (a)(2),
(a)(3), and (a)(4), respectively, and by
adding a new paragraph (a)(l) to read as
set forth below.
■ b. By adding a new paragraph (a)(5) to
read as set forth below.
■ c. In the OMB citation at the end of
the section, by removing the words
‘‘number 0579–0212’’ and adding the
words ‘‘numbers 0579–0212 and 0579–
0342’’ in their place.
§ 71.21 Tissue and blood testing at
slaughter.
(a) * * *
(1) The owner or operator of the
establishment must agree, in writing, to
meet the requirements for a listed
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BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1075
[Docket No. CFPB–2013–0011]
RIN 3170–AA38
Consumer Financial Civil Penalty Fund
Bureau of Consumer Financial
Protection.
ACTION: Final rule.
AGENCY:
SUMMARY: The Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Dodd-Frank Act or Act) establishes a
‘‘Consumer Financial Civil Penalty
Fund’’ (Civil Penalty Fund) into which
the Consumer Financial Protection
Bureau (Bureau) must deposit any civil
penalty it obtains against any person in
any judicial or administrative action
under Federal consumer financial laws.
Under the Act, funds in the Civil
Penalty Fund may be used for payments
to the victims of activities for which
civil penalties have been imposed under
Federal consumer financial laws. In
addition, to the extent that such victims
cannot be located or such payments are
otherwise not practicable, the Bureau
may use funds in the Civil Penalty Fund
for the purpose of consumer education
and financial literacy programs. This
rule implements the relevant statutory
provisions by articulating the Bureau’s
interpretation of what kinds of
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26489
payments to victims are appropriate and
by establishing procedures for allocating
funds for such payments to victims and
for consumer education and financial
literacy programs.
DATES: This rule is effective May 7,
2013.
FOR FURTHER INFORMATION CONTACT:
Kristin Bateman, Attorney-Advisor,
Legal Division, Bureau of Consumer
Financial Protection, 1700 G Street NW.,
Washington, DC 20552, at (202) 435–
7821.
SUPPLEMENTARY INFORMATION:
I. Background
Title X of the Dodd-Frank Act
established the Bureau with a mandate
to regulate the offering and provision of
consumer financial products and
services under the Federal consumer
financial laws. Public Law 111–203,
§ 1011(a) (2010), codified at 12 U.S.C.
5491(a). The Dodd-Frank Act authorizes
the Bureau, among other things, to
enforce Federal consumer financial law
through judicial actions and
administrative adjudication
proceedings. 12 U.S.C. 5563, 5564. In
those actions and proceedings, a court
or the Bureau may require a party that
has violated the law to pay a civil
penalty. See, e.g., 12 U.S.C. 5565.
Section 1017(d)(1) of the Dodd-Frank
Act establishes a separate fund in the
Federal Reserve, the ‘‘Consumer
Financial Civil Penalty Fund’’ (Civil
Penalty Fund), into which the Bureau
must deposit civil penalties it collects
from any person in any judicial or
administrative action under Federal
consumer financial laws. 12 U.S.C.
5497(d)(1). Under the Act, amounts in
the Fund may be used ‘‘for payments to
the victims of activities for which civil
penalties have been imposed under the
Federal consumer financial laws.’’ 12
U.S.C. 5497(d)(2). In addition, ‘‘[t]o the
extent that such victims cannot be
located or such payments are otherwise
not practicable,’’ the Bureau may use
amounts in the Fund for consumer
education and financial literacy
programs. Id.
II. Summary of the Rule
This rule implements section
1017(d)(2) of the Dodd-Frank Act, 12
U.S.C. 5497(d)(2), by specifying the
conditions under which victims will be
eligible for payment from the Civil
Penalty Fund and the amounts of the
payments that the Bureau may make to
them. In addition, the rule sets forth
procedures the Bureau will follow for
allocating and distributing funds from
the Civil Penalty Fund.
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First, the rule describes the roles of
Bureau officials involved in managing
the Civil Penalty Fund. It establishes the
position of Civil Penalty Fund
Administrator (Fund Administrator) and
provides that the Fund Administrator
will report to the Chief Financial
Officer. In addition, the rule provides
that the Civil Penalty Fund Governance
Board—the body comprised of senior
Bureau officials established by the
Director to advise on matters relating to
the Civil Penalty Fund—may advise or
direct the Fund Administrator on the
administration of the Civil Penalty
Fund. The Fund Administrator must
follow any written directions that the
Civil Penalty Fund Governance Board
provides.
Second, the rule identifies the
category of victims who may receive
payments from the Civil Penalty Fund
and sets forth the amounts they may
receive. Under the rule, a victim is
eligible for payment from the Civil
Penalty Fund if a final order in a Bureau
enforcement action imposed a civil
penalty for the violation or violations
that harmed the victim. In addition, the
rule effectuates the intent of section
1017(d)(2) of the Dodd-Frank Act to
provide Civil Penalty Fund payments
only to compensate victims for the
harms they suffered from a violation for
which penalties were imposed. In
addition, as envisioned by section
1017(d)(2), the Bureau will make
payments to victims from the Civil
Penalty Fund only to the extent
practicable. The rule identifies that part
of victims’ harm that the Bureau
believes to be potentially practicable to
calculate, and thus susceptible to
compensation under section 1017(d)(2).
The rule also establishes procedures for
determining that compensable harm.
When possible, the amount of
compensable harm that a victim
suffered from a violation will be
determined based on the objective terms
of the order imposing a civil penalty for
the violation. If the amount of harm
cannot be determined based on the
terms of the order alone, a victim’s
compensable harm is the victim’s outof-pocket loss that resulted from the
violation, unless that amount would be
impracticable to determine.
The rule further provides that the
Bureau will use funds in the Civil
Penalty Fund to compensate only
victims’ uncompensated harm. Under
the rule, a victim’s uncompensated
harm is the victim’s compensable harm,
less any compensation for that harm
that the victim has received or is
reasonably expected to receive.
Third, the rule establishes a two-stage
procedure for expending money in the
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Civil Penalty Fund. First, the Fund
Administrator will allocate funds for
payments to victims and, if appropriate,
for consumer education and financial
literacy programs. At the allocation
stage, the Fund Administrator will
assign amounts to classes of victims—
that is, to groups of similarly situated
victims who suffered the same or
similar violations for which the Bureau
obtained relief in an enforcement action.
The Fund Administrator will allocate
funds to a class only to the extent that
payments to class members would be
practicable. Second, the Fund
Administrator will designate a
payments administrator to distribute
allocated funds to individual victims in
the classes to which funds have been
allocated. Again, a payments
administrator will make payments to
individual victims only to the extent
practicable. The rule identifies specific
ways in which payments to individual
victims or to a class of victims might be
impracticable.
For funds allocated to consumer
education and financial literacy
programs, the Bureau has adopted
criteria 1—not contained in this rule—
for selecting the particular consumer
education or financial literacy programs
to be funded.
Under the rule, the Fund
Administrator will allocate funds from
the Civil Penalty Fund on a six-month
schedule. The Fund Administrator is
responsible for establishing the
schedule of six-month periods.
Following the end of any given sixmonth period, the funds available for
allocation are those present in the Civil
Penalty Fund as of the end of that
period, minus funds already allocated
and certain other funds. In general, the
Fund Administrator may allocate the
available funds to those classes of
victims that had uncompensated harm
as of the end of that six-month period,
unless making payments to that class
would be impracticable. If sufficient
funds are available, the Fund
Administrator will allocate to all such
classes of victims enough money to
provide full compensation to the
victims in those classes to whom it is
practicable to make payments. If funds
remain, the Fund Administrator may
allocate a portion of those remaining
funds for consumer education and
financial literacy programs.
The Bureau anticipates that at times
the available funds in the Civil Penalty
Fund may not be sufficient to provide
full compensation to all classes of
1 The criteria are available at: https://
files.consumerfinance.gov/f/
201207_cfpb_civil_penalty__criteria.pdf.
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victims to which it is practicable to
make payments. The Bureau has
endeavored to establish equitable,
transparent, and efficient procedures for
allocating funds in those circumstances.
Under the rule, classes of victims that
first had uncompensated harm during
the six-month period that most recently
ended will receive priority in such
‘‘lean’’ periods. If funds remain after
allocating sufficient funds to provide
full compensation to all victims in those
classes, classes of victims from the
previous six-month period will receive
second priority, and so forth until no
funds remain. At times, there may not
be sufficient funds to give full
compensation to all classes of victims
from a single six-month period. In those
circumstances, the rule specifies that
funds will be allocated in a way
designed to ensure, to the degree
possible, that victims in those classes
will receive compensation—through
redress and Civil Penalty Fund
payments—for an equal percentage of
their compensable harm.
In addition, to preserve flexibility in
special circumstances, the rule
authorizes the Fund Administrator, in
her discretion, to depart from these
procedures, including by declining to
make, or altering the amount of, any
allocation provided for by the rule.
However, if the Fund Administrator
exercises that discretion, funds that
otherwise would have been allocated to
a class of victims cannot instead be
allocated to consumer education and
financial literacy programs in that
period. Rather, the Fund Administrator
may allocate funds to consumer
education and financial literacy
programs during that six-month period
only to the same extent she could have
had she not exercised that discretion.
In addition to establishing procedures
governing the allocation of funds from
the Civil Penalty Fund, the rule also
establishes procedures governing the
distribution of allocated funds to
eligible victims. In particular, the rule
directs the Fund Administrator to
designate a payments administrator to
distribute payments to eligible victims
in a class to which Civil Penalty Fund
funds have been allocated. Under the
rule, the Fund Administrator will
instruct the payments administrator to
propose a plan for distributing the
payments. The Fund Administrator may
require the plan to include procedures
for determining payment amounts, for
locating and notifying victims, for
making payments, and for potentially
eligible victims to contact the payments
administrator. Upon the Fund
Administrator’s approval of a
distribution plan, the payments
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administrator will distribute payments
to victims in accordance with the plan
to the extent practicable. If funds remain
after distributing payments to victims in
a class, the payments administrator will
distribute those remaining allocated
funds, to the extent practicable, among
eligible victims in that class up to the
amount of their remaining
uncompensated harm. Any remaining
funds that cannot be distributed among
victims in the class in that way will be
returned to the Civil Penalty Fund for
future allocation.
Fourth, the rule sets forth several
circumstances in which it will be
deemed impracticable to make
payments to victims or to classes of
victims.
Finally, the rule requires the Fund
Administrator to issue regular reports
on the disposition of funds in the Civil
Penalty Fund. Those reports will be
made available on
www.consumerfinance.gov.
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III. Legal Authority
The Bureau is issuing this rule
pursuant to its authority under section
1022(b)(1) of the Dodd-Frank Act, which
authorizes the Bureau to prescribe rules
as may be necessary or appropriate to
enable the Bureau to administer and
carry out the purposes and objectives of
Federal consumer financial law, 12
U.S.C. 5512(b)(1); and under section
1017(d) of the Dodd-Frank Act, which
establishes the Civil Penalty Fund and
authorizes the Bureau to use amounts in
that Fund for payments to victims and
for consumer education and financial
literacy programs.
This rule is in part an interpretative
rule and in part a rule relating to agency
procedure and practice. Accordingly,
the rule 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.
553(d). Even if this requirement applied,
the Bureau finds there is good cause for
this rule to take effect immediately upon
publication in the Federal Register. The
principal purpose of delaying an
effective date is to provide regulated
persons an opportunity to prepare, such
as by bringing their operations into
compliance with new requirements. But
this rule does not impose any
obligations or prohibitions on the
public, and the public therefore needs
no time to prepare for the rule’s
effective date. Meanwhile, making the
rule immediately effective allows the
Bureau to begin as soon as possible the
process of allocating funds in the Civil
Penalty Fund to victims.
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IV. Section-by-Section Description
Section 1075.100 Scope and Purpose
This section describes the scope and
purpose of the rule. It explains that the
rule implements section 1017(d)(2) of
the Dodd-Frank Act by describing the
conditions under which victims will be
eligible for payment from the Civil
Penalty Fund and the amounts of the
payments they may receive. This section
further explains that this rule
establishes procedures for allocating
funds in the Civil Penalty Fund to
classes of victims and to consumer
education and financial literacy
programs, and for distributing allocated
funds to individual victims. The rule
also requires the Fund Administrator to
issue regular reports on the Civil
Penalty Fund.
Section 1075.101 Definitions
This section defines terms used in the
rule.
Bureau. The rule provides that the
term ‘‘Bureau’’ means the Bureau of
Consumer Financial Protection.
Bureau enforcement action. The rule
provides that the term ‘‘Bureau
enforcement action’’ means any judicial
or administrative action or proceeding
in which the Bureau has obtained relief
with respect to a violation.
Chief Financial Officer. The rule
states that the term ‘‘Chief Financial
Officer’’ means the Chief Financial
Officer of the Bureau or any Bureau
employee to whom that officer has
delegated authority to act under this
part. The rule further states that, in the
absence of a Chief Financial Officer, the
Director shall designate an alternative
official of the Bureau to perform the
functions of the Chief Financial Officer
under this part.
Civil Penalty Fund. The rule provides
that the term ‘‘Civil Penalty Fund’’
means the Consumer Financial Civil
Penalty Fund established by 12 U.S.C.
5497(d).
Civil Penalty Fund Governance Board.
The rule provides that the term ‘‘Civil
Penalty Fund Governance Board’’ refers
to the body, comprised of senior Bureau
officials, established by the Bureau’s
Director to advise on matters relating to
the Civil Penalty Fund.
Class of victims. The rule defines the
term ‘‘class of victims’’ to mean a group
of similarly situated victims who
suffered harm from the same or similar
violations for which the Bureau
obtained relief in a Bureau enforcement
action. Under this definition, a single
Bureau enforcement action could
involve multiple classes of victims. For
example, the Bureau might obtain relief
for multiple different violations in a
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single action. The set of victims harmed
by one violation might overlap with the
set of victims harmed by another
violation, but each set could constitute
a distinct class for purposes of this rule.
Defendant. The rule states that the
term ‘‘defendant’’ means a party in a
Bureau enforcement action that is found
or alleged to have committed a
violation. This includes parties that
generally are referred to as
‘‘respondents’’ in administrative
enforcement actions.
Final order. The rule provides that the
term ‘‘final order’’ means a consent
order or settlement issued by a court or
by the Bureau, or an appealable order
issued by a court or by the Bureau as to
which the time for filing an appeal has
expired and no appeals are pending.
The rule makes clear that for purposes
of this definition, ‘‘appeals’’ include
petitions for reconsideration, review,
rehearing, and certiorari.
This rule’s definition of ‘‘final order’’
differs from the definition of that term
in the Bureau’s Rules of Practice for
Adjudication Proceedings, which
provide that an order may be considered
‘‘final’’ even if a petition for
reconsideration or review is pending.
For purposes of this rule, the Bureau has
chosen to define ‘‘final order’’ as an
order that is subject to no further review
because the terms of an order in part
determine whether victims may receive
payments from the Civil Penalty Fund
and, if so, in what amount. Thus, it is
important that the terms of the final
order not be subject to change.
Otherwise, the Bureau would risk
making Civil Penalty Fund payments
that might turn out, as a result of
appellate decisions, to have exceeded
the amount victims may receive under
the rule.
Person. The rule incorporates the
definition of ‘‘person’’ set forth in
section 1002(19) of the Dodd-Frank Act.
Thus, the rule states that the term
‘‘person’’ means an individual,
partnership, company, corporation,
association (incorporated or
unincorporated), trust, estate,
cooperative organization, or other
entity.
Redress. The rule states that the term
‘‘redress’’ means any amounts that a
final order requires a defendant to
distribute, credit, or otherwise pay to
those harmed by a violation, or to pay
to the Bureau or another intermediary
for distribution to those harmed by the
defendant’s violation. The rule makes
clear that redress includes but is not
limited to restitution, refunds, and
damages. A case brought by a party
other than the Bureau—such as another
federal agency, a state’s attorney
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general, or a private plaintiff—may
result in ‘‘redress’’ as defined by the
rule.
Victim. The rule defines ‘‘victim’’ to
mean a person harmed as a result of a
violation.
Violation. The rule provides that the
term ‘‘violation’’ means any act or
omission that constitutes a violation of
law for which the Bureau is authorized
to obtain relief pursuant to 12 U.S.C.
5565(a).
Section 1075.102
Fund Administrator
102(a) In General
Section 1075.102(a) establishes within
the Bureau the position of Civil Penalty
Fund Administrator (Fund
Administrator) and provides that the
Fund Administrator will report to the
Chief Financial Officer and serve at that
officer’s pleasure. In addition, the Chief
Financial Officer may, to the extent
permitted by applicable law, relieve the
Fund Administrator of the duties of that
position without notice, without cause,
and before naming a successor Fund
Administrator.
102(b) Powers and Duties
Section 1075.102(b) provides that the
Fund Administrator will have the
powers and duties assigned to that
official by this rule.
102(c) Interpretation of These
Regulations
Section 1075.102(c) provides that the
Civil Penalty Fund Governance Board
may advise or direct the Fund
Administrator on the administration of
the Civil Penalty Fund, including
regarding the interpretation of this part
and its application to particular facts
and circumstances. The Governance
Board may provide this advice or
direction on its own initiative or at the
Fund Administrator’s request. The rule
makes clear that if the Governance
Board issues to the Fund Administrator
written directions regarding the
administration of the Civil Penalty
Fund, the Fund Administrator must
follow those directions.
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102(d) Unavailability of the Fund
Administrator
Section 1075.102(d) provides that if
there is no Fund Administrator or if the
Fund Administrator is otherwise
unavailable, the Chief Financial Officer
will perform the Fund Administrator’s
functions and duties. In accordance
with § 1075.101, the Chief Financial
Officer may delegate to another Bureau
employee the authority to perform the
Fund Administrator’s functions and
duties in these circumstances.
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Section 1075.103 Eligible Victims
Section 1075.103 provides that a
victim is eligible for payment from the
Civil Penalty Fund if a final order in a
Bureau enforcement action imposed a
civil penalty for the violation or
violations that harmed the victim. This
implements the Dodd-Frank Act, which
authorizes Civil Penalty Fund payments
to ‘‘the victims of activities for which
civil penalties have been imposed under
the Federal consumer financial laws.’’
12 U.S.C. 5497(d)(2). The Act does not
clearly specify whether the particular
activities that affected a particular
victim must have been found to be
violations in an enforcement action
before the victim may receive payments
from the Civil Penalty Fund. However,
the Bureau interprets section 1017(d)(2)
of the Dodd-Frank Act as authorizing
such payments only to the victims of
particular violations for which civil
penalties were imposed. If section
1017(d)(2) instead authorized the
Bureau to make payments to victims of
activities that are of the same type as
activities for which civil penalties were
imposed—even if no civil penalty was
imposed for the particular activities that
harmed the victim—it would be difficult
to identify all such activities, assess
whether those activities were
sufficiently similar to activities that
gave rise to a civil penalty, and identify
the victims of those activities. By
contrast, interpreting section 1017(d)(2)
to authorize payments only to victims of
particular violations for which civil
penalties were imposed establishes a
clear eligibility rule that is
straightforward to apply.
A victim’s eligibility for payment
from the Civil Penalty Fund and, as
discussed below, the amount of any
such payment do not depend on the
amount of the civil penalty imposed or
paid for the violation that harmed the
victim. Section 1017 of the Dodd-Frank
Act instructs the Bureau to deposit all
amounts received as civil penalties into
a single Civil Penalty Fund and
authorizes payments from that Fund to
the ‘‘victims’’ of ‘‘activities’’ for which
‘‘penalties’’ have been imposed. By
creating a single Civil Penalty Fund, the
statute enables the pooling of penalties
from multiple actions. The Bureau
therefore interprets section 1017 to
make a victim’s eligibility for payments
from the Civil Penalty Fund depend
only on whether a final order imposed
a civil penalty for the violation that
harmed the victim, and not on whether
the defendant actually paid the penalty
imposed or on how much the defendant
paid. Thus, a victim is not limited to
receiving some portion of the particular
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civil penalty paid for the violation that
harmed the victim, but rather may
receive payment from any funds in the
Civil Penalty Fund.
Section 1075.104
Payments to Victims
104(a) In General
Section 1075.104(a) provides that the
Bureau will use funds in the Civil
Penalty Fund for payments to
compensate eligible victims’
uncompensated harm, as described in
paragraph (b) of this section. This
provision gives effect to the Bureau’s
interpretation of the Dodd-Frank Act as
authorizing payments to victims only up
to the amount necessary to compensate
them for the harm they suffered as a
result of a violation. The Bureau
recognizes that section 1017(d)(2)
authorizes payments to victims but does
not specify what kinds of payments, in
what amounts, or for what purposes.
However, section 1017(d)(1)’s caption,
‘‘Establishment of Victims Relief Fund,’’
suggests that Civil Penalty Fund
payments should provide relief to
victims for harm suffered.
Compensation for harm is a common
purpose for payments to victims, and
laws ordinarily do not go beyond that
purpose to give victims windfall
recoveries that exceed the harms they
suffered.2 To be sure, some laws do
provide for payments to victims in
excess of harms suffered, usually to
provide additional incentives for private
parties to enforce the law or to enhance
the deterrent effect of such private
enforcement.3 Providing such payments
here, however, would not further those
goals: It would not incentivize victims
to bring private enforcement actions,
nor would it have any impact on
deterrence because the size of the
payments would not affect the size of
the civil penalty that the defendant had
to pay. Moreover, there is no indication
in section 1017(d)’s text that the Civil
Penalty Fund should provide victims
payments beyond the extent of their
harm.
The Bureau’s interpretation also gives
effect to the second sentence of section
2 See, e.g., Prudential Ins. Co. of Am. v. S.S. Am.
Lancer, 870 F.2d 867, 871 (2d Cir. 1989); Reilly v.
United States, 863 F.2d 149, 165 (1st Cir. 1988);
Westerman v. Sears, Roebuck & Co., 577 F.2d 873,
879 (5th Cir. 1978).
3 See, e.g., Shearson/Am. Express, Inc. v.
McMahon, 482 U.S. 220, 241 (1987) (explaining that
‘‘the antitrust treble-damages provision gives
private parties an incentive to bring civil suits that
serve to advance the national interest in a
competitive economy’’); City of Newport v. Fact
Concerts, Inc., 453 U.S. 247, 266–67 (1981)
(‘‘Punitive damages by definition are not intended
to compensate the injured party, but rather to
punish the tortfeasor whose wrongful action was
intentional or malicious, and to deter him and
others from similar extreme conduct.’’).
