CFPB warns against intimidation of whistleblowers

The CFPB yesterday announced it has issued Consumer Financial Protection Circular 2024-04 to law enforcement agencies on whistleblower protections under section 1057 of the Consumer Financial Protection Act (CFPA). The circular explains how companies may be breaking the law by requiring employees to sign broad nondisclosure agreements that could deter whistleblowing. 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.

In its press release, the CFPB asserts that whistleblowing plays an important role in addressing illegal and unethical misconduct. In the 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. 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.