On November 22, the CFPB released findings of a study the Bureau conducted on the impact of certain deposit regulations on the day-to-day operations of banking institutions, focusing on compliance costs related to checking accounts, traditional savings accounts, debit cards, and overdraft programs. The study collected information from seven banks about activities related to compliance with regulations implementing the Truth in Savings Act, the Electronic Fund Transfer Act, the financial privacy requirements of the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act (Regulations DD, E, P, and V, respectively), as well as FCRA’s adverse action requirements, which are not implemented by regulation. According to the Bureau, compliance costs were concentrated in the Operations, Information Technology, Human Resources, Compliance, and Retail functions, and banks incurred the most substantial costs complying with rules related to authorization rights, error resolution requirements, disclosure mandates, and advertising standards.
The report identifies the compliance-related activities that entailed the highest costs across business functions and suggests that “authorization rights” (i.e., opt-ins and opt-outs) and error-resolution requirements are the most costly to administer. The report also discusses the potential for the study—which the Bureau characterizes as representing “some of the most rigorous information currently available” on compliance costs—to advance research on the cost of compliance, influence the ultimate understanding of regulatory impacts on consumers and markets, and inform the CFPB’s ongoing efforts to avoid unnecessary compliance costs. The Bureau states that estimating the operational effects of consumer financial services regulation alone has “limited value to policymaking” and is mainly helpful in determining the impact of a specific regulation on product pricing and availability or market structure and competition. The Bureau concluded that research on the effects of regulations will remain an ongoing priority, but it will nevertheless continue to address problems observed in the marketplace — “mindful that, whatever the costs of regulation, the costs of not regulating adequately can be even larger.”
The full report, Understanding the Effects of Certain Deposit Regulations on Financial Institutions’ Operations: Findings on Relative Costs for Systems, Personnel, and Processes at Seven Institutions, is available here.