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1017(d)(2), which authorizes the Bureau
to use funds in the Civil Penalty Fund
for consumer education and financial
literacy programs to the extent that
payments to victims are not practicable.
If the amount of individual victims’
payments were not limited in some way,
any one victim could receive the full
amount in the Fund. Thus, so long as it
was practicable to pay at least one
victim—as it almost certainly always
will be—funds would never become
available for consumer education and
financial literacy programs under
section 1017(d)(2)’s second sentence.
Therefore, for all the terms of section
1017(d)(2) to have effect, payments to
victims must be subject to reasonable
limitation. In light of the general
principles discussed above, the Bureau
believes that paying victims only to
compensate them for harms suffered as
a result of violations effectuates the
statutory intent.
104(b) Victims’ Uncompensated Harm
In general, a victim’s uncompensated
harm is the amount of the victim’s
compensable harm, as described in
§ 1075.104(c) and discussed below,
minus any compensation for that harm
that the victim has received or is
reasonably expected to receive. To
ensure that Civil Penalty Fund
payments do not overcompensate
victims, the Bureau will take account of
compensation that victims have
received from other sources. In addition,
in some cases, some time may elapse
between when an entity is directed to
compensate victims, or when funds are
allocated to compensate victims, and
when the victims actually receive that
compensation. The Bureau will take
account of such compensation, even if
victims have not yet received it. The
Bureau understands section 1017(d)(2)
to create a backstop that could provide
compensation that victims otherwise
would not receive. Thus, ‘‘payments to
victims’’ should not include payments
that would duplicate compensation that
the victims are reasonably expected to
receive in the future.
Section 1075.104(b)(2) describes three
categories of compensation that a victim
‘‘has received or is reasonably expected
to receive.’’ First, paragraph (b)(2)(i)
provides that a victim has received or is
reasonably expected to receive any Civil
Penalty Fund payment that the victim
has previously received or will receive
as a result of a previous allocation from
the Civil Penalty Fund to the victim’s
class.
Second, paragraph (b)(2)(ii) provides
that a victim has received or is
reasonably expected to receive any
redress that a final order in a Bureau
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enforcement action orders to be
distributed, credited, or otherwise paid
to the victim, and that has not been
suspended or waived and that the Chief
Financial Officer has not determined to
be uncollectible. The Bureau expects
that defendants generally will pay the
redress that they are ordered to pay in
a Bureau enforcement action. Therefore,
the Bureau generally considers it
reasonable to anticipate that victims
will receive any amount of
compensation ordered in such an
action. However, in some circumstances
it will not be reasonable to expect a
victim to receive some portion of the
compensation ordered in a given action.
In particular, victims will not likely
receive a redress amount that the
Bureau has suspended or waived. In
addition, victims will not likely receive
a redress amount that the Bureau has
determined to be uncollectible in whole
or in part.
Third, paragraph (b)(2)(iii) provides
that a victim has received or is
reasonably expected to receive any other
redress that the Bureau knows has been
distributed, credited, or otherwise paid
to the victim, or has been paid to an
intermediary for distribution to the
victim, to the extent that (1) such
redress compensates the victim for the
same harm as would be compensated by
a Civil Penalty Fund payment, and (2)
it is not unduly burdensome, in light of
the amounts at stake, to determine the
amount of that redress or the extent to
which it compensates the victim for the
same harm as would be compensated by
a Civil Penalty Fund payment.
The ‘‘other redress’’ covered by this
provision includes redress paid to
victims as a result of private litigation
or enforcement actions by other
regulators. Such redress would be
subtracted from a victim’s compensable
harm only if the Bureau knows that the
defendant has paid the other redress.
The Bureau would not, pursuant to the
rule, actively investigate what other
redress victims have been paid.
However, to the extent the Bureau does
learn of other redress, such redress
should be counted as compensation that
victims have received.4
In addition, under this provision, a
victim is not ‘‘reasonably expected to
receive’’ other redress that a party has
been ordered to pay, but has not yet
paid. While many defendants will
actually pay the full amounts ordered,
the Bureau recognizes that some may
not. The Bureau has substantially less
4 The Bureau anticipates it will learn of other
redress as a matter of course in many cases. For
example, the Bureau may require a defendant to
notify the Bureau of any judgment or settlement
involving violations related to the order.
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26493
information about the likelihood that
defendants will fully comply with the
orders in actions brought by other
parties than it does about compliance
with orders in its own actions. The
Bureau often will not know, for
example, whether redress from such a
non-Bureau action is uncollectible. And
while the Bureau has the authority to
seek enforcement of orders it obtains,
the Bureau usually will not know what
efforts other parties might undertake to
enforce the orders obtained in their own
actions. Given those uncertainties, the
Bureau will not consider a victim to be
reasonably likely to receive redress from
other parties’ actions until the
defendant has actually paid that redress
to an intermediary for distribution to the
victims.
Finally, the Bureau recognizes that in
some circumstances it may not be
practicable to assess the uncompensated
harm of individual victims. In such
cases, § 1075.104(b)(3) provides that, for
purposes of this rule, each individual
victim’s uncompensated harm will be
the victim’s share of the aggregate
uncompensated harm of the victim’s
class.
104(c) Victims’ Compensable Harm
Section 1075.104(c) describes the
amount of victims’ compensable harm
for purposes of this rule. As noted
above, the Bureau interprets section
1017(d)(2) of the Dodd-Frank Act to
authorize payments to a victim only up
to the amount of harm that the victim
suffered from the violation for which
the Bureau obtained a civil penalty and
for which the victim has not received
and is not reasonably likely to receive
other compensation. The Bureau also
interprets that provision as directing the
Bureau to make payments to victims
only to the extent practicable.
The Bureau believes that for payments
to be ‘‘practicable,’’ it must be feasible
to carry out all the steps involved in
making the payments, and to do so
efficiently and without excessive
administrative cost in the context of a
system of making payments to many
victims of many different activities.5
The Dodd-Frank Act did not establish a
tribunal or a formal procedure for
distributing payments pursuant to
5 Cf. 40 CFR 230.10(a)(2) (regulation specifying
that an alternative is ‘‘practicable’’ for purpose of
the Clean Water Act if ‘‘it is available and capable
of being done after taking into consideration cost,
existing technology, and logistics in light of overall
project purposes’’); Biodiversity Legal Found. v.
Babbitt, 146 F.3d 1249, 1255–56 (10th Cir. 1998)
(statutory instruction to adhere to deadline to the
degree ‘‘practicable’’ permitted agency to vary from
deadline on the bases of what resources and
funding were available and of how the agency
assessed priorities).
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section 1017(d)(2). Indeed, the statute
does not specify any mechanism for
making the payments. But, in light of
section 1017(d)(2)’s placement within a
statutory section that generally deals
with the Bureau’s administrative
operations, the Bureau interprets that
provision to refer to payments that may
be made through ordinary
administrative mechanisms.
‘‘Practicable,’’ therefore, means capable
of being carried out through such
mechanisms.
Consistent with this interpretation,
later sections of the rule, discussed
below, direct the allocation and
payment of funds only to the extent that
payments to victims would be
practicable. In addition, § 1075.109
identifies circumstances in which
payment may not be practicable. For
payments to be practicable, the Bureau
must be able to take measures that are
reasonable in the context of the Civil
Penalty Fund to determine the amount
of victims’ harm, and thus the amount
of the payments the victims may
receive. Given the nature of the Civil
Penalty Fund and the likely volume of
payments, making complex
individualized determinations or
subjective judgments about the nature or
extent of victims’ harm would entail
significant administrative burden and
delay. Calculating harm based on such
determinations or judgments therefore
would not be practicable. Instead, in
this context, harm is practicable to
calculate only if the Fund Administrator
can determine it by applying objective
standards on a classwide basis. For
these reasons, the Bureau defines
‘‘compensable harm’’ to include only
those amounts of harm that the Bureau
deems practicable to calculate, in the
sense just described. Section
1075.104(c) describes amounts of harm
that the Bureau believes will be
practicable to calculate and establishes
procedures that the Fund Administrator
will follow to determine compensable
harm in each of several categories of
cases.
The measures of harm described in
this section will not always correspond
to the amount of harm for which the
Bureau or injured victims could obtain
compensation under the relevant laws
and regulations and do not in any way
reflect the Bureau’s view on what kinds
of harm are or should be compensable
in litigation. Rather, these objective
measures simply reflect what is
practicable for the Fund Administrator
to determine in the context of the Civil
Penalty Fund.
To the extent possible, the amount of
a victim’s compensable harm will be
based on the objective terms of a final
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order. Referring to the terms of a final
order will be practicable, and following
the terms of orders will enable the Fund
Administrator to determine a victim’s
compensable harm quickly and
efficiently in most circumstances. In
addition, by relying on the terms of a
final order, the Fund Administrator can
avoid making potentially subjective
judgments about the nature of the harm
that a class of victims has suffered and
how to quantify and calculate that harm.
There are several categories of cases
in which the Fund Administrator will
be able to rely on the terms of a final
order. First, under paragraph (c)(1), if a
final order in a Bureau enforcement
action ordered redress for a class of
victims, the compensable harm of each
victim in that class is equal to the
victim’s share of the total redress
ordered, including any amounts that
have been suspended or waived.
Second, under paragraph (c)(2)(i), if
the Bureau sought redress for a class of
victims but a court or administrative
tribunal denied that request for redress
in the final order, the victims in that
class have no compensable harm. A
court or administrative tribunal’s denial
of a request for redress presumably
reflects that body’s conclusion that the
Bureau has not proven that the victims’
harm is legally compensable.
Third, under paragraph (c)(2)(ii), if
the final order in a Bureau enforcement
action neither ordered nor denied
redress to victims but did specify the
amount of their harm, including by
prescribing a formula for calculating
that harm, each victim’s compensable
harm is equal to that victim’s share of
the amount specified. This paragraph
will apply in cases where the Bureau
does not seek any redress for a class of
victims. For example, if the Bureau
believed a defendant had too few
financial resources to provide any
meaningful redress to its victims, the
Bureau might choose not to seek such
redress and instead to pursue injunctive
relief. However, the final order in such
a case might still describe amounts of
harm that victims suffered from the
violations at issue. Relying on such a
description would be practicable to the
same extent as relying on an order of
redress. When possible, such victims’
harm—like the harm of victims for
whom redress is ordered—will be
determined according to the objective
terms of a final order. Only when that
is not possible will the Bureau look to
external factors to assess victims’ harm.
Paragraph (c)(2)(iii) describes the
amounts of harm that the Bureau
believes could practicably be
determined in those circumstances.
Under this paragraph, each victim’s
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compensable harm is equal to the
victim’s out-of-pocket losses that
resulted from the violation or violations
for which a civil penalty was imposed,
except to the extent such losses are
impracticable to determine.
The restriction to out-of-pocket losses
effectuates the ‘‘practicable’’ standard
for payments to victims because those
losses are what would be ‘‘practicable’’
to determine in the context of
disbursing funds from the Civil Penalty
Fund. As discussed above, the Bureau
believes that for payments to be
‘‘practicable’’ it should be possible for
the Fund Administrator to calculate the
appropriate payments on the basis of
objective standards applicable on a
classwide basis. In addition, the Fund
Administrator should be able to obtain
objective evidence of the harm with
effort that is reasonable in this context.
It follows that, when the Fund
Administrator must assess harm on her
own because no final order has
specified an amount of harm, the Fund
Administrator should assess only the
amount of out-of-pocket loss. In general,
the amounts that victims have spent out
of pocket can be determined on the
basis of documentary records that are
straightforward to obtain. If, in
exchange, victims have received some
product or service of value, the objective
value of that product or service should
generally also be feasible to determine
on a classwide basis. Measures of harm
beyond out-of-pocket loss would tend to
involve more individualized questions
or more complex judgments than the
Bureau practicably can make in
administering the Civil Penalty Fund.6
The Bureau recognizes, however, that
it may not always be practicable to make
a complete determination of victims’
out-of-pocket losses. For instance, at
times there may be no objective
standard for assessing the value of a
good or service the buyer received. As
another example, in some cases, there
may be no centralized records of the
amounts buyers paid, and it may be too
costly given the amounts at stake to seek
that evidence from the individual
buyers. Thus, under the rule, out-ofpocket losses are compensable harm
only to the extent that they are
practicable to determine.7
6 The Bureau does not regard out-of-pocket losses
as a general limitation on what remedy might be
available to plaintiffs, such as the Bureau, in a given
action to enforce federal consumer financial law.
Other measures of harm often will be appropriate,
depending on the circumstances. Out-of-pocket
losses simply represents the Bureau’s judgment
about what would be practicable to calculate in the
specific context of the Civil Penalty Fund.
7 If one aspect of out-of-pocket losses is
impracticable to determine, the Fund Administrator
need not necessarily conclude that no harm can
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The Bureau recognizes that many
victims will have suffered harms in
addition to those that the Civil Penalty
Fund may compensate under this rule.
For example, out-of-pocket loss may not
be a complete measure of a particular
victim’s harm. But the Bureau does not
understand the statute to guarantee
complete compensation for victims. The
Fund provides compensation only to the
extent funds are available due to
defendants’ payment of civil penalties;
and, pursuant to section 1017(d), the
Fund provides compensation only to the
degree ‘‘practicable.’’ The Bureau
believes the rule faithfully interprets
section 1017(d), and the rule does not
preclude victims from receiving
compensation from other sources in
amounts greater than the Civil Penalty
Fund might provide.
Section 1075.105 Allocating Funds
from the Civil Penalty Fund—In General
Section 1075.105 establishes basic
procedures that the Fund Administrator
will follow when allocating funds in the
Civil Penalty Fund to classes of victims
and to consumer education and
financial literacy programs. In
particular, this section describes the
schedule for making allocations and
specifies what funds will be available
for the allocations made on that
schedule.
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105(a) In General
Section 1075.105(a) provides that the
Fund Administrator will allocate the
funds specified in § 1075.105(c) to
classes of victims and, as appropriate, to
consumer education and financial
literacy programs according to the
schedule described in § 1075.105(b) and
the guidelines set forth in §§ 1075.106
and 1075.107.
105(b) Schedule for Making Allocations
Section 1075.105(b)(1) directs the
Fund Administrator, within 60 days of
this rule’s effective date, to establish
and publish on
www.consumerfinance.gov a schedule
for allocating funds in the Civil Penalty
Fund. That schedule generally will
establish six-month periods and identify
the start and end dates of those periods,
with each period’s start date
immediately following the end date of
the previous period. The first two
periods of this schedule, however, need
not be six months long. Rather, they
may be longer or shorter than six
practicably be determined for the class. For
example, if the value of a good or service received
is impracticable to determine, the Fund
Administrator may under the rule treat the amounts
paid as the compensable harm if doing so would
be reasonable.
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months so that future six-month periods
may start and end on dates that better
serve administrative efficiency. These
first two periods are considered ‘‘sixmonth periods’’ under this rule
regardless of their actual length. The
start date of the first period will be July
21, 2011.
The Fund Administrator will allocate
funds from the Civil Penalty Fund on
the basis of this schedule. In addition,
the amounts that will be available for
allocation and the time when classes of
victims may be considered for
allocations will depend on the
schedule.8 Section 1075.105(b)(2)
provides that, within 60 days after the
end of a six-month period, the Fund
Administrator will allocate available
funds in the Civil Penalty Fund in
accordance with §§ 1075.106 and
1075.107. Consistent with those
provisions, the Fund Administrator will
allocate funds (1) to classes of victims
that had uncompensated harm as of the
last day of that six-month period and (2)
to consumer education and financial
literacy programs as appropriate.
Thus, the Fund Administrator will
allocate funds from the Civil Penalty
Fund only once every six months. The
Bureau has chosen to make payments on
a six-month schedule in part because it
would be less fair to make payments on
a continual basis, as funds are deposited
and as classes of victims with
uncompensated harm arise. If a class
happened to have uncompensated harm
for the first time on a day shortly after
the Bureau had just allocated a
substantial portion of the Civil Penalty
Fund to some other class, victims in the
new class would receive relatively small
payments. Conversely, if a large amount
were deposited into the Civil Penalty
Fund, a class of victims that next had
uncompensated harm would be
relatively likely to receive full
compensation for that harm. In both
cases, the accidents of timing would
dictate the results. The Bureau’s method
of allocating funds on a six-month
schedule will give equal treatment to all
classes from a given six-month period.9
The 60-day window for allocating
funds after a six-month period gives the
Fund Administrator time to collect and
8 As explained in greater detail below, the
schedule also in some cases governs which classes
of victims will receive priority when there are
insufficient funds available to compensate all
victims fully.
9 The Bureau could, in principle, extend this
principle of equal treatment by allocating funds less
frequently than every six months. However, doing
so would mean making payments to victims less
frequently. The Bureau expects that a six-month
schedule will eliminate the most significant effects
of timing while still ensuring that victims receive
payments reasonably quickly.
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26495
analyze available data in order to assess
which classes of victims are eligible for
Civil Penalty Fund payments and the
amounts they may receive and to
perform the calculations necessary to
comply with §§ 1075.106 and 1075.107.
The classes to which funds may be
allocated are only those classes that had
uncompensated harm as of the last day
of the six-month period that most
recently concluded. Although other
classes might have come to have
uncompensated harm between that day
and the time when the Fund
Administrator next makes allocations, it
would be difficult, as a general rule, for
the Fund Administrator to carry out the
assessments and calculations necessary
to quantify the uncompensated harm of
such classes and to take that harm into
account in determining how funds will
be allocated. If the Fund Administrator
continually had to account for new
classes of victims with new amounts of
uncompensated harm after the close of
a six-month period, her calculations
would continually change. Constantly
making new calculations would waste
resources and could make it difficult for
the Fund Administrator to allocate
funds within 60 days of the close of a
six-month period. For these reasons, the
Bureau concludes that it would be
impracticable for the Fund
Administrator to make payments for
uncompensated harm that arose after
the end of a six-month period.
Accordingly, the Fund Administrator
will consider a class for an allocation
only after the end of the six-month
period in which the class began to have
uncompensated harm.
Section 1075.105(b)(3) authorizes the
Civil Penalty Fund Governance Board to
change the schedule of six-month
periods if it determines that a new
schedule would better serve
administrative efficiency. Under this
provision, the Civil Penalty Fund
Governance Board may change the
schedule by directing the Fund
Administrator to publish a new
schedule on www.consumerfinance.gov.
Any new schedule must comply with
paragraph (b)(1)(i) of this section by
establishing six-month periods and their
start and end dates, with the start date
of one period immediately following the
end date of the preceding period. The
first period of a new schedule may be
shorter or longer than six months. That
first period will constitute a ‘‘six-month
period’’ under this part regardless of its
actual length.
105(c) Funds Available for Allocation
Section 1075.105(c) provides that the
funds available for allocation following
the end of a six-month period are those
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funds that were in the Civil Penalty
Fund on the end date of that six-month
period, minus (1) Any funds already
allocated, (2) any funds that the Fund
Administrator determines are necessary
for authorized administrative expenses,
and (3) any funds collected pursuant to
an order that has not yet become a final
order.
Just as additional classes may become
eligible between the end of a six-month
period and the time when the Fund
Administrator allocates funds following
the end of that period, additional funds
may be deposited into the Civil Penalty
Fund during that interval. For the same
reasons that the Bureau does not intend
to allocate funds to such classes until
the succeeding allocation, the Bureau
likewise will not allocate such newly
deposited funds until the succeeding
allocation. Allocating funds involves
calculations and assessments, and it
would be difficult for the Fund
Administrator to make those
calculations and assessments based on a
fluctuating, uncertain amount available
for allocation.
The provision does not permit reallocation of funds that the Fund
Administrator has already allocated.
Although funds might remain on
deposit in the Civil Penalty Fund for a
period of time after they are allocated to
a class of victims or to consumer
education and financial literacy
programs, such funds remain allocated
and are not available for reallocation.
In addition, this provision makes
unavailable for allocation any funds that
the Fund Administrator determines are
necessary for authorized administrative
purposes. The Bureau interprets section
1017(d)(2) of the Dodd-Frank Act, 12
U.S.C. 5497(d)(2), to authorize the
Bureau to use funds in the Civil Penalty
Fund not only for the actual payments
to victims themselves, but also for the
administrative expenses incurred to
make those payments. Nothing in
section 1017 or any other provision of
law bars the Bureau from using funds in
the Civil Penalty Fund for such
administrative expenses, nor is there
any indication that such expenditures
are allowed only with express
authorization. In addition, no other
source of funding more specifically
provides for those expenses. The Bureau
may therefore use funds in the Civil
Penalty Fund for administrative
expenses that it determines are
necessary or incident to making
payments to victims.10 To ensure that
10 See Government Accountability Office,
Principles of Federal Appropriations Law 4–20 (3d
ed.) (quoting Comptroller General McCarl to Maj.
Gen. Anton Stephan, Commanding Officer, District
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sufficient funds remain in the Civil
Penalty Fund to pay such administrative
expenses, the Bureau will exclude from
the allocation process those funds that
the Fund Administrator deems
necessary for those expenses.
Finally, this provision also makes
unavailable for allocation any funds that
the Bureau collected pursuant to an
order that has not yet become a final
order. This ensures that the Bureau does
not allocate or spend amounts that it
could have to return to the payer. In
particular, a defendant in a Bureau
enforcement action could pay a civil
penalty into the Civil Penalty Fund
before the order imposing the civil
penalty becomes a final order. In such
a case, if the defendant appealed and a
court reversed the imposition of the
civil penalty, the Bureau would have to
pay the amount of the civil penalty back
to the defendant.
Section 1075.106 Allocating Funds to
Classes of Victims
Section 1075.106 describes how funds
will be allocated to classes of victims
and establishes which victim classes
will get priority and how much money
the Fund Administrator will allocate to
victim classes when there are not
enough funds available to provide full
compensation to all eligible victims who
have uncompensated harm.
