This interesting article highlights the risk of piggyback class action shareholder derivative suits against corporate directors and senior officers in the wake of whopping settlements companies reached with the new Consumer Financial Protection Bureau (“CFPB”). As the article notes, such piggyback lawsuits have occurred in the past following settlements with other government regulators, such as the Federal Trade Commission (consumer production violations), the Securities and Exchange Commissions (securities violations) and the Department of Justice (antitrust or Foreign Corrupt Practices Act violations.)
In light of the fact that the CFPB has the authority to regulate in part banks, credit unions, and all nonbank entities of any size that offer financial products or services in residential mortgage, private education lending, and payday markets, the likely number of companies that could potentially be subject to such piggyback lawsuits is staggering. This is especially true in light of the fact that, unlike the FTC Act, a number of CFPB rules and regulations expressly allow for provide for private rights of action, providing greater opportunity for piggbyback litigation after CFPB settlements. Companies should bear these risks in mind and take steps to prepare for CFPB oversight and compliance as soon as possible.