May 8, 2013
Law360 interviewed me in CFPB Flexes Enforcement Muscle In 1st Criminal Referral (behind a paywall) regarding the prosecution of an alleged debt relief scam:
Criminal charges filed Tuesday against a New York debt settlement firm based on a referral from the Consumer Financial Protection Bureau show that the fledgling agency’s enforcement staff will be able to successfully leverage its unique investigative powers, attorneys say.
U.S. Attorney Preet Bharara of the Southern District of New York charged Michael Levitis, his company Mission Settlement Agency and three employees of the company with mail fraud, wire fraud and conspiracy to commit mail and wire fraud alleging they scammed 1,200 customers seeking debt relief out of about $2.2 million.
The case was the direct result of a referral from the CFPB, marking the first time that criminal charges have come out of a probe by the bureau. And it won’t be the last, experts said.
The bureau already has an aggressive enforcement policy and broad authority and investigative powers, and will likely use the referral tool to make its enforcement powers even more formidable, according to K&L Gates LLP partner Larry Platt.
“Most people have had the CFPB on their radar screen as an enforcement agency. But what this shows is that it’s also working as a scout,” he said.
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But observers say the bureau may be more willing to use that power than other banking regulators.
Prudential banking regulators view their main mission as preserving the safety and soundness of the institutions they regulate, not necessarily seeking criminal actions for consumer protection violations, according to Brooklyn Law School professor David Reiss. The CFPB, by contrast, is charged solely with a mission for consumer protection, he said.
“There’s no question that the CFPB would be more aggressive on criminal investigations than other bank regulators,” Reiss said.| Permalink