On July 24, 2024, the Consumer Financial Protection Bureau (CFPB) issued a circular explaining that confidentiality or nondisclosure agreements may chill whistleblowing activity and therefore violate the CFPB’s whistleblower protection statute in certain circumstances – Section 1057 of the Consumer Financial Protection Act of 2010 (CFPA), 12 USC § 5567. While acknowledging that confidentiality agreements are commonplace and may be legitimately used to safeguard trade secrets and sensitive employee or customer information, the circular warns employers that these agreements can constitute impermissible threats against employees. The circular highlights risks of prohibited explicit and implicit threats against the employee on the basis of not only the verbiage in the agreement, but also the context of and manner in which the agreement is presented to the employee.

CFPB sees potential for violations in the content and context of confidentiality agreements

The CFPA prohibits providers of financial services and their service providers from discriminating against employees for engaging in whistleblower activity related to a violation or a suspected violation of a federal financial consumer law.

The statutory prohibition encompasses termination or discrimination against an employee for: “(1) providing or being about to provide information to the employer, the CFPB, or any other state, local, or federal government authority or law enforcement agency relating to a violation of, or...

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