The CFPB recently issued Circular 2024-04 to highlight its stance that requiring employees to sign certain confidentiality agreements violates the Consumer Financial Protection Act (CFPA). Specifically, the focus of the Circular is agreements that attempt to contradict “whistleblower” protections, or those that make an …employee reasonably believe that they would be sued or subject to other adverse actions if they disclosed information related to suspected violations of federal consumer financial law to government investigators.
The Circular points out that “broad confidentiality agreements” that do not clearly allow the sharing of information with government enforcement agencies or the cooperation with law enforcement investigations risk violating the CFPA. While it acknowledges that confidentiality agreements do have their place, including very broad wording in such agreements may prevent employees from reporting suspected violations and could hinder an agency’s investigation efforts. Forcing an employee to sign such an agreement could be seen as a threat to punish the employee for “whistleblowing activity”, which is prohibited.
While the Circular is actually geared towards regulators and the public, financial institutions may also want to take a look at their agreements to determine whether there is potential risk.
Published
2024/08/12
