Enhanced Consumer Law Enforcement: Class Actions Often Follow

By on December 30, 2013

December/January 2014

Alan D. Wingfield and Paige S. Fitzgerald, Troutman Sanders LLP

Newly empowered federal and state regulators, including the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the Department of Justice and state attorneys general, are embarking on unprecedented enforcement, investigatory and regulatory actions. Litigation often follows; consumer class actions and shareholder lawsuits are a routine consequence of compliance failures. Meanwhile, what is accepted as adequate compliance is evolving. The CFPB has made clear that a compliance program should be audited, heavily-documented and based on a top-down approach.

Businesses that are subject to consumer protection laws – any companies that deals with consumers – need to respond by implementing compliance programs that are crafted to meet these increased risks and responsibilities. Moreover, these programs should be effectively communicated to employees.

Success at resolving legitimate consumer disputes is a major concern of regulators during any review of a compliance program. Companies should regularly review their compliance with relevant laws as well as their adherence to internal policies and procedures.

Any audit function should be performed by individuals who are independent of the company’s day-to-day compliance program and related business personnel. The end result of an effective compliance audit is regular reporting to the board of directors or its designated committees, accompanied by findings regarding whether policies and standards adopted by the board have been appropriately implemented by the company. A fully-functioning audit process is viewed by regulators as evidence that adopted procedures are more than window dressing.

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