106(a) Allocations When There Are
Sufficient Funds Available To
Compensate All Uncompensated Harm
Section 1075.106(a) provides that, if
the funds available under § 1075.105(c)
are sufficient, the Fund Administrator
will allocate to each class of victims the
amount necessary to compensate fully
the uncompensated harm, determined
under § 1075.104(b) as of the last day of
the most recently concluded six-month
period, of all victims in that class to
whom it is practicable to make
payments.
This provision contains two
limitations on the extent to which the
Fund Administrator will allocate funds
to compensate fully all victims. First,
the Fund Administrator will not allocate
funds to compensate uncompensated
harm that arose after the end of the most
recent six-month period.11 As explained
above, it would be impracticable for the
of Columbia Militia, 6 Comp. Gen. 619, 621 (1927))
(parenthetical explanation).
11 A class’s uncompensated harm could increase
after the end of a six-month period if, for example,
the Bureau waives or deems uncollectible an
amount of redress that the class had been
reasonably expected to receive. Under the rule, the
Fund Administrator will take account of any
increase in a class’s uncompensated harm only after
the six-month period in which that increase
occurred.
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Fund Administrator to make timely
allocations if she had to revise the
calculations continually to take account
of newly arising uncompensated harm.
Second, the Fund Administrator will
allocate to each class only an amount
sufficient to compensate the
uncompensated harm of all victims in
the class to whom it is practicable to
make payments. As noted above, section
1017(d)(2) of the Dodd-Frank Act calls
for payments to victims only to the
degree that such payments are
practicable. The Bureau recognizes that
even if it is practicable to calculate the
uncompensated harm of a class of
victims, it may nonetheless be
impracticable, in some circumstances,
to make payments to particular victims
in the class. Section 1075.109 describes
a number of such circumstances, which
will be discussed below in more detail.
Pursuant to § 1075.106(a), the Fund
Administrator is authorized to take
account of such circumstances at the
time of allocation by reducing the
allocation to a class on the ground that
payments to some victims in the class
will be impracticable.12
106(b) Allocations When There Are
Insufficient Funds Available To
Compensate All Uncompensated Harm
Section 1075.106(b) establishes the
procedures the Fund Administrator will
follow when the funds available under
§ 1075.105(c) are not sufficient to
provide full compensation as described
by paragraph (a).
This section groups classes of victims
according to the six-month period in
which the victims first had
uncompensated harm as described in
§ 1075.104(b). Paragraph (b)(1) specifies
how classes of victims will receive
priority according to their respective
six-month periods. Paragraph (b)(2)
explains how the Fund Administrator
will identify the six-month period to
which a class of victims belongs.
106(b)(1) Priority to Classes of Victims
From the Most Recent Six-Month Period
Under § 1075.106(b)(1), when there
are insufficient funds available to
provide all victims full compensation as
described in paragraph (a), the Fund
12 In many instances, the Fund Administrator will
not know at the time of allocation whether it is
practicable to make payments to particular
individual victims. Sometimes, however, the Fund
Administrator may have concrete information
indicating that it will not be practicable to pay
particular victims. If, for example, the Bureau
previously distributed payments to a class and,
despite reasonable efforts, could not locate some
victims, the Fund Administrator might reasonably
conclude, when making a further allocation, that it
is not practicable to make payments to those
unlocatable victims.
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Administrator will prioritize allocations
to classes of victims from the most
recent six-month period. If funds remain
after allocating to each class of victims
from that six-month period the amount
necessary to compensate fully the
uncompensated harm, determined
under § 1075.104(b) as of the last day of
the most recently concluded six-month
period, of all victims in that class to
whom it is practicable to make
payments, the Fund Administrator next
will allocate funds to classes of victims
from the preceding six-month period,
and so forth until no funds remain. The
Bureau has specified this tiered
allocation process because it will be
more administratively efficient to
determine the appropriate allocations
for classes from single six-month
periods than to determine the
appropriate allocations for all classes at
once.
In addition, this process will result in
lower administrative costs, both as an
absolute matter and in terms of
administrative cost per dollar
distributed, than would a process
requiring funds to be allocated among
all classes. First, allocating the limited
funds to a limited number of classes
will mean that there will be fewer
payments to make—and lower
associated costs—than if the limited
funds were allocated to more classes.
Second, allocating the limited funds to
a smaller number of classes generally
will result in payments of greater
amounts than if the Fund Administrator
had instead allocated the limited funds
more thinly among more classes.
Making larger payments generally will
be more cost-effective—in terms of
administrative cost per dollar
distributed—than making smaller
payments.
106(b)(2) Assigning Classes of Victims
to a Six-Month Period
As explained above, § 1075.106(b)(1)
instructs the Fund Administrator to
allocate funds among classes of victims
from a single six-month period before
allocating funds to classes of victims
from an earlier six-month period.
Paragraph (b)(2) explains that for
purposes of paragraph (b), a class of
victims is ‘‘from’’ the six-month period
in which those victims first had
uncompensated harm as described in
§ 1075.104(b).
This provision further specifies how
the Fund Administrator will determine
when a class of victims first had such
uncompensated harm. First, if redress
was ordered for a class of victims in a
Bureau enforcement action but
suspended or waived in whole or in
part, the class of victims first had
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uncompensated harm, if it had any, on
the date the suspension or waiver
became effective. Second, if redress was
ordered for a class of victims in a
Bureau enforcement action, but the
Chief Financial Officer determined that
redress to be uncollectible in whole or
in part, the class of victims first had
uncompensated harm, if it had any, on
the date the Chief Financial Officer
made that determination. Finally, if no
redress was ordered for a class of
victims in a Bureau enforcement action,
the class of victims first had
uncompensated harm, if any, on the
date the order imposing a civil penalty
became a final order.
This provision corresponds to
§ 1075.104(b), which defines a victim’s
uncompensated harm. As noted above,
that section provides that a victim’s
uncompensated harm is the victim’s
compensable harm, minus any
compensation for that harm that the
victim has received or is reasonably
expected to receive. In all cases, a class
of victims will first have compensable
harm under this rule, if any, as of the
date an order in a Bureau enforcement
action becomes final because, under
§ 1075.104(c), the terms of the final
order determine the amount of victims’
compensable harm or how that harm
will be ascertained. In cases where no
redress is ordered, victims also often
will have uncompensated harm as of the
date the order in the Bureau
enforcement action becomes final
because, at the time of the order, they
will not be reasonably expected to
receive redress for their compensable
harm. In cases where redress is ordered,
however, victims generally will have no
uncompensated harm at the time of the
order because at that time they generally
will be reasonably expected to receive
the redress ordered. Later events,
however, could make it no longer
reasonable to expect the victims to
receive compensation. In particular,
under § 1075.104(b), a victim will no
longer be reasonably expected to receive
redress amounts if the Bureau waives or
suspends those amounts or deems them
uncollectible. Thus, a victim may begin
to have uncompensated harm when
such an event occurs.
106(c) No Allocation to a Class of
Victims If Making Payments Would Be
Impracticable
Section 1075.106(c) provides that,
notwithstanding any other provision in
this section, the Fund Administrator
will not allocate funds available under
§ 1075.105(c) to a class of victims if she
determines that making payments to
that class of victims would be
impracticable. As noted above, the
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Bureau interprets the Dodd-Frank Act to
direct payments from the Civil Penalty
Fund to victims only to the extent that
such payments are practicable. In some
cases, it may be impracticable to make
payments to an entire class of victims;
the Fund Administrator will not allocate
funds to such a class.
106(d) Fund Administrator’s Discretion
106(d)(1)
Section 1075.106(d)(1) provides that,
notwithstanding any provision in this
part, the Fund Administrator, in her
discretion, may depart from the
procedures specified by this section,
including by declining to make, or
altering the amount of, any allocation
provided for by this section. This
provision gives the Fund Administrator
discretion to depart from the allocation
procedures specified by § 1075.106; it is
not intended to authorize the Fund
Administrator otherwise to depart from
the provisions in this part, for example
by giving victims payments greater than
their uncompensated harm. With this
provision, the Bureau simply aims to
give the Fund Administrator the
flexibility to depart from the allocation
procedures established by § 1075.106
when the circumstances warrant. For
example, the Fund Administrator might
choose to deviate from § 1075.106’s
allocation procedures if insufficient
information is available, at the end of a
given six-month period, to assess the
total uncompensated harm for a class
from that period. The Fund
Administrator might choose to postpone
allocating funds to that class until such
time as the Fund Administrator has the
necessary information. When the Fund
Administrator does allocate funds to
that class, she may, pursuant to this
paragraph, prioritize the class for
receiving allocations even though,
according to § 1075.106(b)(2), the class’s
uncompensated harm arose some time
previously.
As another example, a class of victims
might have had uncompensated harm in
an earlier six-month period, but the
amount of the class’s uncompensated
harm might increase in a later six-month
period. For example, the Bureau might
suspend some amount of redress on one
date, at which point the class could
have uncompensated harm equal to that
suspended amount. Then, the Chief
Financial Officer might later deem part
of the non-suspended amount
uncollectible, at which point the class
could have additional uncompensated
harm equal to that uncollectible
amount. The Fund Administrator might
prioritize the class with respect to the
additional amount of uncompensated
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harm, even though pursuant to
§ 1075.106(b)(2) the class would be from
the six-month period when it first had
uncompensated harm.
Because the Bureau cannot anticipate
all the situations in which it may be
reasonable to deviate from § 1075.106’s
allocation procedures, it leaves the
decision to deviate to the Fund
Administrator’s discretion. However,
the Fund Administrator must provide
the Civil Penalty Fund Governance
Board a written explanation of the
reason for departing from the ordinary
allocation procedures.
106(d)(2)
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Section 1075.106(d)(2) provides that,
if the Fund Administrator, in allocating
funds during a given time period
described by § 1075.105(b)(2), exercises
her discretion under paragraph (d)(1) of
this section, she may allocate funds to
consumer education and financial
literacy programs under § 1075.107
during that time period only to the same
extent she could have absent that
exercise of discretion. While the Fund
Administrator may, exercising the
discretion authorized by paragraph
(d)(1), adjust the distribution of funds
among various classes, she cannot
increase the amount available in a given
time period for consumer education and
financial literacy programs.13
The limitation on allocating funds to
consumer education and financial
literacy programs applies only to an
allocation that occurs in the same time
period described in § 1075.105(b)(2) in
which the Fund Administrator exercises
her discretion under § 1075.106(d)(1).
This reflects the Bureau’s interpretation
of 12 U.S.C. 5497(d)(2) as authorizing it
to use funds in the Civil Penalty Fund
for consumer education and financial
literacy programs whenever it is not
currently practicable to use those funds
for payments to victims instead. Under
§ 1017(d)(2), funds may be used for
consumer education and financial
literacy programs even if it would have
been practicable at some time in the
past to use those funds for payments to
victims.
13 The Bureau notes that when the Fund
Administrator determines that payments to some
victims in a class or to an entire class would be
impracticable, the Fund Administrator’s decision to
allocate fewer funds or no funds to the class is not
an exercise of discretion under paragraph (d)(1).
Consistent with section 1017(d)(2) of the DoddFrank Act, the Bureau will not make or attempt to
make payments that would be impracticable.
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Section 1075.107 Allocating Funds to
Consumer Education and Financial
Literacy Programs
107(a)
Section 1075.107(a) implements the
second sentence of section 1017(d)(2) of
the Dodd-Frank Act, which authorizes
the Bureau to use funds in the Civil
Penalty Fund for the purpose of
consumer education and financial
literacy programs to the extent that
victims cannot be located or payments
to victims are otherwise not practicable.
In particular, § 1075.107(a) provides
that, if funds available under
§ 1075.105(c) remain after the Fund
Administrator allocates funds as
described in § 1075.106(a), she may
allocate the remaining funds for
consumer education and financial
literacy programs. An allocation under
§ 1075.106(a) provides full
compensation for the uncompensated
harm of all victims to whom it is
practicable to make payments. Thus,
any funds remaining after such an
allocation are available for allocation to
consumer education and financial
literacy programs. The Fund
Administrator is not required to allocate
such remaining funds to consumer
education and financial literacy
programs and instead may keep some or
all funds in reserve for future allocation.
In the future, the Bureau may limit
the amount of funds that the Fund
Administrator may allocate to consumer
education and financial literacy
programs under this provision. In a
notice of proposed rulemaking
published in today’s Federal Register,
the Bureau seeks comment on whether
it should impose any limits and, if so,
what those limits should be.
107(b)
Section 1075.107(b) clarifies that the
Fund Administrator’s authority to
allocate funds for consumer education
and financial literacy programs does not
include the authority to allocate funds
to particular consumer education or
financial literacy programs or otherwise
to select the particular consumer
education or financial literacy programs
for which allocated funds will be used.
Instead, the Fund Administrator’s
authority is limited to determining the
amount that is allocated for expenditure
on those kinds of programs. The Bureau
has developed, and posted at https://
files.consumerfinance.gov/f/
201207_cfpb_civil_penalty_
fund_criteria.pdf, its criteria for
selecting these programs. These criteria
are beyond the scope of this rule.
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Section 1075.108 Distributing
Payments to Victims
After the Fund Administrator
allocates funds to a class of victims,
those funds will be distributed to the
individual victims in that class. Section
1075.108 describes the process for
distributing payments to victims.
108(a) Designation of a Payments
Administrator
Section 1075.108(a) provides that,
upon allocating funds to a class of
victims under § 1075.106, the Fund
Administrator will designate a
payments administrator who will be
responsible for distributing payments to
the victims in that class. The payments
administrator may be any person,
including a Bureau employee or
contractor.
108(b) Distribution Plan
Section 1075.108(b) requires a
payments administrator to submit to the
Fund Administrator a proposed plan for
distributing the funds that have been
allocated to a class of victims. The Fund
Administrator will then approve,
approve with modifications, or
disapprove the proposed distribution
plan. If the Fund Administrator
disapproves a proposed plan, the
payments administrator must submit a
new proposed plan.
108(c) Contents of Plan
Section 1075.108(c) indicates that the
Fund Administrator will instruct the
payments administrator to prepare a
distribution plan and sets forth several
elements that the Fund Administrator
may require a distribution plan to
include. Specifically, the Fund
Administrator may require a
distribution plan to include:
1. Procedures for determining the
amount each victim will receive. Such
procedures may, but need not, include
a process for submitting and approving
claims. The Bureau anticipates that a
process for submitting and approving
claims will not be required when it
receives adequate data from a defendant
to assess how much uncompensated
harm each victim suffered.
2. Procedures for locating and
notifying victims eligible or potentially
eligible for payment. These procedures
can include contacts by mail, telephone,
electronic communications, or other
means that may be practicable to
employ.
3. The method or methods by which
the payments will be made. Payment
methods could include paper checks,
electronic funds transfers, or other
methods that may be practicable to
employ.
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4. The method or methods by which
potentially eligible victims may contact
the payments administrator. Such
methods can include a telephone
number, email address, or other
methods.
5. Any other provisions that the Fund
Administrator deems appropriate.
108(e) Disposition of Funds Remaining
After Attempted Distribution to a Class
of Victims
Section 1075.108(e) addresses the
circumstance in which some of the
funds allocated to a class of victims
remain undistributed after the payments
administrator has made, or attempted to
make, payments to the victims in that
class. Funds might remain if the
payments administrator cannot make
payments to all victims in a class—
because some victims cannot be located,
because some victims do not redeem
their payments, or because of other
similar circumstances. To the extent
practicable, the payments administrator
will distribute the remaining funds to
victims in that class up to the amount
of their remaining uncompensated harm
as described in § 1075.104(b). The
108(d) Distribution of Payments
Section 1075.108(d) provides that the
payments administrator will make
payments to victims in a class, except to
the extent such payments are
impracticable, in accordance with the
distribution plan approved under
paragraph (b) of this section and subject
to the Fund Administrator’s
supervision.
Number of
victims to
whom payments
successfully
made
Total funds
distributed
(Payment
amount ×
Number of
victims to
whom payments made)
Amount allocated to the
class
$10,000 ..........................
$100
75
$7,500
$2,500
10,000 ............................
100
96
9,600
400
20,000 ............................
200
75
15,000
5,000
16,000 ............................
160
75
12,000
4,000
As noted above, section 1017(d)(2) of
the Dodd-Frank Act authorizes the
Bureau to use funds in the Civil Penalty
Fund for consumer education and
financial literacy programs to the extent
that payments to victims are not
‘‘practicable.’’ Accordingly, pursuant to
§§ 1075.106 and 1075.108 of this rule,
the Bureau will not make payments to
individual victims when doing so
would be impracticable and will not
allocate funds to a class of victims to the
extent making payments to that class
would be impracticable. This section
identifies circumstances in which
payments to victims will be deemed not
practicable.
In identifying these circumstances,
the Bureau has considered the ordinary
meaning of ‘‘practicable’’: ‘‘reasonably
capable of being accomplished;
feasible.’’ Black’s Law Dictionary (9th
ed. 2009). As a general matter,
‘‘practicability’’ is a flexible concept.
What is practicable for an agency to
14 This chart is provided solely for explanatory
purposes. The numbers are hypothetical and are not
Disposition of remaining funds
Distributed among the 75 victims in the class to
whom payments can successfully be made.
The additional payments will be $33.33 each,
giving victims a total of $133.33 each.
Returned to the Civil Penalty Fund. If the remaining funds were distributed among the 96
victims in the class to whom payments could
successfully be made, each payment would
be only $4.17. Given the cost of making a
payment, it is likely not practicable to distribute payments of that amount.
Returned to Civil Penalty Fund. The 75 victims
to whom payments were successfully made
have already received $200, which is full
compensation for their uncompensated harm.
$3,000 is distributed among the 75 victims to
whom payments can successfully be made.
That gives each victim an additional $40, for a
total of $200, full compensation. The remaining $1,000 will then be returned to the Civil
Penalty Fund.
accomplish depends, among other
things, on the context and on the
purpose the agency seeks to fulfill. As
noted above, the Bureau will make Civil
Penalty Fund payments to compensate
many victims of many different
activities for harm suffered from
violations of law. Because, as discussed
above, the Civil Penalty Fund pays for
the administrative expenses incurred
making payments to victims as well as
for the payments themselves,
administrative expenses should not be
excessive. Therefore, the Bureau
based on any actual class of victims that is or may
be eligible for payment from the Civil Penalty Fund.
Section 1075.109 When Payments to
Victims Are Impracticable
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Bureau believes that doing so will often
be the most efficient use of remaining
funds. The payments administrator will
have recent and up-to-date information
on the victims to whom it successfully
made payments, and a second
distribution to those victims would
likely also be successful. If funds remain
after providing full compensation for
the uncompensated harm of such
victims, the remaining funds will be
returned to the Civil Penalty Fund.
Those funds will then be available for
future allocation.
For example, assume a class is
comprised of 100 victims who have
suffered $200 in uncompensated harm
each, for a total $20,000 uncompensated
harm for the class. The following chart
shows how remaining funds would be
distributed under four different
scenarios 14:
Allocated
funds that
remain
(Amount allocated¥Total
funds distributed)
Payment
amount (each
victim’s share
of the
allocated
amount)
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concludes that in assessing whether
payments to victims are practicable in
this context, one factor it should
consider is the cost of administering the
payments relative to the amounts of the
payments.15
This section has two paragraphs that
implement this understanding of
practicability by identifying
circumstances in which the costs of
making payments would likely be so
great, relative to the size of the
payments, that making those payments
would be impracticable. The first
paragraph discusses payments to
individual victims, and the second
relates to payments to entire classes of
victims.
109(a) Individual Payments
Section 1075.109(a) sets forth several
circumstances in which payments to
individual victims will be deemed
impracticable. This section draws in
part on class-action case law that
examines when it is not practicable to
locate class members or to make
payments to them. Under this section, it
will be deemed impracticable to make a
payment to an individual victim if:
1. The payment to the victim would
be of such a small amount that the
victim would not be likely to redeem
the payment.
2. The payment to the victim is too
small to justify the cost of locating the
victim and making the payment. For
example, if it will cost $10 to locate and
make a payment to a victim, the Fund
Administrator may deem it
impracticable to make a $10 or $15
payment to that victim.
3. The victim cannot be located with
effort that is reasonable in light of the
amount of the payment. This provision
acknowledges that there are different
methods a payments administrator
could employ to attempt to locate a
victim, and that each additional effort
will carry additional cost. At some
point, the additional cost is not
reasonable given the amount of the
payment that the victim would receive.
In these circumstances, it will not be
practicable to make a payment to the
victim.
4. The victim does not timely submit
information that a distribution plan
requires to be submitted before a
payment will be made. For example, in
some cases, the Bureau may not be able
to get complete information from a
defendant identifying the victims of a
15 Cf. Consolidated Edison v. Bodman, 477 F.
Supp. 2d 198, 201–02 (D.D.C. 2007) (instruction to
make payments ‘‘insofar as practicable’’ permitted
agency to adjust payment schedule so that it would
not be making small payments to a large number
of claimants).
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violation and the amounts of their harm.
In those cases, a distribution plan may
require that victims make claims for
payment by submitting relevant
information. If a victim fails to submit
that information as required by the
distribution plan, the payments
administrator will not be able to
determine whether the person is a
victim and, if so, the amount of that
person’s uncompensated harm. In those
circumstances, it will not be practicable
to make a payment to that victim.
5. The victim does not redeem the
payment within a reasonable time. For
example, if payments are made by
check, the check will indicate that it
will be void after a certain amount of
time. If a victim does not redeem the
payment within that amount of time, it
may not be practicable to make a
payment to that victim.
6. The Fund Administrator
determines that other circumstances
make it unreasonable to make a
payment to the victim. The Bureau
acknowledges that there may be
situations other than those specifically
enumerated in which the costs of
making a payment will not be
reasonable in light of the benefits.
109(b) Payments to a Class of Victims
Section 1075.109(b) sets forth several
circumstances in which making
payments to a class of victims will be
deemed impracticable. Under this
section, it will be deemed impracticable
to make payments to a class of victims
if:
1. The expected aggregate actual
payment to the class of victims is too
small to justify the costs of locating the
victims in the class and making
payments to them. This could occur, for
example, in some circumstances where
the Fund Administrator expects to have
limited success in distributing payments
to a class. For instance, suppose that
there are 1,000 victims in a class who
each have $50 in uncompensated harm,
and that it will cost $10 per victim to
distribute payments. In addition, the
Fund Administrator has information
indicating she is likely to be able to
locate only 100 victims, but she does
not know which 100 victims. Thus, it
would cost $10,000 to attempt to make
payments to the class, and in the end
victims would receive an aggregate
payment of only $5,000 (100 victims ×
$50 each). In those circumstances, the
costs of attempting to make payments to
the class may be too great in light of the
aggregate actual payment to the class.
