WASHINGTON (Legal Newsline) - A Civil Penalty Fund rule has been created by the Consumer Financial Protection Bureau (CFPB) which establishes conditions and a transparent process for allocating money from the fund to compensate victims of civil penalty violations.
The CFPB Civil Penalty Fund was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. According to the act, if a person or company violates a federal consumer financial protection law, the CFPB can bring an enforcement action against them and can result in mandatory payment of a civil penalty. All civil penalties collected are deposited into the fund.
The new rule, issued Friday, allows for the money in the fund to provide compensation to victims of violations for which civil penalties have been imposed. The amount provided will depend on the compensation victims may have received from other sources as well as the circumstances.
"Congress directed the Bureau to establish the Civil Penalty Fund in order to compensate people who were harmed by illegal actions," CFPB Director Richard Cordray said. "Today's rule will allow us to do this in a transparent, responsible way."
Every six months the bureau will distribute funds to eligible victims. A schedule of distribution will be posted on consumerfiance.gov. The first allocation of funds is scheduled for May 30. The length of time for distributing payments to victims will vary by each case.
After the funds are allocated, if money remains in the fund for any reason, for example - they cannot be located, the bureau may set aside money for consumer education and financial literacy programs or for future victims.
The rule also requires CFPB to issue regular reports on the fund to be included on the CFPB's semi-annual reports to Congress and continue to appear on quarterly reports.
The Civil Penalty Fund Rule has been issued as a final rule and is effective immediately.
The bureau is allowing a 60 day period for the public to comment which will be reviewed by the bureau and may issue a revised rule if necessary.