Protect Whistleblowers: Consumer Bureau Limits Nondisclosure Agreements

Guidance would change scope of nondisclosure agreements

A key federal regulator is taking steps to protect whistleblowers in the financial industry by issuing guidance to change the scope of nondisclosure agreements.

The Consumer Financial Protection Bureau (CFPB) issued new guidance that prevents banks and other financial institutions from requiring employees to sign sweeping nondisclosure agreements designed to prevent disclosure of wrongdoing at the institution.

"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."

The CFPB's new guidance 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.

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