2. It would be impracticable under
paragraph (a) of this section to make a
payment to any victim in the class. This
situation could arise, for example,
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where each victim’s payment would be
$10 or less and it would cost $10 or
more per victim to distribute payments.
3. The Fund Administrator
determines that other circumstances
make it unreasonable to make payments
to the class.
Section 1075.110 Reporting
Requirements
Section 1075.110 requires the Fund
Administrator to issue regular reports,
on at least an annual basis, that describe
how funds in the Civil Penalty Fund
have been allocated, the basis for those
allocations, and how funds that have
been allocated to classes of victims have
been distributed. The section further
provides that these reports will be made
available to the public on
www.consumerfinance.gov.
V. Section 1022(b)(2) of the Dodd-Frank
Act
A. Overview
In developing the final rule, the
Bureau has considered potential
benefits, costs, and impacts, and
consulted or offered to consult with the
Board of Governors of the Federal
Reserve System, the Federal Deposit
Insurance Corporation, the Office of the
Comptroller of the Currency, the
National Credit Union Administration,
and the Federal Trade Commission,
including with regard to consistency
with any prudential, market, or systemic
objectives administered by those
agencies.16
The rule establishes the position of
Fund Administrator and delegates to
that official certain powers and
responsibilities relating to the
administration of the Civil Penalty
Fund. The rule also describes the
victims who are eligible for payments
from the Civil Penalty Fund and the
amounts of payments they may receive.
In particular, the rule explains the
Bureau’s understanding of what
16 Section 1022(b)(2)(A) of the Dodd-Frank Act,
12 U.S.C. 55212(b)(2), directs the Bureau, when
prescribing a rule under the Federal consumer
financial laws, to consider 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 insured 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) of the DoddFrank Act directs the Bureau to consult with
appropriate prudential regulators or other Federal
agencies regarding consistency with prudential,
market, or systemic objectives that those agencies
administer. The manner and extent to which these
provisions apply to a rulemaking of this kind that
does not establish standards of conduct is unclear.
Nevertheless, to inform this rulemaking more fully,
the Bureau performed the described analyses and
consultations.
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consumer education and financial
literacy programs.
B. Potential Benefits and Costs to
Consumers and Covered Persons
emcdonald on DSK67QTVN1PROD with RULES
payments would be ‘‘practicable,’’
within the meaning of the word as used
in section 1017(d)(2) of the Dodd-Frank
Act. The rule sets forth the procedures
by which the Fund Administrator will
allocate funds to classes of victims and,
when funds are available, to programs
for consumer education and financial
literacy and provides mechanisms for
paying the allocated funds to victims.
Finally, the rule requires the Fund
Administrator to report periodically on
disbursements from the Civil Penalty
Fund.
VI. Regulatory Requirements
This rule relates to benefits, namely
payments that victims may receive from
the Civil Penalty Fund. Pursuant to 5
U.S.C. 553(a)(2), this rule is therefore
exempt from the notice and comment
rulemaking requirements of the
Administrative Procedure Act (APA). In
addition, this rule concerns matters of
agency organization, procedure, and
practice, and in part articulates the
Bureau’s interpretations of the DoddFrank Act. It is therefore also exempt
from the APA’s notice and comment
rulemaking requirements pursuant to 5
U.S.C. 553(b).
Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis. 5 U.S.C. 603(a), 604(a).
The analysis considers the benefits,
costs, and impacts of the rule against a
statutory baseline. That is, the analysis
evaluates the benefits, costs, and
impacts of the rule as compared to the
statute without an implementing rule.17
The rule does not impose any
obligations on consumers or covered
persons. The rule provides expeditious
procedures for allocating funds from the
Civil Penalty Fund to implement section
1017(d) of the Dodd-Frank Act.
Although a rule is not necessary to
implement this statutory provision, the
rule establishes consistent procedures
applicable with respect to all victims
who might receive payments from the
Civil Penalty Fund. By explaining how
funds will be allocated and distributed,
the rule provides clarity and
predictability to those consumers who
are victims of unlawful activity and
might anticipate payments from the
Fund.
Moreover, the efficiency of the rule’s
procedures should help keep the
administrative costs of making
payments relatively low. Because, as
discussed above, the Bureau may pay
such administrative expenses from the
Civil Penalty Fund, reducing those costs
will generally increase the amount of
money available for payments to victims
and, when appropriate, for consumer
education and financial literacy
programs. In addition, adopting a rule,
instead of permitting the Fund
Administrator to distribute payments to
victims on an ad hoc basis, may have
some distributional impacts. The Fund
Administrator’s case-by-case decisions
might, by comparison to the results
prescribed by the rule, lead to payments
to different consumers of differing
amounts, or could lead to greater or
lesser amounts being available for
17 The
Bureau has discretion in any rulemaking
to choose an appropriate scope of analysis with
respect to potential benefits and costs and the
appropriate baseline.
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C. Potential Specific Impacts of the
Proposed Rule
The final rule does not have a unique
impact on rural consumers or 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 is
the rule expected to reduce consumers’
access to consumer financial products
or services.
VII. Paperwork Reduction Act
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
constitute collections of information
requiring approval under the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq.
List of Subjects in 12 CFR Part 1075
Administrative practice and
procedure, Authority delegations,
Consumer Financial Civil Penalty Fund,
Consumer protection, Organization and
functions.
Authority and Issuance
For the reasons set forth in the
preamble, the Bureau amends Chapter X
in Title 12 of the Code of Federal
Regulations by adding part 1075 to read
as follows:
■
PART 1075—CONSUMER FINANCIAL
CIVIL PENALTY FUND RULE
Sec.
1075.100
1075.101
1075.102
1075.103
1075.104
PO 00000
Scope and purpose.
Definitions.
Fund administrator.
Eligible victims.
Payments to victims.
Frm 00017
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26501
1075.105 Allocating funds from the Civil
Penalty Fund—in general.
1075.106 Allocating funds to classes of
victims.
1075.107 Allocating funds to consumer
education and financial literacy
programs.
1075.108 Distributing payments to victims.
1075.109 When payments to victims are
impracticable.
1075.110 Reporting requirements.
Authority: 12 U.S.C. 5512(b)(1), 5497(d).
§ 1075.100
Scope and purpose.
Section 1017(d)(1) of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act of 2010, Public Law 111–
203, 124 Stat. 1978 (12 U.S.C. 5497(d))
(Dodd-Frank Act) establishes the
‘‘Consumer Financial Civil Penalty
Fund.’’ This part describes the
conditions under which victims will be
eligible for payments from the
Consumer Financial Civil Penalty Fund
and the amounts of the payments they
may receive. This part also establishes
procedures and guidelines for allocating
funds from the Consumer Financial
Civil Penalty Fund to classes of victims
and distributing such funds to
individual victims, and for allocating
funds to consumer education and
financial literacy programs. This part
also establishes reporting requirements.
§ 1075.101
Definitions.
For the purposes of this part, the
following definitions apply:
Bureau means the Bureau of
Consumer Financial Protection.
Bureau enforcement action means any
judicial or administrative action or
proceeding in which the Bureau has
obtained relief with respect to a
violation.
Chief Financial Officer means the
Chief Financial Officer of the Bureau or
any Bureau employee to whom that
officer has delegated authority to act
under this part. In the absence of a Chief
Financial Officer of the Bureau, the
Director shall designate an alternative
official of the Bureau to perform the
functions of the Chief Financial Officer
under this part.
Civil Penalty Fund means the
Consumer Financial Civil Penalty Fund
established by 12 U.S.C. 5497(d).
Civil Penalty Fund Governance Board
means the body, comprised of senior
Bureau officials, established by the
Director of the Bureau to advise on
matters relating to the Civil Penalty
Fund.
Class of victims means a group of
similarly situated victims who suffered
harm from the same or similar
violations for which the Bureau
obtained relief in a Bureau enforcement
action.
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Defendant means a party in a Bureau
enforcement action that is found or
alleged to have committed a violation.
Final order means a consent order or
settlement issued by a court or by the
Bureau, or an appealable order issued
by a court or by the Bureau as to which
the time for filing an appeal has expired
and no appeals are pending. For
purposes of this definition, ‘‘appeals’’
include petitions for reconsideration,
review, rehearing, and certiorari.
Person means an individual,
partnership, company, corporation,
association (incorporated or
unincorporated), trust, estate,
cooperative organization, or other
entity.
Redress means any amounts—
including but not limited to restitution,
refunds, and damages—that a final order
requires a defendant:
(1) To distribute, credit, or otherwise
pay to those harmed by a violation; or
(2) To pay to the Bureau or another
intermediary for distribution to those
harmed by the violation.
Victim means a person harmed as a
result of a violation.
Violation means any act or omission
that constitutes a violation of law for
which the Bureau is authorized to
obtain relief pursuant to 12 U.S.C.
5565(a).
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§ 1075.102
Fund administrator.
(a) In general. There is established the
position of Civil Penalty Fund
Administrator (Fund Administrator).
The Fund Administrator will report to
the Chief Financial Officer. The Chief
Financial Officer may, to the extent
permitted by applicable law, relieve the
Fund Administrator of the duties of that
position without notice, without cause,
and prior to the naming of a successor
Fund Administrator.
(b) Powers and duties. The Fund
Administrator will have the powers and
duties assigned to that official in this
part.
(c) Interpretation of these regulations.
(1) On its own initiative or at the Fund
Administrator’s request, the Civil
Penalty Fund Governance Board may
advise or direct the Fund Administrator
on the administration of the Civil
Penalty Fund, including regarding the
interpretation of this part and its
application to particular facts and
circumstances.
(2) The Fund Administrator must
follow any written directions that the
Civil Penalty Fund Governance Board
provides pursuant to paragraph (c)(1) of
this section.
(d) Unavailability of the Fund
Administrator. If there is no Fund
Administrator or if the Fund
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Administrator is otherwise unavailable,
the Chief Financial Officer will perform
the functions and duties of the Fund
Administrator.
§ 1075.103
Eligible victims.
A victim is eligible for payment from
the Civil Penalty Fund if a final order
in a Bureau enforcement action imposed
a civil penalty for the violation or
violations that harmed the victim.
§ 1075.104
Payments to victims.
(a) In general. The Bureau will use
funds in the Civil Penalty Fund for
payments to compensate eligible
victims’ uncompensated harm, as
described in to paragraph (b) of this
section.
(b) Victims’ uncompensated harm. (1)
A victim’s uncompensated harm is the
victim’s compensable harm, as
described in paragraph (c) of this
section, minus any compensation for
that harm that the victim has received
or is reasonably expected to receive.
(2) For purposes of paragraph (b)(1) of
this section, a victim has received or is
reasonably expected to receive
compensation in the amount of:
(i) Any Civil Penalty Fund payment
that the victim has previously received
or will receive as a result of a previous
allocation from the Civil Penalty Fund
to the victim’s class;
(ii) Any redress that a final order in
a Bureau enforcement action orders to
be distributed, credited, or otherwise
paid to the victim, and that has not been
suspended or waived and that the Chief
Financial Officer has not determined to
be uncollectible; and
(iii) Any other redress that the Bureau
knows that has been distributed,
credited, or otherwise paid to the
victim, or has been paid to an
intermediary for distribution to the
victim, to the extent that:
(A) That redress compensates the
victim for the same harm as would be
compensated by a Civil Penalty Fund
payment; and
(B) It is not unduly burdensome, in
light of the amounts at stake, to
determine the amount of that redress or
the extent to which it compensates the
victim for the same harm as would be
compensated by a Civil Penalty Fund
payment.
(3) If the Fund Administrator deems
it impracticable to assess the
uncompensated harm of individual
victims in a class, each individual
victim’s uncompensated harm will be
the victim’s share of the aggregate
uncompensated harm of the victim’s
class.
(c) Victims’ compensable harm.
Victims’ compensable harm for
purposes of this part is as follows:
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(1) If a final order in a Bureau
enforcement action ordered redress for a
class of victims, the compensable harm
of each victim in the class is equal to
that victim’s share of the total redress
ordered, including any amounts that are
suspended or waived.
(2) If a final order in a Bureau
enforcement action does not order
redress for a class of victims, those
victims’ compensable harm is as
follows:
(i) If the Bureau sought redress for a
class of victims but a court or
administrative tribunal denied that
request for redress in the final order, the
victims in that class have no
compensable harm.
(ii) Except as provided in paragraph
(c)(2)(i) of this section, if the final order
in the Bureau enforcement action
specifies the amount of the victims’
harm, including by prescribing a
formula for calculating that harm, each
victim’s compensable harm is equal to
that victim’s share of the amount
specified.
(iii) Except as provided in paragraph
(c)(2)(i) of this section, if the final order
in the Bureau enforcement action does
not specify the amount of the victims’
harm, each victim’s compensable harm
is equal to the victim’s out-of-pocket
losses that resulted from the violation or
violations for which a civil penalty was
imposed, except to the extent such
losses are impracticable to determine.
§ 1075.105 Allocating funds from the Civil
Penalty Fund—in general.
(a) In general. The Fund
Administrator will allocate Civil Penalty
Fund funds specified in paragraph (c) of
this section to classes of victims and to
consumer education and financial
literacy programs as appropriate
according to the schedule established in
paragraph (b) of this section and the
guidelines established in §§ 1075.106
and 1075.107.
(b) Schedule for making allocations.
(1) Within 60 days of May 7, 2013, the
Fund Administrator will establish, and
publish on www.consumerfinance.gov, a
schedule for allocating funds in the
Civil Penalty Fund, in accordance with
the following:
(i) The schedule will establish sixmonth periods and identify the start and
end dates of those periods. The start
date of one period will be the day
immediately after the end date of the
preceding period.
(ii) Notwithstanding paragraph
(b)(1)(i) of this section, the first and
second periods may be longer or shorter
than six months to allow future sixmonth periods to start and end on dates
that better serve administrative
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efficiency. The first and second periods
will constitute ‘‘six-month periods’’
under this part regardless of their actual
length.
(iii) The start date of the first period
is July 21, 2011.
(2) Within 60 days after the end of a
six-month period, the Fund
Administrator will allocate available
funds in the Civil Penalty Fund in
accordance with §§ 1075.106 and
1075.107.
(3) If the Civil Penalty Fund
Governance Board determines that the
schedule established under paragraph
(b)(1) of this section should be changed
to better serve administrative efficiency,
it may change that schedule by directing
the Fund Administrator to publish the
new schedule on
www.consumerfinance.gov. Any new
schedule must comply with paragraph
(b)(1)(i) of this section. The first period
of any new schedule may be shorter or
longer than six months. That first period
will constitute a ‘‘six-month period’’
under this part regardless of its actual
length.
(c) Funds available for allocation. The
funds available for allocation following
the end of a six-month period are those
funds that were in the Civil Penalty
Fund on the end date of that six-month
period, minus:
(1) Any funds already allocated,
(2) Any funds that the Fund
Administrator determines are necessary
for authorized administrative expenses,
and
(3) Any funds collected pursuant to
an order that has not yet become a final
order.
emcdonald on DSK67QTVN1PROD with RULES
§ 1075.106
victims.
Allocating funds to classes of
(a) Allocations when there are
sufficient funds available to compensate
all uncompensated harm. If the funds
available under § 1075.105(c) are
sufficient, the Fund Administrator will
allocate to each class of victims the
amount necessary to compensate fully
the uncompensated harm, determined
under § 1075.104(b) as of the last day of
the most recently concluded six-month
period, of all victims in that class to
whom it is practicable to make
payments.
(b) Allocations when there are
insufficient funds available to
compensate all uncompensated harm. If
the funds available under § 1075.105(c)
are not sufficient to make the allocations
described in paragraph (a) of this
section, the Fund Administrator will
allocate the available funds to classes of
victims as follows:
(1) Priority to classes of victims from
the most recent six-month period. The
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Fund Administrator will first allocate
funds to classes of victims from the
most recently concluded six-month
period, as determined under paragraph
(b)(2) of this section. If funds remain
after allocating to each class of victims
from that six-month period the amount
necessary to compensate fully the
uncompensated harm, determined
under § 1075.104(b) as of the last day of
the most recently concluded six-month
period, of all victims in that class to
whom it is practicable to make
payments, the Fund Administrator next
will allocate funds to classes of victims
from the preceding six-month period,
and so forth until no funds remain.
(2) Assigning classes of victims to a
six-month period. For purposes of this
paragraph (b), the Fund Administrator
will assign each class of victims to the
six-month period in which the victims
first had uncompensated harm as
described in § 1075.104(b). When a class
of victims first had uncompensated
harm as described in § 1075.104(b) will
be determined as follows:
(i) If redress was ordered for a class
of victims in a Bureau enforcement
action but suspended or waived in
whole or in part, the class of victims
first had uncompensated harm as
described in § 1075.104(b) on the date
the suspension or waiver became
effective.
(ii) If redress was ordered for a class
of victims in a Bureau enforcement
action but determined by the Chief
Financial Officer to be uncollectible in
whole or in part, the class of victims
first had uncompensated harm as
described in § 1075.104(b) on the date
the Chief Financial Officer made that
determination.
(iii) If no redress was ordered for a
class of victims in a Bureau enforcement
action, the class of victims first had
uncompensated harm as described in
§ 1075.104(b) on the date the order
imposing a civil penalty became a final
order.
(c) No allocation to a class of victims
if making payments would be
impracticable. Notwithstanding any
other provision in this section, the Fund
Administrator will not allocate funds
available under § 1075.105(c) to a class
of victims if she determines that making
payments to that class of victims would
be impracticable.
(d) Fund Administrator’s discretion.
(1) Notwithstanding any provision in
this part, the Fund Administrator, in her
discretion, may depart from the
procedures specified by this section,
including by declining to make, or
altering the amount of, any allocation
provided for by this section. Whenever
the Fund Administrator exercises this
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26503
discretion, she will provide the Civil
Penalty Fund Governance Board a
written explanation of the reason for
departing from the procedures specified
by this section.
(2) If, in allocating funds during a
given time period described in
§ 1075.105(b)(2), the Fund
Administrator exercises her discretion
under paragraph (d)(1) of this section,
she may allocate funds to consumer
education and financial literacy
programs under 1075.107 during that
time period only to the same extent she
could have absent that exercise of
discretion.
§ 1075.107 Allocating funds to consumer
education and financial literacy programs.
(a) If funds available under
§ 1075.105(c) remain after the Fund
Administrator allocates funds as
described in § 1075.106(a), the Fund
Administrator may allocate those
remaining funds for consumer
education and financial literacy
programs.
(b) The Fund Administrator shall not
have the authority to allocate funds to
particular consumer education or
financial literacy programs or otherwise
to select the particular consumer
education or financial literacy programs
for which allocated funds will be used.
§ 1075.108
victims.
Distributing payments to
(a) Designation of a payments
administrator. Upon allocating Civil
Penalty Fund funds to a class of victims
pursuant to § 1075.106, the Fund
Administrator will designate a
payments administrator who will be
responsible for distributing payments to
the victims in that class. A payments
administrator may be any person,
including a Bureau employee or
contractor.
(b) Distribution plan. The payments
administrator must submit to the Fund
Administrator a proposed plan for the
distribution of funds allocated to a class
of victims. The Fund Administrator will
approve, approve with modifications, or
disapprove the proposed distribution
plan. If the Fund Administrator
disapproves a proposed plan, the
payments administrator must submit a
new proposed plan.
(c) Contents of plan. The Fund
Administrator will instruct the
payments administrator to prepare a
distribution plan and may require that
plan to include:
(1) Procedures for determining the
amount each victim will receive. Such
procedures may, but need not, include
a process for submitting and approving
claims.
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(2) Procedures for locating and
notifying victims eligible or potentially
eligible for payment.
(3) The method or methods by which
the payments will be made.
(4) The method or methods by which
potentially eligible victims may contact
the payments administrator.
(5) Any other provisions that the
Fund Administrator deems appropriate.
(d) Distribution of payments. The
payments administrator will make
payments to victims in a class, except to
the extent such payments are
impracticable, in accordance with the
distribution plan approved under
paragraph (b) of this section and subject
to the Fund Administrator’s
supervision.
(e) Disposition of funds remaining
after attempted distribution to a class of
victims. If funds allocated to a class of
victims remain after a payments
administrator distributes payments to
that class, the payments administrator
will distribute those remaining funds as
follows:
(1) To the extent practicable, the
payments administrator will distribute
those remaining funds to victims in that
class up to the amount of their
remaining uncompensated harm as
described in § 1075.104(b).
(2) Any remaining funds that cannot
be distributed pursuant to paragraph
(e)(1) of this section will be returned to
the Civil Penalty Fund.
emcdonald on DSK67QTVN1PROD with RULES
§ 1075.109 When payments to victims are
impracticable.
(a) Individual payments. Making a
payment to an individual victim will be
deemed impracticable if:
(1) The payment to the victim would
be of such a small amount that the
victim would not be likely to redeem
the payment;
(2) The payment to the victim is too
small to justify the cost of locating the
victim and making the payment;
(3) The victim cannot be located with
effort that is reasonable in light of the
amount of the payment;
(4) The victim does not timely submit
information that a distribution plan
requires to be submitted before a
payment will be made;
(5) The victim does not redeem the
payment within a reasonable time; or
(6) The Fund Administrator
determines that other circumstances
make it unreasonable to make a
payment to the victim.
(b) Payments to a class of victims.
Making payments to a class of victims
will be deemed impracticable if:
(1) The expected aggregate actual
payment to the class of victims is too
small to justify the costs of locating the
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victims in the class and making
payments to them;
(2) It would be impracticable under
paragraph (a) of this section to make a
payment to any victim in the class; or
(3) The Fund Administrator
determines that other circumstances
make it unreasonable to make payments
to the class.
§ 1075.110
Reporting requirements.
The Fund Administrator must issue
regular reports, on at least an annual
basis, that describe how funds in the
Civil Penalty Fund have been allocated,
the basis for those allocations, and how
funds that have been allocated to classes
of victims have been distributed. These
reports will be made available on
www.consumerfinance.gov.
Dated: April 26, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial
Protection.
