Did the CFPB Falsify Documents in Payday Lender Exam?

By Richard E. Gottlieb, Partner, Financial Services Group

In an explosive letter to Attorney General Jeff Sessions, a former Consumer Financial Protection Bureau (CFPB or Bureau) employee claims that her former bosses asked her to falsify records in a payday lender examination that resulted in a multimillion-dollar settlement.

What happened

Cassandra Jackson began working for the CFPB in 2011 as an examiner in the Southeast Division. Over the next five years, she claims she participated in more than 30 examinations on various types of regulated financial institutions.

Ms. Jackson’s Dec. 6, 2017, letter addresses an examination that allegedly began in September 2013 of a Texas-based payday lender. The company offered installment loans, title loans, prepaid cards and check cashing. Jackson was tasked with examining military lending, storefront transactions and franchise locations.

“During the course of this examination, I was asked to change, remove, and otherwise falsify documents connected with this examination,” Jackson claims. The requests came from the examiner in charge (EIC) as well as others in management positions, she asserts, and she further claims that she was instructed “to remove documentation that the lender provided as evidence to support my initial examination report.”

Ms. Jackson next alleges that her bosses instructed her to cite the payday lender for a violation for which she had verified the company was in compliance, and to state that the company did not provide (and the CFPB did not receive) documents that would have satisfied the Bureau’s guidelines. In fact, she says, the lender had provided such documentation, but Bureau personnel told her to remove that documentation from the case files.

When she refused to falsify the report, Ms. Jackson had several meetings with the EIC where she attempted to provide documentation and work papers in support of her initial findings. “CFPB management intentionally disregarded that evidence and proceeded to ask me to issue a report that I knew to be false,” she wrote to Sessions. “I refused to do so knowing that complying with their requests would amount to committing an act of fraud.”

The EIC then changed the report and signed off on it herself before it was submitted and approved, Jackson claims. “It is my understanding that the falsified report was then used to garner a settlement with [the lender] of a reported $5 million civil penalty and up to another $5 million in customer restitution,” Jackson wrote. “Again, my examination and report did not find significant violations by the lender.”

As we reported back in 2014, the CFPB announced a $10 million deal with the lender in 2014 after alleging the company operated a “culture of coercion” that included unfair, deceptive and abusive practices in connection with its collection of payday loans.

Ms. Jackson claimed that after her refusal, she was told she was “not performing at [her] grade level” and was subject to disciplinary action. In addition to the alleged retaliation, Jackson said she encountered “widespread racism and gender discrimination” from Bureau management. Although she continued to work at the CFPB, she was forced to resign “due to the incredibly hostile work environment and the retaliation I continued to receive from management at the CFPB due to the [lender] incident,” Jackson said.

“I encourage you to initiate an investigation into this matter, as well as civil rights violations at the Consumer [Financial] Protection Bureau,” she wrote to the Attorney General. As yet, no word from the Department of Justice as to whether it intends to do so.

Why it matters

The letter couldn’t come at a worse time for the CFPB, with the Bureau’s very existence potentially at risk. That said, whistleblower claims from disciplined or discharged employees often devolve into a “he-said, she-said” battle and, as yet, there is no independent evidence the CFPB engaged in any wrongdoing. However, the accusations are serious enough to expect the Department of Justice to investigate, likely with the full cooperation of Acting Director Mick Mulvaney.