Public Comment on the Consumer Financial Civil Penalty Fund Rule Amendment

Public Comment on the Consumer Financial Civil Penalty Fund Rule Amendment

by Chris Nelson| Jul 24, 2025

Consumer Protections, Equity work, federal action, News

The following public comment was submitted by Chris Nelson on behalf of CCLP on July 18, 2025 to the Consumer Financial Protection Bureau, regarding a proposed Consumer Financial Civil Penalty Fund Rule Amendment. For more information see the proposed rule on the Federal Register.

Dear Acting Director Vought:

The Colorado Center on Law & Policy (CCLP) is submitting these comments opposing the Consumer Financial Protection Bureau's proposed rule amending 12 CFR Part 1075 to eliminate references to consumer education and financial literacy programs from the Civil Penalty Fund regulations.[1] Specifically, the proposed rule would remove language from sections 1075.100, 1075.105, and 1075.106, and eliminate section 1075.107 entirely-effectively stripping the Bureau of its congressionally granted discretionary authority to allocate Civil Penalty Fund resources to consumer education and financial literacy programs when direct victim compensation is not practicable.[2] This proposed change contradicts congressional intent, undermines free market principles, and represents regulatory overreach that exceeds the Bureau's authority following recent Supreme Court precedent.

Congressional Intent and Statutory Authority

The Consumer Financial Protection Act (CFPA) establishes the CFPB "with a mandate to regulate the offering and provision of consumer financial products and services under the Federal consumer financial laws."[3] Congress granted the Bureau broad rulemaking authority under Section 1022(b)(1) 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."[4] Critically, the CFPA explicitly grants the Bureau discretionary authority under Section 1017(d)(2) to allocate Civil Penalty Fund resources to consumer education and financial literacy programs when direct victim compensation is not practicable.[5] This statutory language is unambiguous, and under Loper Bright Enterprises v. Raimondo, courts must determine the best interpretation of clear statutory text rather than deferring to agency interpretations, making any administrative attempt to eliminate this congressionally- granted discretionary power contrary to clear congressional intent.[6] Consumer education and financial literacy programs directly support these congressionally mandated objectives by preventing future violations and protecting consumers from harmful practices.[7]

The Bureau argues it lacks "adequate guardrails" for exercising discretion over consumer education funding and cites transparency concerns.[8] However, these arguments conflate administrative choices with statutory authority. Congress has the authority to grant discretionary power to agencies and does so regularly without requiring them to abandon that power due to internal procedural concerns. Congress specifically contemplated scenarios where funds would remain after victim compensation and provided a constructive mechanism for their use. If the Bureau desires additional procedural safeguards or greater transparency, it should establish them through improved reporting and oversight mechanisms, as well as rulemaking that follows notice and comment procedures, rather than eliminating this fundamental authority granted by Congress. By eliminating this authority entirely, the Bureau substitutes its current policy preferences for Congress's explicit statutory design, directly contravening its mandate to "carry out the purposes and objectives of Federal consumer financial law."[9]

Free Market Principles and Consumer Education

For free markets to function properly, both parties involved in a transaction must have enough information to determine whether the transaction maximizes their individual utility-the economic satisfaction or benefit derived from consuming goods or services.[10] In economic theory, informed consumer choice is fundamental to market efficiency, as consumers can only maximize their utility when they have sufficient information to evaluate the true costs, benefits, and risks associated with financial products.[11] Research consistently demonstrates that financial education programs help consumers develop the knowledge and skills necessary to prevent predatory practices, build financial stability, and make informed decisions about financial products and services.

The Congressional Research Service notes that the CFPB was created specifically because "consumer financial regulatory powers were strengthened and consolidated in a single regulator with a consumer-centric mission" due to widespread market failures in consumer financial services.[12] Consumer education programs effectively address these documented market failures by reducing information asymmetries between complex financial institutions and individual consumers and preventing future violations-precisely the type of market failure that Executive Order 12866 recognizes as justifying regulatory intervention.[13] The Bureau specifically requests comment on whether market failures justify retaining consumer education authority under this standard[14], yet by removing the CFPB's authority to fund consumer education and financial literacy programs through the Civil Penalty Fund, this proposed rule eliminates a vital resource for ensuring that consumers have access to the information they need to make informed financial decisions. This undermines the market efficiency that well-functioning consumer financial markets rely on.

Conclusion

The proposed rule contradicts clear congressional intent, undermines free market principles, and violates recently established standards for agency interpretation of statutory authority. Rather than eliminating this valuable consumer protection tool, the Bureau should strengthen its implementation while preserving the authority Congress deliberately granted. The discretionary language in Section 1017(d)(2) grants authority that should be exercised responsibly rather than abandoned entirely, particularly given the demonstrated need for consumer education. We respectfully request that the Bureau withdraw this proposed rule and instead focus on improving the implementation of existing statutory authority for consumer education programs.

Sincerely,

Chris Nelson
Research & Policy Analyst
Colorado Center on Law and Policy

**********

[1] Consumer Financial Civil Penalty Fund Rule Amendment, 90 Fed. Reg. 25904 (June 18, 2025) (Docket No. CFPB-2025-0021).

[2] Id. at 25906.

[3] 12 U.S.C. § 5491(a); Pub. L. 111-203, sec. 1011(a) (2010).

[4] 12 U.S.C. § 5512(b)(1).

[5] 12 U.S.C. § 5497(d)(2).

[6] Colorado Center on Law and Policy, Life after Chevron Issue Brief, at 5 (Apr. 2, 2025).

[7] See Congressional Research Service, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Background and Summary, R41350, at 16-17 (Apr. 21, 2017) (noting the CFPB's "consumer-centric mission" and authority "to prohibit unfair, deceptive, and abusive acts or practices associated with consumer financial products and services"); 12 U.S.C. § 5531.

[8] Consumer Financial Civil Penalty Fund Rule Amendment, 90 Fed. Reg. at 25905.

[9] 12 U.S.C. § 5512(b)(1).

[10] MIT OpenCourseWare, "Principles of Microeconomics Recitation Text," at 290, available at https://ocw.mit.edu/ans7870/14/14.01SC/MIT14_01SCF11_rttext.pdf.

[11] See Hal R. Varian, "Consumer Choice," in Microeconomic Analysis (3rd ed., New York: W.W. Norton & Company, 1992).

[12] Congressional Research Service, supra note 6, at 16.

[13] Exec. Order No. 12866, 58 Fed. Reg. 51735 (Oct. 4, 1993).

[14] Id. at 25906.

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