[FR Doc. 2013–10320 Filed 5–6–13; 8:45 am]
BILLING CODE 4810–AM–P
• Mail, for paper, disk, or CD–ROM
submissions: LeAnn Delaney, Assistant
Director, Office of Contract Assistance,
409 Third Street SW., Washington, DC
20416.
• Hand Delivery/Courier: LeAnn
Delaney, Assistant Director, Office of
Contract Assistance.
SBA will post all comments on https://
www.Regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at https://www.Regulations.gov,
please submit the information to LeAnn
Delaney and highlight the information
that you consider to be CBI and explain
why you believe this information
should be held confidential. SBA will
review the information and make a final
determination of whether the
information will be published or not.
FOR FURTHER INFORMATION CONTACT:
LeAnn Delaney, Assistant Director,
Office of Contract Assistance, at (202)
205–6460 or by email at wosb@sba.gov.
SUPPLEMENTARY INFORMATION:
I. Background
SMALL BUSINESS ADMINISTRATION
13 CFR Part 127
RIN 3245–AG55
Women-Owned Small Business
Federal Contract Program
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
SUMMARY: The U.S. Small Business
Administration (SBA) is amending its
regulations to implement Section 1697
of the National Defense Authorization
Act for Fiscal Year 2013 (NDAA).
Section 1697 of the NDAA removed the
statutory limitation on the dollar
amount of a contract that women-owned
small businesses can compete for under
the Women-Owned Small Business
(WOSB) Program. As a result,
contracting officers may now set-aside
contracts under the WOSB Program at
any dollar level, as long as the other
requirements for a set-aside under the
program are met.
DATES: Effective Date: This rule is
effective on May 7, 2013.
Applicability Date: This rule applies
to all solicitations issued on or after the
effective date.
Comment Date: Comments must be
received on or before June 6, 2013.
ADDRESSES: You may submit comments,
identified by RIN 3245–AG55 by any of
the following methods:
• Federal Rulemaking Portal: https://
www.regulations.gov and follow the
instructions for submitting comments.
PO 00000
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Sfmt 4700
The Women-Owned Small Business
(WOSB) Program, set forth in section
8(m) of the Small Business Act, 15
U.S.C. 637(m), authorizes Federal
contracting officers to restrict
competition to eligible Women-Owned
Small Businesses (WOSBs) or
Economically Disadvantaged WomenOwned Small Business (EDWOSBs) for
Federal contracts in certain industries.
Section 8(m) of the Small Business Act
(Act) sets forth certain criteria for the
WOSB Program, including the eligibility
and contract requirements for the
program. For example, the Act had
stated that contracting officers could
only set-aside a requirement under the
program if the anticipated award price
of the contract did not exceed $5
million in the case of manufacturing
contracts and $3 million in the case of
all other contracts. Recently, SBA had
amended its regulations to adjust these
statutory thresholds for inflation so that
the anticipated award price of the
contract awarded under the WOSB
Program must not exceed $6.5 million
in the case of manufacturing contracts
and $4 million in the case of all other
contracts. See 77 FR 1861 (Jan. 12,
2012).
Even with this adjustment for
inflation, these dollar value restrictions
on awards under the program limited a
contracting officer’s ability to set-aside
contracts for WOSBs or EDWOSBs. As
a result, Section 1697 of the National
Defense Authorization Act for Fiscal
Year 2013, Public Law 112–239,
amended the Small Business Act and
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Agencies
[Federal Register Volume 78, Number 88 (Tuesday, May 7, 2013)]
[Rules and Regulations]
[Pages 26489-26504]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10320]
=======================================================================
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1075
[Docket No. CFPB-2013-0011]
RIN 3170-AA38
Consumer Financial Civil Penalty Fund
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Final rule.
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SUMMARY: The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act or Act) establishes a ``Consumer Financial Civil
Penalty Fund'' (Civil Penalty Fund) into which the Consumer Financial
Protection Bureau (Bureau) must deposit any civil penalty it obtains
against any person in any judicial or administrative action under
Federal consumer financial laws. Under the Act, funds in the Civil
Penalty Fund may be used for payments to the victims of activities for
which civil penalties have been imposed under Federal consumer
financial laws. In addition, to the extent that such victims cannot be
located or such payments are otherwise not practicable, the Bureau may
use funds in the Civil Penalty Fund for the purpose of consumer
education and financial literacy programs. This rule implements the
relevant statutory provisions by articulating the Bureau's
interpretation of what kinds of payments to victims are appropriate and
by establishing procedures for allocating funds for such payments to
victims and for consumer education and financial literacy programs.
DATES: This rule is effective May 7, 2013.
FOR FURTHER INFORMATION CONTACT: Kristin Bateman, Attorney-Advisor,
Legal Division, Bureau of Consumer Financial Protection, 1700 G Street
NW., Washington, DC 20552, at (202) 435-7821.
SUPPLEMENTARY INFORMATION:
I. Background
Title X of the Dodd-Frank Act established the Bureau with a mandate
to regulate the offering and provision of consumer financial products
and services under the Federal consumer financial laws. Public Law 111-
203, Sec. 1011(a) (2010), codified at 12 U.S.C. 5491(a). The Dodd-
Frank Act authorizes the Bureau, among other things, to enforce Federal
consumer financial law through judicial actions and administrative
adjudication proceedings. 12 U.S.C. 5563, 5564. In those actions and
proceedings, a court or the Bureau may require a party that has
violated the law to pay a civil penalty. See, e.g., 12 U.S.C. 5565.
Section 1017(d)(1) of the Dodd-Frank Act establishes a separate
fund in the Federal Reserve, the ``Consumer Financial Civil Penalty
Fund'' (Civil Penalty Fund), into which the Bureau must deposit civil
penalties it collects from any person in any judicial or administrative
action under Federal consumer financial laws. 12 U.S.C. 5497(d)(1).
Under the Act, amounts in the Fund may be used ``for payments to the
victims of activities for which civil penalties have been imposed under
the Federal consumer financial laws.'' 12 U.S.C. 5497(d)(2). In
addition, ``[t]o the extent that such victims cannot be located or such
payments are otherwise not practicable,'' the Bureau may use amounts in
the Fund for consumer education and financial literacy programs. Id.
II. Summary of the Rule
This rule implements section 1017(d)(2) of the Dodd-Frank Act, 12
U.S.C. 5497(d)(2), by specifying the conditions under which victims
will be eligible for payment from the Civil Penalty Fund and the
amounts of the payments that the Bureau may make to them. In addition,
the rule sets forth procedures the Bureau will follow for allocating
and distributing funds from the Civil Penalty Fund.
[[Page 26490]]
First, the rule describes the roles of Bureau officials involved in
managing the Civil Penalty Fund. It establishes the position of Civil
Penalty Fund Administrator (Fund Administrator) and provides that the
Fund Administrator will report to the Chief Financial Officer. In
addition, the rule provides that the Civil Penalty Fund Governance
Board--the body comprised of senior Bureau officials established by the
Director to advise on matters relating to the Civil Penalty Fund--may
advise or direct the Fund Administrator on the administration of the
Civil Penalty Fund. The Fund Administrator must follow any written
directions that the Civil Penalty Fund Governance Board provides.
Second, the rule identifies the category of victims who may receive
payments from the Civil Penalty Fund and sets forth the amounts they
may receive. Under the rule, a victim is eligible for payment from the
Civil Penalty Fund if a final order in a Bureau enforcement action
imposed a civil penalty for the violation or violations that harmed the
victim. In addition, the rule effectuates the intent of section
1017(d)(2) of the Dodd-Frank Act to provide Civil Penalty Fund payments
only to compensate victims for the harms they suffered from a violation
for which penalties were imposed. In addition, as envisioned by section
1017(d)(2), the Bureau will make payments to victims from the Civil
Penalty Fund only to the extent practicable. The rule identifies that
part of victims' harm that the Bureau believes to be potentially
practicable to calculate, and thus susceptible to compensation under
section 1017(d)(2). The rule also establishes procedures for
determining that compensable harm. When possible, the amount of
compensable harm that a victim suffered from a violation will be
determined based on the objective terms of the order imposing a civil
penalty for the violation. If the amount of harm cannot be determined
based on the terms of the order alone, a victim's compensable harm is
the victim's out-of-pocket loss that resulted from the violation,
unless that amount would be impracticable to determine.
The rule further provides that the Bureau will use funds in the
Civil Penalty Fund to compensate only victims' uncompensated harm.
Under the rule, a victim's uncompensated harm is the victim's
compensable harm, less any compensation for that harm that the victim
has received or is reasonably expected to receive.
Third, the rule establishes a two-stage procedure for expending
money in the Civil Penalty Fund. First, the Fund Administrator will
allocate funds for payments to victims and, if appropriate, for
consumer education and financial literacy programs. At the allocation
stage, the Fund Administrator will assign amounts to classes of
victims--that is, to groups of similarly situated victims who suffered
the same or similar violations for which the Bureau obtained relief in
an enforcement action. The Fund Administrator will allocate funds to a
class only to the extent that payments to class members would be
practicable. Second, the Fund Administrator will designate a payments
administrator to distribute allocated funds to individual victims in
the classes to which funds have been allocated. Again, a payments
administrator will make payments to individual victims only to the
extent practicable. The rule identifies specific ways in which payments
to individual victims or to a class of victims might be impracticable.
For funds allocated to consumer education and financial literacy
programs, the Bureau has adopted criteria \1\--not contained in this
rule--for selecting the particular consumer education or financial
literacy programs to be funded.
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\1\ The criteria are available at: https://files.consumerfinance.gov/f/201207_cfpb_civil_penalty__criteria.pdf.
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Under the rule, the Fund Administrator will allocate funds from the
Civil Penalty Fund on a six-month schedule. The Fund Administrator is
responsible for establishing the schedule of six-month periods.
Following the end of any given six-month period, the funds available
for allocation are those present in the Civil Penalty Fund as of the
end of that period, minus funds already allocated and certain other
funds. In general, the Fund Administrator may allocate the available
funds to those classes of victims that had uncompensated harm as of the
end of that six-month period, unless making payments to that class
would be impracticable. If sufficient funds are available, the Fund
Administrator will allocate to all such classes of victims enough money
to provide full compensation to the victims in those classes to whom it
is practicable to make payments. If funds remain, the Fund
Administrator may allocate a portion of those remaining funds for
consumer education and financial literacy programs.
The Bureau anticipates that at times the available funds in the
Civil Penalty Fund may not be sufficient to provide full compensation
to all classes of victims to which it is practicable to make payments.
The Bureau has endeavored to establish equitable, transparent, and
efficient procedures for allocating funds in those circumstances. Under
the rule, classes of victims that first had uncompensated harm during
the six-month period that most recently ended will receive priority in
such ``lean'' periods. If funds remain after allocating sufficient
funds to provide full compensation to all victims in those classes,
classes of victims from the previous six-month period will receive
second priority, and so forth until no funds remain. At times, there
may not be sufficient funds to give full compensation to all classes of
victims from a single six-month period. In those circumstances, the
rule specifies that funds will be allocated in a way designed to
ensure, to the degree possible, that victims in those classes will
receive compensation--through redress and Civil Penalty Fund payments--
for an equal percentage of their compensable harm.
In addition, to preserve flexibility in special circumstances, the
rule authorizes the Fund Administrator, in her discretion, to depart
from these procedures, including by declining to make, or altering the
amount of, any allocation provided for by the rule. However, if the
Fund Administrator exercises that discretion, funds that otherwise
would have been allocated to a class of victims cannot instead be
allocated to consumer education and financial literacy programs in that
period. Rather, the Fund Administrator may allocate funds to consumer
education and financial literacy programs during that six-month period
only to the same extent she could have had she not exercised that
discretion.
In addition to establishing procedures governing the allocation of
funds from the Civil Penalty Fund, the rule also establishes procedures
governing the distribution of allocated funds to eligible victims. In
particular, the rule directs the Fund Administrator to designate a
payments administrator to distribute payments to eligible victims in a
class to which Civil Penalty Fund funds have been allocated. Under the
rule, the Fund Administrator will instruct the payments administrator
to propose a plan for distributing the payments. The Fund Administrator
may require the plan to include procedures for determining payment
amounts, for locating and notifying victims, for making payments, and
for potentially eligible victims to contact the payments administrator.
Upon the Fund Administrator's approval of a distribution plan, the
payments
[[Page 26491]]
administrator will distribute payments to victims in accordance with
the plan to the extent practicable. If funds remain after distributing
payments to victims in a class, the payments administrator will
distribute those remaining allocated funds, to the extent practicable,
among eligible victims in that class up to the amount of their
remaining uncompensated harm. Any remaining funds that cannot be
distributed among victims in the class in that way will be returned to
the Civil Penalty Fund for future allocation.
Fourth, the rule sets forth several circumstances in which it will
be deemed impracticable to make payments to victims or to classes of
victims.
Finally, the rule requires the Fund Administrator to issue regular
reports on the disposition of funds in the Civil Penalty Fund. Those
reports will be made available on www.consumerfinance.gov.
III. Legal Authority
The Bureau is issuing this rule pursuant to its authority under
section 1022(b)(1) of the Dodd-Frank Act, which authorizes the Bureau
to prescribe rules as may be necessary or appropriate to enable the
Bureau to administer and carry out the purposes and objectives of
Federal consumer financial law, 12 U.S.C. 5512(b)(1); and under section
1017(d) of the Dodd-Frank Act, which establishes the Civil Penalty Fund
and authorizes the Bureau to use amounts in that Fund for payments to
victims and for consumer education and financial literacy programs.
This rule is in part an interpretative rule and in part a rule
relating to agency procedure and practice. Accordingly, the rule 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.
553(d). Even if this requirement applied, the Bureau finds there is
good cause for this rule to take effect immediately upon publication in
the Federal Register. The principal purpose of delaying an effective
date is to provide regulated persons an opportunity to prepare, such as
by bringing their operations into compliance with new requirements. But
this rule does not impose any obligations or prohibitions on the
public, and the public therefore needs no time to prepare for the
rule's effective date. Meanwhile, making the rule immediately effective
allows the Bureau to begin as soon as possible the process of
allocating funds in the Civil Penalty Fund to victims.
IV. Section-by-Section Description
Section 1075.100 Scope and Purpose
This section describes the scope and purpose of the rule. It
explains that the rule implements section 1017(d)(2) of the Dodd-Frank
Act by describing the conditions under which victims will be eligible
for payment from the Civil Penalty Fund and the amounts of the payments
they may receive. This section further explains that this rule
establishes procedures for allocating funds in the Civil Penalty Fund
to classes of victims and to consumer education and financial literacy
programs, and for distributing allocated funds to individual victims.
The rule also requires the Fund Administrator to issue regular reports
on the Civil Penalty Fund.
Section 1075.101 Definitions
This section defines terms used in the rule.
Bureau. The rule provides that the term ``Bureau'' means the Bureau
of Consumer Financial Protection.
Bureau enforcement action. The rule provides that the term ``Bureau
enforcement action'' means any judicial or administrative action or
proceeding in which the Bureau has obtained relief with respect to a
violation.
Chief Financial Officer. The rule states that the term ``Chief
Financial Officer'' means the Chief Financial Officer of the Bureau or
any Bureau employee to whom that officer has delegated authority to act
under this part. The rule further states that, in the absence of a
Chief Financial Officer, the Director shall designate an alternative
official of the Bureau to perform the functions of the Chief Financial
Officer under this part.
Civil Penalty Fund. The rule provides that the term ``Civil Penalty
Fund'' means the Consumer Financial Civil Penalty Fund established by
12 U.S.C. 5497(d).
Civil Penalty Fund Governance Board. The rule provides that the
term ``Civil Penalty Fund Governance Board'' refers to the body,
comprised of senior Bureau officials, established by the Bureau's
Director to advise on matters relating to the Civil Penalty Fund.
Class of victims. The rule defines the term ``class of victims'' to
mean a group of similarly situated victims who suffered harm from the
same or similar violations for which the Bureau obtained relief in a
Bureau enforcement action. Under this definition, a single Bureau
enforcement action could involve multiple classes of victims. For
example, the Bureau might obtain relief for multiple different
violations in a single action. The set of victims harmed by one
violation might overlap with the set of victims harmed by another
violation, but each set could constitute a distinct class for purposes
of this rule.
Defendant. The rule states that the term ``defendant'' means a
party in a Bureau enforcement action that is found or alleged to have
committed a violation. This includes parties that generally are
referred to as ``respondents'' in administrative enforcement actions.
Final order. The rule provides that the term ``final order'' means
a consent order or settlement issued by a court or by the Bureau, or an
appealable order issued by a court or by the Bureau as to which the
time for filing an appeal has expired and no appeals are pending. The
rule makes clear that for purposes of this definition, ``appeals''
include petitions for reconsideration, review, rehearing, and
certiorari.
This rule's definition of ``final order'' differs from the
definition of that term in the Bureau's Rules of Practice for
Adjudication Proceedings, which provide that an order may be considered
``final'' even if a petition for reconsideration or review is pending.
For purposes of this rule, the Bureau has chosen to define ``final
order'' as an order that is subject to no further review because the
terms of an order in part determine whether victims may receive
payments from the Civil Penalty Fund and, if so, in what amount. Thus,
it is important that the terms of the final order not be subject to
change. Otherwise, the Bureau would risk making Civil Penalty Fund
payments that might turn out, as a result of appellate decisions, to
have exceeded the amount victims may receive under the rule.
Person. The rule incorporates the definition of ``person'' set
forth in section 1002(19) of the Dodd-Frank Act. Thus, the rule states
that the term ``person'' means an individual, partnership, company,
corporation, association (incorporated or unincorporated), trust,
estate, cooperative organization, or other entity.
Redress. The rule states that the term ``redress'' means any
amounts that a final order requires a defendant to distribute, credit,
or otherwise pay to those harmed by a violation, or to pay to the
Bureau or another intermediary for distribution to those harmed by the
defendant's violation. The rule makes clear that redress includes but
is not limited to restitution, refunds, and damages. A case brought by
a party other than the Bureau--such as another federal agency, a
state's attorney
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general, or a private plaintiff--may result in ``redress'' as defined
by the rule.
Victim. The rule defines ``victim'' to mean a person harmed as a
result of a violation.
Violation. The rule provides that the term ``violation'' means any
act or omission that constitutes a violation of law for which the
Bureau is authorized to obtain relief pursuant to 12 U.S.C. 5565(a).
Section 1075.102 Fund Administrator
102(a) In General
Section 1075.102(a) establishes within the Bureau the position of
Civil Penalty Fund Administrator (Fund Administrator) and provides that
the Fund Administrator will report to the Chief Financial Officer and
serve at that officer's pleasure. In addition, the Chief Financial
Officer may, to the extent permitted by applicable law, relieve the
Fund Administrator of the duties of that position without notice,
without cause, and before naming a successor Fund Administrator.
102(b) Powers and Duties
Section 1075.102(b) provides that the Fund Administrator will have
the powers and duties assigned to that official by this rule.
102(c) Interpretation of These Regulations
Section 1075.102(c) provides that the Civil Penalty Fund Governance
Board may advise or direct the Fund Administrator on the administration
of the Civil Penalty Fund, including regarding the interpretation of
this part and its application to particular facts and circumstances.
The Governance Board may provide this advice or direction on its own
initiative or at the Fund Administrator's request. The rule makes clear
that if the Governance Board issues to the Fund Administrator written
directions regarding the administration of the Civil Penalty Fund, the
Fund Administrator must follow those directions.
102(d) Unavailability of the Fund Administrator
Section 1075.102(d) provides that if there is no Fund Administrator
or if the Fund Administrator is otherwise unavailable, the Chief
Financial Officer will perform the Fund Administrator's functions and
duties. In accordance with Sec. 1075.101, the Chief Financial Officer
may delegate to another Bureau employee the authority to perform the
Fund Administrator's functions and duties in these circumstances.
Section 1075.103 Eligible Victims
Section 1075.103 provides that a victim is eligible for payment
from the Civil Penalty Fund if a final order in a Bureau enforcement
action imposed a civil penalty for the violation or violations that
harmed the victim. This implements the Dodd-Frank Act, which authorizes
Civil Penalty Fund payments to ``the victims of activities for which
civil penalties have been imposed under the Federal consumer financial
laws.'' 12 U.S.C. 5497(d)(2). The Act does not clearly specify whether
the particular activities that affected a particular victim must have
been found to be violations in an enforcement action before the victim
may receive payments from the Civil Penalty Fund. However, the Bureau
interprets section 1017(d)(2) of the Dodd-Frank Act as authorizing such
payments only to the victims of particular violations for which civil
penalties were imposed. If section 1017(d)(2) instead authorized the
Bureau to make payments to victims of activities that are of the same
type as activities for which civil penalties were imposed--even if no
civil penalty was imposed for the particular activities that harmed the
victim--it would be difficult to identify all such activities, assess
whether those activities were sufficiently similar to activities that
gave rise to a civil penalty, and identify the victims of those
activities. By contrast, interpreting section 1017(d)(2) to authorize
payments only to victims of particular violations for which civil
penalties were imposed establishes a clear eligibility rule that is
straightforward to apply.
A victim's eligibility for payment from the Civil Penalty Fund and,
as discussed below, the amount of any such payment do not depend on the
amount of the civil penalty imposed or paid for the violation that
harmed the victim. Section 1017 of the Dodd-Frank Act instructs the
Bureau to deposit all amounts received as civil penalties into a single
Civil Penalty Fund and authorizes payments from that Fund to the
``victims'' of ``activities'' for which ``penalties'' have been
imposed. By creating a single Civil Penalty Fund, the statute enables
the pooling of penalties from multiple actions. The Bureau therefore
interprets section 1017 to make a victim's eligibility for payments
from the Civil Penalty Fund depend only on whether a final order
imposed a civil penalty for the violation that harmed the victim, and
not on whether the defendant actually paid the penalty imposed or on
how much the defendant paid. Thus, a victim is not limited to receiving
some portion of the particular civil penalty paid for the violation
that harmed the victim, but rather may receive payment from any funds
in the Civil Penalty Fund.
