CFPB Warns Against Intimidation of Whistleblowers

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued a circular to law enforcement agencies and regulators explaining how companies may be breaking the law by requiring employees to sign broad nondisclosure agreements that could deter whistleblowing. The circular explains how imposing sweeping nondisclosure agreements that do not clearly permit communication with law enforcement may intimidate employees from disclosing misconduct or cooperating with investigations. This could impede investigations and potentially violate federal whistleblower protections.

“The law enforcement community uncovers serious wrongdoing by financial firms through whistleblower tips,” said CFPB Director Rohit Chopra. “Companies should not censor or muzzle employees through nondisclosure agreements that deter whistleblowers from coming forward to law enforcement.”

Whistleblowing plays an important role in addressing illegal and unethical misconduct. In the Consumer Financial Protection Act (CFPA), Congress included a provision specifically protecting whistleblowers from retaliation for reporting violations of consumer financial protection laws. Although nondisclosure agreements can be entered into for legitimate purposes, such as ensuring the protection of confidential trade secrets, such agreements, depending on how they are worded and the context, could lead employees to believe they would face lawsuits or other retaliation for reporting suspected misconduct to governmental authorities.

Today’s circular explains that financial institutions may violate the CFPA when they require employees in certain circumstances to sign broad nondisclosure agreements, or other types of agreements that contain confidentiality requirements, if the agreements do not clearly permit communications or cooperation with law enforcement. Confidentiality agreements often specify that the employer may file a lawsuit or terminate an employee for violating the terms of the agreement.

The circular highlights particularly egregious circumstances that would typically violate the law. One example is when an employer demands a confidentiality agreement during an internal investigation, warning employees not to discuss the relevant matters with any external parties and saying they may be subject to legal penalties for doing so. If an employee involved in or aware of an investigation must sign such an agreement, they may see it as a threat against whistleblowing. An employer can significantly reduce the risk of violating whistleblower protections by ensuring that its agreements expressly permit employees to communicate freely with government enforcement agencies and to cooperate in government investigations.

The CFPB’s action today builds on prior efforts to affirm whistleblower protections and collect reports of misconduct. For example, the CFPB previously streamlined how workers in the technology industry can submit tips about potential violations of federal consumer financial laws. The CFPB’s work also aligns with a broader federal effort to protect whistleblowers and ensure corporate accountability. For example, the Securities and Exchange Commission has pursued enforcement actions against companies that violated its whistleblower protection rules when those companies required their employees or clients to sign overly restrictive confidentiality agreements.

Read today’s circular.

Employees of companies who they believe their company has violated federal consumer financial laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.