Section 1075.104 Payments to Victims
104(a) In General
Section 1075.104(a) provides that the Bureau will use funds in the
Civil Penalty Fund for payments to compensate eligible victims'
uncompensated harm, as described in paragraph (b) of this section. This
provision gives effect to the Bureau's interpretation of the Dodd-Frank
Act as authorizing payments to victims only up to the amount necessary
to compensate them for the harm they suffered as a result of a
violation. The Bureau recognizes that section 1017(d)(2) authorizes
payments to victims but does not specify what kinds of payments, in
what amounts, or for what purposes. However, section 1017(d)(1)'s
caption, ``Establishment of Victims Relief Fund,'' suggests that Civil
Penalty Fund payments should provide relief to victims for harm
suffered. Compensation for harm is a common purpose for payments to
victims, and laws ordinarily do not go beyond that purpose to give
victims windfall recoveries that exceed the harms they suffered.\2\ To
be sure, some laws do provide for payments to victims in excess of
harms suffered, usually to provide additional incentives for private
parties to enforce the law or to enhance the deterrent effect of such
private enforcement.\3\ Providing such payments here, however, would
not further those goals: It would not incentivize victims to bring
private enforcement actions, nor would it have any impact on deterrence
because the size of the payments would not affect the size of the civil
penalty that the defendant had to pay. Moreover, there is no indication
in section 1017(d)'s text that the Civil Penalty Fund should provide
victims payments beyond the extent of their harm.
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\2\ See, e.g., Prudential Ins. Co. of Am. v. S.S. Am. Lancer,
870 F.2d 867, 871 (2d Cir. 1989); Reilly v. United States, 863 F.2d
149, 165 (1st Cir. 1988); Westerman v. Sears, Roebuck & Co., 577
F.2d 873, 879 (5th Cir. 1978).
\3\ See, e.g., Shearson/Am. Express, Inc. v. McMahon, 482 U.S.
220, 241 (1987) (explaining that ``the antitrust treble-damages
provision gives private parties an incentive to bring civil suits
that serve to advance the national interest in a competitive
economy''); City of Newport v. Fact Concerts, Inc., 453 U.S. 247,
266-67 (1981) (``Punitive damages by definition are not intended to
compensate the injured party, but rather to punish the tortfeasor
whose wrongful action was intentional or malicious, and to deter him
and others from similar extreme conduct.'').
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The Bureau's interpretation also gives effect to the second
sentence of section
[[Page 26493]]
1017(d)(2), which authorizes the Bureau to use funds in the Civil
Penalty Fund for consumer education and financial literacy programs to
the extent that payments to victims are not practicable. If the amount
of individual victims' payments were not limited in some way, any one
victim could receive the full amount in the Fund. Thus, so long as it
was practicable to pay at least one victim--as it almost certainly
always will be--funds would never become available for consumer
education and financial literacy programs under section 1017(d)(2)'s
second sentence. Therefore, for all the terms of section 1017(d)(2) to
have effect, payments to victims must be subject to reasonable
limitation. In light of the general principles discussed above, the
Bureau believes that paying victims only to compensate them for harms
suffered as a result of violations effectuates the statutory intent.
104(b) Victims' Uncompensated Harm
In general, a victim's uncompensated harm is the amount of the
victim's compensable harm, as described in Sec. 1075.104(c) and
discussed below, minus any compensation for that harm that the victim
has received or is reasonably expected to receive. To ensure that Civil
Penalty Fund payments do not overcompensate victims, the Bureau will
take account of compensation that victims have received from other
sources. In addition, in some cases, some time may elapse between when
an entity is directed to compensate victims, or when funds are
allocated to compensate victims, and when the victims actually receive
that compensation. The Bureau will take account of such compensation,
even if victims have not yet received it. The Bureau understands
section 1017(d)(2) to create a backstop that could provide compensation
that victims otherwise would not receive. Thus, ``payments to victims''
should not include payments that would duplicate compensation that the
victims are reasonably expected to receive in the future.
Section 1075.104(b)(2) describes three categories of compensation
that a victim ``has received or is reasonably expected to receive.''
First, paragraph (b)(2)(i) provides that a victim has received or is
reasonably expected to receive any Civil Penalty Fund payment that the
victim has previously received or will receive as a result of a
previous allocation from the Civil Penalty Fund to the victim's class.
Second, paragraph (b)(2)(ii) provides that a victim has received or
is reasonably expected to receive any redress that a final order in a
Bureau enforcement action orders to be distributed, credited, or
otherwise paid to the victim, and that has not been suspended or waived
and that the Chief Financial Officer has not determined to be
uncollectible. The Bureau expects that defendants generally will pay
the redress that they are ordered to pay in a Bureau enforcement
action. Therefore, the Bureau generally considers it reasonable to
anticipate that victims will receive any amount of compensation ordered
in such an action. However, in some circumstances it will not be
reasonable to expect a victim to receive some portion of the
compensation ordered in a given action. In particular, victims will not
likely receive a redress amount that the Bureau has suspended or
waived. In addition, victims will not likely receive a redress amount
that the Bureau has determined to be uncollectible in whole or in part.
Third, paragraph (b)(2)(iii) provides that a victim has received or
is reasonably expected to receive any other redress that the Bureau
knows has been distributed, credited, or otherwise paid to the victim,
or has been paid to an intermediary for distribution to the victim, to
the extent that (1) such redress compensates the victim for the same
harm as would be compensated by a Civil Penalty Fund payment, and (2)
it is not unduly burdensome, in light of the amounts at stake, to
determine the amount of that redress or the extent to which it
compensates the victim for the same harm as would be compensated by a
Civil Penalty Fund payment.
The ``other redress'' covered by this provision includes redress
paid to victims as a result of private litigation or enforcement
actions by other regulators. Such redress would be subtracted from a
victim's compensable harm only if the Bureau knows that the defendant
has paid the other redress. The Bureau would not, pursuant to the rule,
actively investigate what other redress victims have been paid.
However, to the extent the Bureau does learn of other redress, such
redress should be counted as compensation that victims have
received.\4\
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\4\ The Bureau anticipates it will learn of other redress as a
matter of course in many cases. For example, the Bureau may require
a defendant to notify the Bureau of any judgment or settlement
involving violations related to the order.
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In addition, under this provision, a victim is not ``reasonably
expected to receive'' other redress that a party has been ordered to
pay, but has not yet paid. While many defendants will actually pay the
full amounts ordered, the Bureau recognizes that some may not. The
Bureau has substantially less information about the likelihood that
defendants will fully comply with the orders in actions brought by
other parties than it does about compliance with orders in its own
actions. The Bureau often will not know, for example, whether redress
from such a non-Bureau action is uncollectible. And while the Bureau
has the authority to seek enforcement of orders it obtains, the Bureau
usually will not know what efforts other parties might undertake to
enforce the orders obtained in their own actions. Given those
uncertainties, the Bureau will not consider a victim to be reasonably
likely to receive redress from other parties' actions until the
defendant has actually paid that redress to an intermediary for
distribution to the victims.
Finally, the Bureau recognizes that in some circumstances it may
not be practicable to assess the uncompensated harm of individual
victims. In such cases, Sec. 1075.104(b)(3) provides that, for
purposes of this rule, each individual victim's uncompensated harm will
be the victim's share of the aggregate uncompensated harm of the
victim's class.
104(c) Victims' Compensable Harm
Section 1075.104(c) describes the amount of victims' compensable
harm for purposes of this rule. As noted above, the Bureau interprets
section 1017(d)(2) of the Dodd-Frank Act to authorize payments to a
victim only up to the amount of harm that the victim suffered from the
violation for which the Bureau obtained a civil penalty and for which
the victim has not received and is not reasonably likely to receive
other compensation. The Bureau also interprets that provision as
directing the Bureau to make payments to victims only to the extent
practicable.
The Bureau believes that for payments to be ``practicable,'' it
must be feasible to carry out all the steps involved in making the
payments, and to do so efficiently and without excessive administrative
cost in the context of a system of making payments to many victims of
many different activities.\5\ The Dodd-Frank Act did not establish a
tribunal or a formal procedure for distributing payments pursuant to
[[Page 26494]]
section 1017(d)(2). Indeed, the statute does not specify any mechanism
for making the payments. But, in light of section 1017(d)(2)'s
placement within a statutory section that generally deals with the
Bureau's administrative operations, the Bureau interprets that
provision to refer to payments that may be made through ordinary
administrative mechanisms. ``Practicable,'' therefore, means capable of
being carried out through such mechanisms.
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\5\ Cf. 40 CFR 230.10(a)(2) (regulation specifying that an
alternative is ``practicable'' for purpose of the Clean Water Act if
``it is available and capable of being done after taking into
consideration cost, existing technology, and logistics in light of
overall project purposes''); Biodiversity Legal Found. v. Babbitt,
146 F.3d 1249, 1255-56 (10th Cir. 1998) (statutory instruction to
adhere to deadline to the degree ``practicable'' permitted agency to
vary from deadline on the bases of what resources and funding were
available and of how the agency assessed priorities).
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Consistent with this interpretation, later sections of the rule,
discussed below, direct the allocation and payment of funds only to the
extent that payments to victims would be practicable. In addition,
Sec. 1075.109 identifies circumstances in which payment may not be
practicable. For payments to be practicable, the Bureau must be able to
take measures that are reasonable in the context of the Civil Penalty
Fund to determine the amount of victims' harm, and thus the amount of
the payments the victims may receive. Given the nature of the Civil
Penalty Fund and the likely volume of payments, making complex
individualized determinations or subjective judgments about the nature
or extent of victims' harm would entail significant administrative
burden and delay. Calculating harm based on such determinations or
judgments therefore would not be practicable. Instead, in this context,
harm is practicable to calculate only if the Fund Administrator can
determine it by applying objective standards on a classwide basis. For
these reasons, the Bureau defines ``compensable harm'' to include only
those amounts of harm that the Bureau deems practicable to calculate,
in the sense just described. Section 1075.104(c) describes amounts of
harm that the Bureau believes will be practicable to calculate and
establishes procedures that the Fund Administrator will follow to
determine compensable harm in each of several categories of cases.
The measures of harm described in this section will not always
correspond to the amount of harm for which the Bureau or injured
victims could obtain compensation under the relevant laws and
regulations and do not in any way reflect the Bureau's view on what
kinds of harm are or should be compensable in litigation. Rather, these
objective measures simply reflect what is practicable for the Fund
Administrator to determine in the context of the Civil Penalty Fund.
To the extent possible, the amount of a victim's compensable harm
will be based on the objective terms of a final order. Referring to the
terms of a final order will be practicable, and following the terms of
orders will enable the Fund Administrator to determine a victim's
compensable harm quickly and efficiently in most circumstances. In
addition, by relying on the terms of a final order, the Fund
Administrator can avoid making potentially subjective judgments about
the nature of the harm that a class of victims has suffered and how to
quantify and calculate that harm.
There are several categories of cases in which the Fund
Administrator will be able to rely on the terms of a final order.
First, under paragraph (c)(1), if a final order in a Bureau enforcement
action ordered redress for a class of victims, the compensable harm of
each victim in that class is equal to the victim's share of the total
redress ordered, including any amounts that have been suspended or
waived.
Second, under paragraph (c)(2)(i), if the Bureau sought redress for
a class of victims but a court or administrative tribunal denied that
request for redress in the final order, the victims in that class have
no compensable harm. A court or administrative tribunal's denial of a
request for redress presumably reflects that body's conclusion that the
Bureau has not proven that the victims' harm is legally compensable.
Third, under paragraph (c)(2)(ii), if the final order in a Bureau
enforcement action neither ordered nor denied redress to victims but
did specify the amount of their harm, including by prescribing a
formula for calculating that harm, each victim's compensable harm is
equal to that victim's share of the amount specified. This paragraph
will apply in cases where the Bureau does not seek any redress for a
class of victims. For example, if the Bureau believed a defendant had
too few financial resources to provide any meaningful redress to its
victims, the Bureau might choose not to seek such redress and instead
to pursue injunctive relief. However, the final order in such a case
might still describe amounts of harm that victims suffered from the
violations at issue. Relying on such a description would be practicable
to the same extent as relying on an order of redress. When possible,
such victims' harm--like the harm of victims for whom redress is
ordered--will be determined according to the objective terms of a final
order. Only when that is not possible will the Bureau look to external
factors to assess victims' harm.
Paragraph (c)(2)(iii) describes the amounts of harm that the Bureau
believes could practicably be determined in those circumstances. Under
this paragraph, each victim's compensable harm is equal to the victim's
out-of-pocket losses that resulted from the violation or violations for
which a civil penalty was imposed, except to the extent such losses are
impracticable to determine.
The restriction to out-of-pocket losses effectuates the
``practicable'' standard for payments to victims because those losses
are what would be ``practicable'' to determine in the context of
disbursing funds from the Civil Penalty Fund. As discussed above, the
Bureau believes that for payments to be ``practicable'' it should be
possible for the Fund Administrator to calculate the appropriate
payments on the basis of objective standards applicable on a classwide
basis. In addition, the Fund Administrator should be able to obtain
objective evidence of the harm with effort that is reasonable in this
context. It follows that, when the Fund Administrator must assess harm
on her own because no final order has specified an amount of harm, the
Fund Administrator should assess only the amount of out-of-pocket loss.
In general, the amounts that victims have spent out of pocket can be
determined on the basis of documentary records that are straightforward
to obtain. If, in exchange, victims have received some product or
service of value, the objective value of that product or service should
generally also be feasible to determine on a classwide basis. Measures
of harm beyond out-of-pocket loss would tend to involve more
individualized questions or more complex judgments than the Bureau
practicably can make in administering the Civil Penalty Fund.\6\
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\6\ The Bureau does not regard out-of-pocket losses as a general
limitation on what remedy might be available to plaintiffs, such as
the Bureau, in a given action to enforce federal consumer financial
law. Other measures of harm often will be appropriate, depending on
the circumstances. Out-of-pocket losses simply represents the
Bureau's judgment about what would be practicable to calculate in
the specific context of the Civil Penalty Fund.
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The Bureau recognizes, however, that it may not always be
practicable to make a complete determination of victims' out-of-pocket
losses. For instance, at times there may be no objective standard for
assessing the value of a good or service the buyer received. As another
example, in some cases, there may be no centralized records of the
amounts buyers paid, and it may be too costly given the amounts at
stake to seek that evidence from the individual buyers. Thus, under the
rule, out-of-pocket losses are compensable harm only to the extent that
they are practicable to determine.\7\
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\7\ If one aspect of out-of-pocket losses is impracticable to
determine, the Fund Administrator need not necessarily conclude that
no harm can practicably be determined for the class. For example, if
the value of a good or service received is impracticable to
determine, the Fund Administrator may under the rule treat the
amounts paid as the compensable harm if doing so would be
reasonable.
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[[Page 26495]]
The Bureau recognizes that many victims will have suffered harms in
addition to those that the Civil Penalty Fund may compensate under this
rule. For example, out-of-pocket loss may not be a complete measure of
a particular victim's harm. But the Bureau does not understand the
statute to guarantee complete compensation for victims. The Fund
provides compensation only to the extent funds are available due to
defendants' payment of civil penalties; and, pursuant to section
1017(d), the Fund provides compensation only to the degree
``practicable.'' The Bureau believes the rule faithfully interprets
section 1017(d), and the rule does not preclude victims from receiving
compensation from other sources in amounts greater than the Civil
Penalty Fund might provide.
Section 1075.105 Allocating Funds from the Civil Penalty Fund--In
General
Section 1075.105 establishes basic procedures that the Fund
Administrator will follow when allocating funds in the Civil Penalty
Fund to classes of victims and to consumer education and financial
literacy programs. In particular, this section describes the schedule
for making allocations and specifies what funds will be available for
the allocations made on that schedule.
105(a) In General
Section 1075.105(a) provides that the Fund Administrator will
allocate the funds specified in Sec. 1075.105(c) to classes of victims
and, as appropriate, to consumer education and financial literacy
programs according to the schedule described in Sec. 1075.105(b) and
the guidelines set forth in Sec. Sec. 1075.106 and 1075.107.
105(b) Schedule for Making Allocations
Section 1075.105(b)(1) directs the Fund Administrator, within 60
days of this rule's effective date, to establish and publish on
www.consumerfinance.gov a schedule for allocating funds in the Civil
Penalty Fund. That schedule generally will establish six-month periods
and identify the start and end dates of those periods, with each
period's start date immediately following the end date of the previous
period. The first two periods of this schedule, however, need not be
six months long. Rather, they may be longer or shorter than six months
so that future six-month periods may start and end on dates that better
serve administrative efficiency. These first two periods are considered
``six-month periods'' under this rule regardless of their actual
length. The start date of the first period will be July 21, 2011.
The Fund Administrator will allocate funds from the Civil Penalty
Fund on the basis of this schedule. In addition, the amounts that will
be available for allocation and the time when classes of victims may be
considered for allocations will depend on the schedule.\8\ Section
1075.105(b)(2) provides that, within 60 days after the end of a six-
month period, the Fund Administrator will allocate available funds in
the Civil Penalty Fund in accordance with Sec. Sec. 1075.106 and
1075.107. Consistent with those provisions, the Fund Administrator will
allocate funds (1) to classes of victims that had uncompensated harm as
of the last day of that six-month period and (2) to consumer education
and financial literacy programs as appropriate.
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\8\ As explained in greater detail below, the schedule also in
some cases governs which classes of victims will receive priority
when there are insufficient funds available to compensate all
victims fully.
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Thus, the Fund Administrator will allocate funds from the Civil
Penalty Fund only once every six months. The Bureau has chosen to make
payments on a six-month schedule in part because it would be less fair
to make payments on a continual basis, as funds are deposited and as
classes of victims with uncompensated harm arise. If a class happened
to have uncompensated harm for the first time on a day shortly after
the Bureau had just allocated a substantial portion of the Civil
Penalty Fund to some other class, victims in the new class would
receive relatively small payments. Conversely, if a large amount were
deposited into the Civil Penalty Fund, a class of victims that next had
uncompensated harm would be relatively likely to receive full
compensation for that harm. In both cases, the accidents of timing
would dictate the results. The Bureau's method of allocating funds on a
six-month schedule will give equal treatment to all classes from a
given six-month period.\9\
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\9\ The Bureau could, in principle, extend this principle of
equal treatment by allocating funds less frequently than every six
months. However, doing so would mean making payments to victims less
frequently. The Bureau expects that a six-month schedule will
eliminate the most significant effects of timing while still
ensuring that victims receive payments reasonably quickly.
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The 60-day window for allocating funds after a six-month period
gives the Fund Administrator time to collect and analyze available data
in order to assess which classes of victims are eligible for Civil
Penalty Fund payments and the amounts they may receive and to perform
the calculations necessary to comply with Sec. Sec. 1075.106 and
1075.107.
The classes to which funds may be allocated are only those classes
that had uncompensated harm as of the last day of the six-month period
that most recently concluded. Although other classes might have come to
have uncompensated harm between that day and the time when the Fund
Administrator next makes allocations, it would be difficult, as a
general rule, for the Fund Administrator to carry out the assessments
and calculations necessary to quantify the uncompensated harm of such
classes and to take that harm into account in determining how funds
will be allocated. If the Fund Administrator continually had to account
for new classes of victims with new amounts of uncompensated harm after
the close of a six-month period, her calculations would continually
change. Constantly making new calculations would waste resources and
could make it difficult for the Fund Administrator to allocate funds
within 60 days of the close of a six-month period. For these reasons,
the Bureau concludes that it would be impracticable for the Fund
Administrator to make payments for uncompensated harm that arose after
the end of a six-month period. Accordingly, the Fund Administrator will
consider a class for an allocation only after the end of the six-month
period in which the class began to have uncompensated harm.
Section 1075.105(b)(3) authorizes the Civil Penalty Fund Governance
Board to change the schedule of six-month periods if it determines that
a new schedule would better serve administrative efficiency. Under this
provision, the Civil Penalty Fund Governance Board may change the
schedule by directing the Fund Administrator to publish a new schedule
on www.consumerfinance.gov. Any new schedule must comply with paragraph
(b)(1)(i) of this section by establishing six-month periods and their
start and end dates, with the start date of one period immediately
following the end date of the preceding period. The first period of a
new schedule may be shorter or longer than six months. That first
period will constitute a ``six-month period'' under this part
regardless of its actual length.
105(c) Funds Available for Allocation
Section 1075.105(c) provides that the funds available for
allocation following the end of a six-month period are those
[[Page 26496]]
funds that were in the Civil Penalty Fund on the end date of that six-
month period, minus (1) Any funds already allocated, (2) any funds that
the Fund Administrator determines are necessary for authorized
administrative expenses, and (3) any funds collected pursuant to an
order that has not yet become a final order.
Just as additional classes may become eligible between the end of a
six-month period and the time when the Fund Administrator allocates
funds following the end of that period, additional funds may be
deposited into the Civil Penalty Fund during that interval. For the
same reasons that the Bureau does not intend to allocate funds to such
classes until the succeeding allocation, the Bureau likewise will not
allocate such newly deposited funds until the succeeding allocation.
Allocating funds involves calculations and assessments, and it would be
difficult for the Fund Administrator to make those calculations and
assessments based on a fluctuating, uncertain amount available for
allocation.
The provision does not permit re-allocation of funds that the Fund
Administrator has already allocated. Although funds might remain on
deposit in the Civil Penalty Fund for a period of time after they are
allocated to a class of victims or to consumer education and financial
literacy programs, such funds remain allocated and are not available
for reallocation.
In addition, this provision makes unavailable for allocation any
funds that the Fund Administrator determines are necessary for
authorized administrative purposes. The Bureau interprets section
1017(d)(2) of the Dodd-Frank Act, 12 U.S.C. 5497(d)(2), to authorize
the Bureau to use funds in the Civil Penalty Fund not only for the
actual payments to victims themselves, but also for the administrative
expenses incurred to make those payments. Nothing in section 1017 or
any other provision of law bars the Bureau from using funds in the
Civil Penalty Fund for such administrative expenses, nor is there any
indication that such expenditures are allowed only with express
authorization. In addition, no other source of funding more
specifically provides for those expenses. The Bureau may therefore use
funds in the Civil Penalty Fund for administrative expenses that it
determines are necessary or incident to making payments to victims.\10\
To ensure that sufficient funds remain in the Civil Penalty Fund to pay
such administrative expenses, the Bureau will exclude from the
allocation process those funds that the Fund Administrator deems
necessary for those expenses.
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\10\ See Government Accountability Office, Principles of Federal
Appropriations Law 4-20 (3d ed.) (quoting Comptroller General McCarl
to Maj. Gen. Anton Stephan, Commanding Officer, District of Columbia
Militia, 6 Comp. Gen. 619, 621 (1927)) (parenthetical explanation).
---------------------------------------------------------------------------
Finally, this provision also makes unavailable for allocation any
funds that the Bureau collected pursuant to an order that has not yet
become a final order. This ensures that the Bureau does not allocate or
spend amounts that it could have to return to the payer. In particular,
a defendant in a Bureau enforcement action could pay a civil penalty
into the Civil Penalty Fund before the order imposing the civil penalty
becomes a final order. In such a case, if the defendant appealed and a
court reversed the imposition of the civil penalty, the Bureau would
have to pay the amount of the civil penalty back to the defendant.
Section 1075.106 Allocating Funds to Classes of Victims
Section 1075.106 describes how funds will be allocated to classes
of victims and establishes which victim classes will get priority and
how much money the Fund Administrator will allocate to victim classes
when there are not enough funds available to provide full compensation
to all eligible victims who have uncompensated harm.
106(a) Allocations When There Are Sufficient Funds Available To
Compensate All Uncompensated Harm
Section 1075.106(a) provides that, if the funds available under
Sec. 1075.105(c) are sufficient, the Fund Administrator will allocate
to each class of victims the amount necessary to compensate fully the
uncompensated harm, determined under Sec. 1075.104(b) as of the last
day of the most recently concluded six-month period, of all victims in
that class to whom it is practicable to make payments.
This provision contains two limitations on the extent to which the
Fund Administrator will allocate funds to compensate fully all victims.
First, the Fund Administrator will not allocate funds to compensate
uncompensated harm that arose after the end of the most recent six-
month period.\11\ As explained above, it would be impracticable for the
Fund Administrator to make timely allocations if she had to revise the
calculations continually to take account of newly arising uncompensated
harm.
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\11\ A class's uncompensated harm could increase after the end
of a six-month period if, for example, the Bureau waives or deems
uncollectible an amount of redress that the class had been
reasonably expected to receive. Under the rule, the Fund
Administrator will take account of any increase in a class's
uncompensated harm only after the six-month period in which that
increase occurred.
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Second, the Fund Administrator will allocate to each class only an
amount sufficient to compensate the uncompensated harm of all victims
in the class to whom it is practicable to make payments. As noted
above, section 1017(d)(2) of the Dodd-Frank Act calls for payments to
victims only to the degree that such payments are practicable. The
Bureau recognizes that even if it is practicable to calculate the
uncompensated harm of a class of victims, it may nonetheless be
impracticable, in some circumstances, to make payments to particular
victims in the class. Section 1075.109 describes a number of such
circumstances, which will be discussed below in more detail. Pursuant
to Sec. 1075.106(a), the Fund Administrator is authorized to take
account of such circumstances at the time of allocation by reducing the
allocation to a class on the ground that payments to some victims in
the class will be impracticable.\12\
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\12\ In many instances, the Fund Administrator will not know at
the time of allocation whether it is practicable to make payments to
particular individual victims. Sometimes, however, the Fund
Administrator may have concrete information indicating that it will
not be practicable to pay particular victims. If, for example, the
Bureau previously distributed payments to a class and, despite
reasonable efforts, could not locate some victims, the Fund
Administrator might reasonably conclude, when making a further
allocation, that it is not practicable to make payments to those
unlocatable victims.
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106(b) Allocations When There Are Insufficient Funds Available To
Compensate All Uncompensated Harm
Section 1075.106(b) establishes the procedures the Fund
Administrator will follow when the funds available under Sec.
1075.105(c) are not sufficient to provide full compensation as
described by paragraph (a).
This section groups classes of victims according to the six-month
period in which the victims first had uncompensated harm as described
in Sec. 1075.104(b). Paragraph (b)(1) specifies how classes of victims
will receive priority according to their respective six-month periods.
Paragraph (b)(2) explains how the Fund Administrator will identify the
six-month period to which a class of victims belongs.
106(b)(1) Priority to Classes of Victims From the Most Recent Six-Month
Period
Under Sec. 1075.106(b)(1), when there are insufficient funds
available to provide all victims full compensation as described in
paragraph (a), the Fund
[[Page 26497]]
Administrator will prioritize allocations to classes of victims from
the most recent six-month period. If funds remain after allocating to
each class of victims from that six-month period the amount necessary
to compensate fully the uncompensated harm, determined under Sec.
1075.104(b) as of the last day of the most recently concluded six-month
period, of all victims in that class to whom it is practicable to make
payments, the Fund Administrator next will allocate funds to classes of
victims from the preceding six-month period, and so forth until no
funds remain. The Bureau has specified this tiered allocation process
because it will be more administratively efficient to determine the
appropriate allocations for classes from single six-month periods than
to determine the appropriate allocations for all classes at once.
In addition, this process will result in lower administrative
costs, both as an absolute matter and in terms of administrative cost
per dollar distributed, than would a process requiring funds to be
allocated among all classes. First, allocating the limited funds to a
limited number of classes will mean that there will be fewer payments
to make--and lower associated costs--than if the limited funds were
allocated to more classes. Second, allocating the limited funds to a
smaller number of classes generally will result in payments of greater
amounts than if the Fund Administrator had instead allocated the
limited funds more thinly among more classes. Making larger payments
generally will be more cost-effective--in terms of administrative cost
per dollar distributed--than making smaller payments.
106(b)(2) Assigning Classes of Victims to a Six-Month Period
As explained above, Sec. 1075.106(b)(1) instructs the Fund
Administrator to allocate funds among classes of victims from a single
six-month period before allocating funds to classes of victims from an
earlier six-month period. Paragraph (b)(2) explains that for purposes
of paragraph (b), a class of victims is ``from'' the six-month period
in which those victims first had uncompensated harm as described in
Sec. 1075.104(b).
This provision further specifies how the Fund Administrator will
determine when a class of victims first had such uncompensated harm.
First, if redress was ordered for a class of victims in a Bureau
enforcement action but suspended or waived in whole or in part, the
class of victims first had uncompensated harm, if it had any, on the
date the suspension or waiver became effective. Second, if redress was
ordered for a class of victims in a Bureau enforcement action, but the
Chief Financial Officer determined that redress to be uncollectible in
whole or in part, the class of victims first had uncompensated harm, if
it had any, on the date the Chief Financial Officer made that
determination. Finally, if no redress was ordered for a class of
victims in a Bureau enforcement action, the class of victims first had
uncompensated harm, if any, on the date the order imposing a civil
penalty became a final order.
This provision corresponds to Sec. 1075.104(b), which defines a
victim's uncompensated harm. As noted above, that section provides that
a victim's uncompensated harm is the victim's compensable harm, minus
any compensation for that harm that the victim has received or is
reasonably expected to receive. In all cases, a class of victims will
first have compensable harm under this rule, if any, as of the date an
order in a Bureau enforcement action becomes final because, under Sec.
1075.104(c), the terms of the final order determine the amount of
victims' compensable harm or how that harm will be ascertained. In
cases where no redress is ordered, victims also often will have
uncompensated harm as of the date the order in the Bureau enforcement
action becomes final because, at the time of the order, they will not
be reasonably expected to receive redress for their compensable harm.
In cases where redress is ordered, however, victims generally will have
no uncompensated harm at the time of the order because at that time
they generally will be reasonably expected to receive the redress
ordered. Later events, however, could make it no longer reasonable to
expect the victims to receive compensation. In particular, under Sec.
1075.104(b), a victim will no longer be reasonably expected to receive
redress amounts if the Bureau waives or suspends those amounts or deems
them uncollectible. Thus, a victim may begin to have uncompensated harm
when such an event occurs.
106(c) No Allocation to a Class of Victims If Making Payments Would Be
Impracticable
Section 1075.106(c) provides that, notwithstanding any other
provision in this section, the Fund Administrator will not allocate
funds available under Sec. 1075.105(c) to a class of victims if she
determines that making payments to that class of victims would be
impracticable. As noted above, the Bureau interprets the Dodd-Frank Act
to direct payments from the Civil Penalty Fund to victims only to the
extent that such payments are practicable. In some cases, it may be
impracticable to make payments to an entire class of victims; the Fund
Administrator will not allocate funds to such a class.
106(d) Fund Administrator's Discretion
106(d)(1)
Section 1075.106(d)(1) provides that, notwithstanding any provision
in this part, the Fund Administrator, in her discretion, may depart
from the procedures specified by this section, including by declining
to make, or altering the amount of, any allocation provided for by this
section. This provision gives the Fund Administrator discretion to
depart from the allocation procedures specified by Sec. 1075.106; it
is not intended to authorize the Fund Administrator otherwise to depart
from the provisions in this part, for example by giving victims
payments greater than their uncompensated harm. With this provision,
the Bureau simply aims to give the Fund Administrator the flexibility
to depart from the allocation procedures established by Sec. 1075.106
when the circumstances warrant. For example, the Fund Administrator
might choose to deviate from Sec. 1075.106's allocation procedures if
insufficient information is available, at the end of a given six-month
period, to assess the total uncompensated harm for a class from that
period. The Fund Administrator might choose to postpone allocating
funds to that class until such time as the Fund Administrator has the
necessary information. When the Fund Administrator does allocate funds
to that class, she may, pursuant to this paragraph, prioritize the
class for receiving allocations even though, according to Sec.
1075.106(b)(2), the class's uncompensated harm arose some time
previously.
As another example, a class of victims might have had uncompensated
harm in an earlier six-month period, but the amount of the class's
uncompensated harm might increase in a later six-month period. For
example, the Bureau might suspend some amount of redress on one date,
at which point the class could have uncompensated harm equal to that
suspended amount. Then, the Chief Financial Officer might later deem
part of the non-suspended amount uncollectible, at which point the
class could have additional uncompensated harm equal to that
uncollectible amount. The Fund Administrator might prioritize the class
with respect to the additional amount of uncompensated
[[Page 26498]]
harm, even though pursuant to Sec. 1075.106(b)(2) the class would be
from the six-month period when it first had uncompensated harm.
Because the Bureau cannot anticipate all the situations in which it
may be reasonable to deviate from Sec. 1075.106's allocation
procedures, it leaves the decision to deviate to the Fund
Administrator's discretion. However, the Fund Administrator must
provide the Civil Penalty Fund Governance Board a written explanation
of the reason for departing from the ordinary allocation procedures.
106(d)(2)
Section 1075.106(d)(2) provides that, if the Fund Administrator, in
allocating funds during a given time period described by Sec.
1075.105(b)(2), exercises her discretion under paragraph (d)(1) of this
section, she may allocate funds to consumer education and financial
literacy programs under Sec. 1075.107 during that time period only to
the same extent she could have absent that exercise of discretion.
While the Fund Administrator may, exercising the discretion authorized
by paragraph (d)(1), adjust the distribution of funds among various
classes, she cannot increase the amount available in a given time
period for consumer education and financial literacy programs.\13\
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\13\ The Bureau notes that when the Fund Administrator
determines that payments to some victims in a class or to an entire
class would be impracticable, the Fund Administrator's decision to
allocate fewer funds or no funds to the class is not an exercise of
discretion under paragraph (d)(1). Consistent with section
1017(d)(2) of the Dodd-Frank Act, the Bureau will not make or
attempt to make payments that would be impracticable.
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The limitation on allocating funds to consumer education and
financial literacy programs applies only to an allocation that occurs
in the same time period described in Sec. 1075.105(b)(2) in which the
Fund Administrator exercises her discretion under Sec. 1075.106(d)(1).
This reflects the Bureau's interpretation of 12 U.S.C. 5497(d)(2) as
authorizing it to use funds in the Civil Penalty Fund for consumer
education and financial literacy programs whenever it is not currently
practicable to use those funds for payments to victims instead. Under
Sec. 1017(d)(2), funds may be used for consumer education and
financial literacy programs even if it would have been practicable at
some time in the past to use those funds for payments to victims.
Section 1075.107 Allocating Funds to Consumer Education and Financial
Literacy Programs
107(a)
Section 1075.107(a) implements the second sentence of section
1017(d)(2) of the Dodd-Frank Act, which authorizes the Bureau to use
funds in the Civil Penalty Fund for the purpose of consumer education
and financial literacy programs to the extent that victims cannot be
located or payments to victims are otherwise not practicable. In
particular, Sec. 1075.107(a) provides that, if funds available under
Sec. 1075.105(c) remain after the Fund Administrator allocates funds
as described in Sec. 1075.106(a), she may allocate the remaining funds
for consumer education and financial literacy programs. An allocation
under Sec. 1075.106(a) provides full compensation for the
uncompensated harm of all victims to whom it is practicable to make
payments. Thus, any funds remaining after such an allocation are
available for allocation to consumer education and financial literacy
programs. The Fund Administrator is not required to allocate such
remaining funds to consumer education and financial literacy programs
and instead may keep some or all funds in reserve for future
allocation.
In the future, the Bureau may limit the amount of funds that the
Fund Administrator may allocate to consumer education and financial
literacy programs under this provision. In a notice of proposed
rulemaking published in today's Federal Register, the Bureau seeks
comment on whether it should impose any limits and, if so, what those
limits should be.
107(b)
Section 1075.107(b) clarifies that the Fund Administrator's
authority to allocate funds for consumer education and financial
literacy programs does not include the authority to allocate funds to
particular consumer education or financial literacy programs or
otherwise to select the particular consumer education or financial
literacy programs for which allocated funds will be used. Instead, the
Fund Administrator's authority is limited to determining the amount
that is allocated for expenditure on those kinds of programs. The
Bureau has developed, and posted at https://files.consumerfinance.gov/f/201207_cfpb_civil_penalty_fund_criteria.pdf, its criteria for
selecting these programs. These criteria are beyond the scope of this
rule.
Section 1075.108 Distributing Payments to Victims
After the Fund Administrator allocates funds to a class of victims,
those funds will be distributed to the individual victims in that
class. Section 1075.108 describes the process for distributing payments
to victims.
108(a) Designation of a Payments Administrator
Section 1075.108(a) provides that, upon allocating funds to a class
of victims under Sec. 1075.106, the Fund Administrator will designate
a payments administrator who will be responsible for distributing
payments to the victims in that class. The payments administrator may
be any person, including a Bureau employee or contractor.
108(b) Distribution Plan
Section 1075.108(b) requires a payments administrator to submit to
the Fund Administrator a proposed plan for distributing the funds that
have been allocated to a class of victims. The Fund Administrator will
then approve, approve with modifications, or disapprove the proposed
distribution plan. If the Fund Administrator disapproves a proposed
plan, the payments administrator must submit a new proposed plan.
108(c) Contents of Plan
Section 1075.108(c) indicates that the Fund Administrator will
instruct the payments administrator to prepare a distribution plan and
sets forth several elements that the Fund Administrator may require a
distribution plan to include. Specifically, the Fund Administrator may
require a distribution plan to include:
1. Procedures for determining the amount each victim will receive.
Such procedures may, but need not, include a process for submitting and
approving claims. The Bureau anticipates that a process for submitting
and approving claims will not be required when it receives adequate
data from a defendant to assess how much uncompensated harm each victim
suffered.
2. Procedures for locating and notifying victims eligible or
potentially eligible for payment. These procedures can include contacts
by mail, telephone, electronic communications, or other means that may
be practicable to employ.
3. The method or methods by which the payments will be made.
Payment methods could include paper checks, electronic funds transfers,
or other methods that may be practicable to employ.
[[Page 26499]]
4. The method or methods by which potentially eligible victims may
contact the payments administrator. Such methods can include a
telephone number, email address, or other methods.
5. Any other provisions that the Fund Administrator deems
appropriate.
108(d) Distribution of Payments
Section 1075.108(d) provides that the payments administrator will
make payments to victims in a class, except to the extent such payments
are impracticable, in accordance with the distribution plan approved
under paragraph (b) of this section and subject to the Fund
Administrator's supervision.
108(e) Disposition of Funds Remaining After Attempted Distribution to a
Class of Victims
Section 1075.108(e) addresses the circumstance in which some of the
funds allocated to a class of victims remain undistributed after the
payments administrator has made, or attempted to make, payments to the
victims in that class. Funds might remain if the payments administrator
cannot make payments to all victims in a class--because some victims
cannot be located, because some victims do not redeem their payments,
or because of other similar circumstances. To the extent practicable,
the payments administrator will distribute the remaining funds to
victims in that class up to the amount of their remaining uncompensated
harm as described in Sec. 1075.104(b). The Bureau believes that doing
so will often be the most efficient use of remaining funds. The
payments administrator will have recent and up-to-date information on
the victims to whom it successfully made payments, and a second
distribution to those victims would likely also be successful. If funds
remain after providing full compensation for the uncompensated harm of
such victims, the remaining funds will be returned to the Civil Penalty
Fund. Those funds will then be available for future allocation.
For example, assume a class is comprised of 100 victims who have
suffered $200 in uncompensated harm each, for a total $20,000
uncompensated harm for the class. The following chart shows how
remaining funds would be distributed under four different scenarios
\14\:
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\14\ This chart is provided solely for explanatory purposes. The
numbers are hypothetical and are not based on any actual class of
victims that is or may be eligible for payment from the Civil
Penalty Fund.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total funds
distributed Allocated
Payment amount Number of (Payment funds that
(each victim's victims to amount x remain (Amount
Amount allocated to the class share of the whom payments Number of allocated- Disposition of remaining funds
allocated successfully victims to Total funds
amount) made whom payments distributed)
made)
--------------------------------------------------------------------------------------------------------------------------------------------------------
$10,000........................................ $100 75 $7,500 $2,500 Distributed among the 75 victims in the
class to whom payments can
successfully be made. The additional
payments will be $33.33 each, giving
victims a total of $133.33 each.
10,000......................................... 100 96 9,600 400 Returned to the Civil Penalty Fund. If
the remaining funds were distributed
among the 96 victims in the class to
whom payments could successfully be
made, each payment would be only
$4.17. Given the cost of making a
payment, it is likely not practicable
to distribute payments of that amount.
20,000......................................... 200 75 15,000 5,000 Returned to Civil Penalty Fund. The 75
victims to whom payments were
successfully made have already
received $200, which is full
compensation for their uncompensated
harm.
16,000......................................... 160 75 12,000 4,000 $3,000 is distributed among the 75
victims to whom payments can
successfully be made. That gives each
victim an additional $40, for a total
of $200, full compensation. The
remaining $1,000 will then be returned
to the Civil Penalty Fund.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 1075.109 When Payments to Victims Are Impracticable
As noted above, section 1017(d)(2) of the Dodd-Frank Act authorizes
the Bureau to use funds in the Civil Penalty Fund for consumer
education and financial literacy programs to the extent that payments
to victims are not ``practicable.'' Accordingly, pursuant to Sec. Sec.
1075.106 and 1075.108 of this rule, the Bureau will not make payments
to individual victims when doing so would be impracticable and will not
allocate funds to a class of victims to the extent making payments to
that class would be impracticable. This section identifies
circumstances in which payments to victims will be deemed not
practicable.
In identifying these circumstances, the Bureau has considered the
ordinary meaning of ``practicable'': ``reasonably capable of being
accomplished; feasible.'' Black's Law Dictionary (9th ed. 2009). As a
general matter, ``practicability'' is a flexible concept. What is
practicable for an agency to accomplish depends, among other things, on
the context and on the purpose the agency seeks to fulfill. As noted
above, the Bureau will make Civil Penalty Fund payments to compensate
many victims of many different activities for harm suffered from
violations of law. Because, as discussed above, the Civil Penalty Fund
pays for the administrative expenses incurred making payments to
victims as well as for the payments themselves, administrative expenses
should not be excessive. Therefore, the Bureau
[[Page 26500]]
concludes that in assessing whether payments to victims are practicable
in this context, one factor it should consider is the cost of
administering the payments relative to the amounts of the payments.\15\
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\15\ Cf. Consolidated Edison v. Bodman, 477 F. Supp. 2d 198,
201-02 (D.D.C. 2007) (instruction to make payments ``insofar as
practicable'' permitted agency to adjust payment schedule so that it
would not be making small payments to a large number of claimants).
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This section has two paragraphs that implement this understanding
of practicability by identifying circumstances in which the costs of
making payments would likely be so great, relative to the size of the
payments, that making those payments would be impracticable. The first
paragraph discusses payments to individual victims, and the second
relates to payments to entire classes of victims.
109(a) Individual Payments
Section 1075.109(a) sets forth several circumstances in which
payments to individual victims will be deemed impracticable. This
section draws in part on class-action case law that examines when it is
not practicable to locate class members or to make payments to them.
Under this section, it will be deemed impracticable to make a payment
to an individual victim if:
1. The payment to the victim would be of such a small amount that
the victim would not be likely to redeem the payment.
2. The payment to the victim is too small to justify the cost of
locating the victim and making the payment. For example, if it will
cost $10 to locate and make a payment to a victim, the Fund
Administrator may deem it impracticable to make a $10 or $15 payment to
that victim.
3. The victim cannot be located with effort that is reasonable in
light of the amount of the payment. This provision acknowledges that
there are different methods a payments administrator could employ to
attempt to locate a victim, and that each additional effort will carry
additional cost. At some point, the additional cost is not reasonable
given the amount of the payment that the victim would receive. In these
circumstances, it will not be practicable to make a payment to the
victim.
4. The victim does not timely submit information that a
distribution plan requires to be submitted before a payment will be
made. For example, in some cases, the Bureau may not be able to get
complete information from a defendant identifying the victims of a
violation and the amounts of their harm. In those cases, a distribution
plan may require that victims make claims for payment by submitting
relevant information. If a victim fails to submit that information as
required by the distribution plan, the payments administrator will not
be able to determine whether the person is a victim and, if so, the
amount of that person's uncompensated harm. In those circumstances, it
will not be practicable to make a payment to that victim.
5. The victim does not redeem the payment within a reasonable time.
For example, if payments are made by check, the check will indicate
that it will be void after a certain amount of time. If a victim does
not redeem the payment within that amount of time, it may not be
practicable to make a payment to that victim.
6. The Fund Administrator determines that other circumstances make
it unreasonable to make a payment to the victim. The Bureau
acknowledges that there may be situations other than those specifically
enumerated in which the costs of making a payment will not be
reasonable in light of the benefits.
109(b) Payments to a Class of Victims
Section 1075.109(b) sets forth several circumstances in which
making payments to a class of victims will be deemed impracticable.
Under this section, it will be deemed impracticable to make payments to
a class of victims if:
1. The expected aggregate actual payment to the class of victims is
too small to justify the costs of locating the victims in the class and
making payments to them. This could occur, for example, in some
circumstances where the Fund Administrator expects to have limited
success in distributing payments to a class. For instance, suppose that
there are 1,000 victims in a class who each have $50 in uncompensated
harm, and that it will cost $10 per victim to distribute payments. In
addition, the Fund Administrator has information indicating she is
likely to be able to locate only 100 victims, but she does not know
which 100 victims. Thus, it would cost $10,000 to attempt to make
payments to the class, and in the end victims would receive an
aggregate payment of only $5,000 (100 victims x $50 each). In those
circumstances, the costs of attempting to make payments to the class
may be too great in light of the aggregate actual payment to the class.
2. It would be impracticable under paragraph (a) of this section to
make a payment to any victim in the class. This situation could arise,
for example, where each victim's payment would be $10 or less and it
would cost $10 or more per victim to distribute payments.
3. The Fund Administrator determines that other circumstances make
it unreasonable to make payments to the class.
Section 1075.110 Reporting Requirements
Section 1075.110 requires the Fund Administrator to issue regular
reports, on at least an annual basis, that describe how funds in the
Civil Penalty Fund have been allocated, the basis for those
allocations, and how funds that have been allocated to classes of
victims have been distributed. The section further provides that these
reports will be made available to the public on
www.consumerfinance.gov.
V. Section 1022(b)(2) of the Dodd-Frank Act
A. Overview
In developing the final rule, the Bureau has considered potential
benefits, costs, and impacts, and consulted or offered to consult with
the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of the Comptroller of the
Currency, the National Credit Union Administration, and the Federal
Trade Commission, including with regard to consistency with any
prudential, market, or systemic objectives administered by those
agencies.\16\
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\16\ Section 1022(b)(2)(A) of the Dodd-Frank Act, 12 U.S.C.
55212(b)(2), directs the Bureau, when prescribing a rule under the
Federal consumer financial laws, to consider 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 insured 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) of the Dodd-Frank
Act directs the Bureau to consult with appropriate prudential
regulators or other Federal agencies regarding consistency with
prudential, market, or systemic objectives that those agencies
administer. The manner and extent to which these provisions apply to
a rulemaking of this kind that does not establish standards of
conduct is unclear. Nevertheless, to inform this rulemaking more
fully, the Bureau performed the described analyses and
consultations.
---------------------------------------------------------------------------
The rule establishes the position of Fund Administrator and
delegates to that official certain powers and responsibilities relating
to the administration of the Civil Penalty Fund. The rule also
describes the victims who are eligible for payments from the Civil
Penalty Fund and the amounts of payments they may receive. In
particular, the rule explains the Bureau's understanding of what
[[Page 26501]]
payments would be ``practicable,'' within the meaning of the word as
used in section 1017(d)(2) of the Dodd-Frank Act. The rule sets forth
the procedures by which the Fund Administrator will allocate funds to
classes of victims and, when funds are available, to programs for
consumer education and financial literacy and provides mechanisms for
paying the allocated funds to victims. Finally, the rule requires the
Fund Administrator to report periodically on disbursements from the
Civil Penalty Fund.
B. Potential Benefits and Costs to Consumers and Covered Persons
The analysis considers the benefits, costs, and impacts of the rule
against a statutory baseline. That is, the analysis evaluates the
benefits, costs, and impacts of the rule as compared to the statute
without an implementing rule.\17\
---------------------------------------------------------------------------
\17\ The Bureau has discretion in any rulemaking to choose an
appropriate scope of analysis with respect to potential benefits and
costs and the appropriate baseline.
---------------------------------------------------------------------------
The rule does not impose any obligations on consumers or covered
persons. The rule provides expeditious procedures for allocating funds
from the Civil Penalty Fund to implement section 1017(d) of the Dodd-
Frank Act. Although a rule is not necessary to implement this statutory
provision, the rule establishes consistent procedures applicable with
respect to all victims who might receive payments from the Civil
Penalty Fund. By explaining how funds will be allocated and
distributed, the rule provides clarity and predictability to those
consumers who are victims of unlawful activity and might anticipate
payments from the Fund.
Moreover, the efficiency of the rule's procedures should help keep
the administrative costs of making payments relatively low. Because, as
discussed above, the Bureau may pay such administrative expenses from
the Civil Penalty Fund, reducing those costs will generally increase
the amount of money available for payments to victims and, when
appropriate, for consumer education and financial literacy programs. In
addition, adopting a rule, instead of permitting the Fund Administrator
to distribute payments to victims on an ad hoc basis, may have some
distributional impacts. The Fund Administrator's case-by-case decisions
might, by comparison to the results prescribed by the rule, lead to
payments to different consumers of differing amounts, or could lead to
greater or lesser amounts being available for consumer education and
financial literacy programs.
C. Potential Specific Impacts of the Proposed Rule
The final rule does not have a unique impact on rural consumers or
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 is the rule expected to reduce consumers' access to
consumer financial products or services.
VI. Regulatory Requirements
This rule relates to benefits, namely payments that victims may
receive from the Civil Penalty Fund. Pursuant to 5 U.S.C. 553(a)(2),
this rule is therefore exempt from the notice and comment rulemaking
requirements of the Administrative Procedure Act (APA). In addition,
this rule concerns matters of agency organization, procedure, and
practice, and in part articulates the Bureau's interpretations of the
Dodd-Frank Act. It is therefore also exempt from the APA's notice and
comment rulemaking requirements pursuant to 5 U.S.C. 553(b).
Because no notice of proposed rulemaking is required, the
Regulatory Flexibility Act does not require an initial or final
regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).
VII. Paperwork Reduction Act
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 constitute collections of
information requiring approval under the Paperwork Reduction Act, 44
U.S.C. 3501 et seq.
List of Subjects in 12 CFR Part 1075
Administrative practice and procedure, Authority delegations,
Consumer Financial Civil Penalty Fund, Consumer protection,
Organization and functions.
Authority and Issuance
0
For the reasons set forth in the preamble, the Bureau amends Chapter X
in Title 12 of the Code of Federal Regulations by adding part 1075 to
read as follows:
PART 1075--CONSUMER FINANCIAL CIVIL PENALTY FUND RULE
Sec.
1075.100 Scope and purpose.
1075.101 Definitions.
1075.102 Fund administrator.
1075.103 Eligible victims.
1075.104 Payments to victims.
1075.105 Allocating funds from the Civil Penalty Fund--in general.
1075.106 Allocating funds to classes of victims.
1075.107 Allocating funds to consumer education and financial
literacy programs.
1075.108 Distributing payments to victims.
1075.109 When payments to victims are impracticable.
1075.110 Reporting requirements.
Authority: 12 U.S.C. 5512(b)(1), 5497(d).
Sec. 1075.100 Scope and purpose.
Section 1017(d)(1) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, Public Law 111-203, 124 Stat. 1978 (12
U.S.C. 5497(d)) (Dodd-Frank Act) establishes the ``Consumer Financial
Civil Penalty Fund.'' This part describes the conditions under which
victims will be eligible for payments from the Consumer Financial Civil
Penalty Fund and the amounts of the payments they may receive. This
part also establishes procedures and guidelines for allocating funds
from the Consumer Financial Civil Penalty Fund to classes of victims
and distributing such funds to individual victims, and for allocating
funds to consumer education and financial literacy programs. This part
also establishes reporting requirements.
Sec. 1075.101 Definitions.
For the purposes of this part, the following definitions apply:
Bureau means the Bureau of Consumer Financial Protection.
Bureau enforcement action means any judicial or administrative
action or proceeding in which the Bureau has obtained relief with
respect to a violation.
Chief Financial Officer means the Chief Financial Officer of the
Bureau or any Bureau employee to whom that officer has delegated
authority to act under this part. In the absence of a Chief Financial
Officer of the Bureau, the Director shall designate an alternative
official of the Bureau to perform the functions of the Chief Financial
Officer under this part.
Civil Penalty Fund means the Consumer Financial Civil Penalty Fund
established by 12 U.S.C. 5497(d).
Civil Penalty Fund Governance Board means the body, comprised of
senior Bureau officials, established by the Director of the Bureau to
advise on matters relating to the Civil Penalty Fund.
Class of victims means a group of similarly situated victims who
suffered harm from the same or similar violations for which the Bureau
obtained relief in a Bureau enforcement action.
[[Page 26502]]
Defendant means a party in a Bureau enforcement action that is
found or alleged to have committed a violation.
Final order means a consent order or settlement issued by a court
or by the Bureau, or an appealable order issued by a court or by the
Bureau as to which the time for filing an appeal has expired and no
appeals are pending. For purposes of this definition, ``appeals''
include petitions for reconsideration, review, rehearing, and
certiorari.
Person means an individual, partnership, company, corporation,
association (incorporated or unincorporated), trust, estate,
cooperative organization, or other entity.
Redress means any amounts--including but not limited to
restitution, refunds, and damages--that a final order requires a
defendant:
(1) To distribute, credit, or otherwise pay to those harmed by a
violation; or
(2) To pay to the Bureau or another intermediary for distribution
to those harmed by the violation.
Victim means a person harmed as a result of a violation.
Violation means any act or omission that constitutes a violation of
law for which the Bureau is authorized to obtain relief pursuant to 12
U.S.C. 5565(a).
Sec. 1075.102 Fund administrator.
(a) In general. There is established the position of Civil Penalty
Fund Administrator (Fund Administrator). The Fund Administrator will
report to the Chief Financial Officer. The Chief Financial Officer may,
to the extent permitted by applicable law, relieve the Fund
Administrator of the duties of that position without notice, without
cause, and prior to the naming of a successor Fund Administrator.
(b) Powers and duties. The Fund Administrator will have the powers
and duties assigned to that official in this part.
(c) Interpretation of these regulations. (1) On its own initiative
or at the Fund Administrator's request, the Civil Penalty Fund
Governance Board may advise or direct the Fund Administrator on the
administration of the Civil Penalty Fund, including regarding the
interpretation of this part and its application to particular facts and
circumstances.
(2) The Fund Administrator must follow any written directions that
the Civil Penalty Fund Governance Board provides pursuant to paragraph
(c)(1) of this section.
(d) Unavailability of the Fund Administrator. If there is no Fund
Administrator or if the Fund Administrator is otherwise unavailable,
the Chief Financial Officer will perform the functions and duties of
the Fund Administrator.
Sec. 1075.103 Eligible victims.
A victim is eligible for payment from the Civil Penalty Fund if a
final order in a Bureau enforcement action imposed a civil penalty for
the violation or violations that harmed the victim.
Sec. 1075.104 Payments to victims.
(a) In general. The Bureau will use funds in the Civil Penalty Fund
for payments to compensate eligible victims' uncompensated harm, as
described in to paragraph (b) of this section.
(b) Victims' uncompensated harm. (1) A victim's uncompensated harm
is the victim's compensable harm, as described in paragraph (c) of this
section, minus any compensation for that harm that the victim has
received or is reasonably expected to receive.
(2) For purposes of paragraph (b)(1) of this section, a victim has
received or is reasonably expected to receive compensation in the
amount of:
(i) Any Civil Penalty Fund payment that the victim has previously
received or will receive as a result of a previous allocation from the
Civil Penalty Fund to the victim's class;
(ii) Any redress that a final order in a Bureau enforcement action
orders to be distributed, credited, or otherwise paid to the victim,
and that has not been suspended or waived and that the Chief Financial
Officer has not determined to be uncollectible; and
(iii) Any other redress that the Bureau knows that has been
distributed, credited, or otherwise paid to the victim, or has been
paid to an intermediary for distribution to the victim, to the extent
that:
(A) That redress compensates the victim for the same harm as would
be compensated by a Civil Penalty Fund payment; and
(B) It is not unduly burdensome, in light of the amounts at stake,
to determine the amount of that redress or the extent to which it
compensates the victim for the same harm as would be compensated by a
Civil Penalty Fund payment.
(3) If the Fund Administrator deems it impracticable to assess the
uncompensated harm of individual victims in a class, each individual
victim's uncompensated harm will be the victim's share of the aggregate
uncompensated harm of the victim's class.
(c) Victims' compensable harm. Victims' compensable harm for
purposes of this part is as follows:
(1) If a final order in a Bureau enforcement action ordered redress
for a class of victims, the compensable harm of each victim in the
class is equal to that victim's share of the total redress ordered,
including any amounts that are suspended or waived.
(2) If a final order in a Bureau enforcement action does not order
redress for a class of victims, those victims' compensable harm is as
follows:
(i) If the Bureau sought redress for a class of victims but a court
or administrative tribunal denied that request for redress in the final
order, the victims in that class have no compensable harm.
(ii) Except as provided in paragraph (c)(2)(i) of this section, if
the final order in the Bureau enforcement action specifies the amount
of the victims' harm, including by prescribing a formula for
calculating that harm, each victim's compensable harm is equal to that
victim's share of the amount specified.
(iii) Except as provided in paragraph (c)(2)(i) of this section, if
the final order in the Bureau enforcement action does not specify the
amount of the victims' harm, each victim's compensable harm is equal to
the victim's out-of-pocket losses that resulted from the violation or
violations for which a civil penalty was imposed, except to the extent
such losses are impracticable to determine.
Sec. 1075.105 Allocating funds from the Civil Penalty Fund--in
general.
(a) In general. The Fund Administrator will allocate Civil Penalty
Fund funds specified in paragraph (c) of this section to classes of
victims and to consumer education and financial literacy programs as
appropriate according to the schedule established in paragraph (b) of
this section and the guidelines established in Sec. Sec. 1075.106 and
1075.107.
(b) Schedule for making allocations. (1) Within 60 days of May 7,
2013, the Fund Administrator will establish, and publish on
www.consumerfinance.gov, a schedule for allocating funds in the Civil
Penalty Fund, in accordance with the following:
(i) The schedule will establish six-month periods and identify the
start and end dates of those periods. The start date of one period will
be the day immediately after the end date of the preceding period.
(ii) Notwithstanding paragraph (b)(1)(i) of this section, the first
and second periods may be longer or shorter than six months to allow
future six-month periods to start and end on dates that better serve
administrative
[[Page 26503]]
efficiency. The first and second periods will constitute ``six-month
periods'' under this part regardless of their actual length.
(iii) The start date of the first period is July 21, 2011.
(2) Within 60 days after the end of a six-month period, the Fund
Administrator will allocate available funds in the Civil Penalty Fund
in accordance with Sec. Sec. 1075.106 and 1075.107.
(3) If the Civil Penalty Fund Governance Board determines that the
schedule established under paragraph (b)(1) of this section should be
changed to better serve administrative efficiency, it may change that
schedule by directing the Fund Administrator to publish the new
schedule on www.consumerfinance.gov. Any new schedule must comply with
paragraph (b)(1)(i) of this section. The first period of any new
schedule may be shorter or longer than six months. That first period
will constitute a ``six-month period'' under this part regardless of
its actual length.
(c) Funds available for allocation. The funds available for
allocation following the end of a six-month period are those funds that
were in the Civil Penalty Fund on the end date of that six-month
period, minus:
(1) Any funds already allocated,
(2) Any funds that the Fund Administrator determines are necessary
for authorized administrative expenses, and
(3) Any funds collected pursuant to an order that has not yet
become a final order.
Sec. 1075.106 Allocating funds to classes of victims.
(a) Allocations when there are sufficient funds available to
compensate all uncompensated harm. If the funds available under Sec.
1075.105(c) are sufficient, the Fund Administrator will allocate to
each class of victims the amount necessary to compensate fully the
uncompensated harm, determined under Sec. 1075.104(b) as of the last
day of the most recently concluded six-month period, of all victims in
that class to whom it is practicable to make payments.
(b) Allocations when there are insufficient funds available to
compensate all uncompensated harm. If the funds available under Sec.
1075.105(c) are not sufficient to make the allocations described in
paragraph (a) of this section, the Fund Administrator will allocate the
available funds to classes of victims as follows:
(1) Priority to classes of victims from the most recent six-month
period. The Fund Administrator will first allocate funds to classes of
victims from the most recently concluded six-month period, as
determined under paragraph (b)(2) of this section. If funds remain
after allocating to each class of victims from that six-month period
the amount necessary to compensate fully the uncompensated harm,
determined under Sec. 1075.104(b) as of the last day of the most
recently concluded six-month period, of all victims in that class to
whom it is practicable to make payments, the Fund Administrator next
will allocate funds to classes of victims from the preceding six-month
period, and so forth until no funds remain.
(2) Assigning classes of victims to a six-month period. For
purposes of this paragraph (b), the Fund Administrator will assign each
class of victims to the six-month period in which the victims first had
uncompensated harm as described in Sec. 1075.104(b). When a class of
victims first had uncompensated harm as described in Sec. 1075.104(b)
will be determined as follows:
(i) If redress was ordered for a class of victims in a Bureau
enforcement action but suspended or waived in whole or in part, the
class of victims first had uncompensated harm as described in Sec.
1075.104(b) on the date the suspension or waiver became effective.
(ii) If redress was ordered for a class of victims in a Bureau
enforcement action but determined by the Chief Financial Officer to be
uncollectible in whole or in part, the class of victims first had
uncompensated harm as described in Sec. 1075.104(b) on the date the
Chief Financial Officer made that determination.
(iii) If no redress was ordered for a class of victims in a Bureau
enforcement action, the class of victims first had uncompensated harm
as described in Sec. 1075.104(b) on the date the order imposing a
civil penalty became a final order.
(c) No allocation to a class of victims if making payments would be
impracticable. Notwithstanding any other provision in this section, the
Fund Administrator will not allocate funds available under Sec.
1075.105(c) to a class of victims if she determines that making
payments to that class of victims would be impracticable.
(d) Fund Administrator's discretion. (1) Notwithstanding any
provision in this part, the Fund Administrator, in her discretion, may
depart from the procedures specified by this section, including by
declining to make, or altering the amount of, any allocation provided
for by this section. Whenever the Fund Administrator exercises this
discretion, she will provide the Civil Penalty Fund Governance Board a
written explanation of the reason for departing from the procedures
specified by this section.
(2) If, in allocating funds during a given time period described in
Sec. 1075.105(b)(2), the Fund Administrator exercises her discretion
under paragraph (d)(1) of this section, she may allocate funds to
consumer education and financial literacy programs under 1075.107
during that time period only to the same extent she could have absent
that exercise of discretion.
Sec. 1075.107 Allocating funds to consumer education and financial
literacy programs.
(a) If funds available under Sec. 1075.105(c) remain after the
Fund Administrator allocates funds as described in Sec. 1075.106(a),
the Fund Administrator may allocate those remaining funds for consumer
education and financial literacy programs.
(b) The Fund Administrator shall not have the authority to allocate
funds to particular consumer education or financial literacy programs
or otherwise to select the particular consumer education or financial
literacy programs for which allocated funds will be used.
Sec. 1075.108 Distributing payments to victims.
(a) Designation of a payments administrator. Upon allocating Civil
Penalty Fund funds to a class of victims pursuant to Sec. 1075.106,
the Fund Administrator will designate a payments administrator who will
be responsible for distributing payments to the victims in that class.
A payments administrator may be any person, including a Bureau employee
or contractor.
(b) Distribution plan. The payments administrator must submit to
the Fund Administrator a proposed plan for the distribution of funds
allocated to a class of victims. The Fund Administrator will approve,
approve with modifications, or disapprove the proposed distribution
plan. If the Fund Administrator disapproves a proposed plan, the
payments administrator must submit a new proposed plan.
(c) Contents of plan. The Fund Administrator will instruct the
payments administrator to prepare a distribution plan and may require
that plan to include:
(1) Procedures for determining the amount each victim will receive.
Such procedures may, but need not, include a process for submitting and
approving claims.
[[Page 26504]]
(2) Procedures for locating and notifying victims eligible or
potentially eligible for payment.
(3) The method or methods by which the payments will be made.
(4) The method or methods by which potentially eligible victims may
contact the payments administrator.
(5) Any other provisions that the Fund Administrator deems
appropriate.
(d) Distribution of payments. The payments administrator will make
payments to victims in a class, except to the extent such payments are
impracticable, in accordance with the distribution plan approved under
paragraph (b) of this section and subject to the Fund Administrator's
supervision.
(e) Disposition of funds remaining after attempted distribution to
a class of victims. If funds allocated to a class of victims remain
after a payments administrator distributes payments to that class, the
payments administrator will distribute those remaining funds as
follows:
(1) To the extent practicable, the payments administrator will
distribute those remaining funds to victims in that class up to the
amount of their remaining uncompensated harm as described in Sec.
1075.104(b).
(2) Any remaining funds that cannot be distributed pursuant to
paragraph (e)(1) of this section will be returned to the Civil Penalty
Fund.
Sec. 1075.109 When payments to victims are impracticable.
(a) Individual payments. Making a payment to an individual victim
will be deemed impracticable if:
(1) The payment to the victim would be of such a small amount that
the victim would not be likely to redeem the payment;
(2) The payment to the victim is too small to justify the cost of
locating the victim and making the payment;
(3) The victim cannot be located with effort that is reasonable in
light of the amount of the payment;
(4) The victim does not timely submit information that a
distribution plan requires to be submitted before a payment will be
made;
(5) The victim does not redeem the payment within a reasonable
time; or
(6) The Fund Administrator determines that other circumstances make
it unreasonable to make a payment to the victim.
(b) Payments to a class of victims. Making payments to a class of
victims will be deemed impracticable if:
(1) The expected aggregate actual payment to the class of victims
is too small to justify the costs of locating the victims in the class
and making payments to them;
(2) It would be impracticable under paragraph (a) of this section
to make a payment to any victim in the class; or
(3) The Fund Administrator determines that other circumstances make
it unreasonable to make payments to the class.
Sec. 1075.110 Reporting requirements.
The Fund Administrator must issue regular reports, on at least an
annual basis, that describe how funds in the Civil Penalty Fund have
been allocated, the basis for those allocations, and how funds that
have been allocated to classes of victims have been distributed. These
reports will be made available on www.consumerfinance.gov.
Dated: April 26, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-10320 Filed 5-6-13; 8:45 am]
BILLING CODE 4810-AM-P