The Consumer Financial Protection Bureau (CFPB or Bureau) turned its focus to rulemaking, with the Bureau issuing a final rule amending Regulation CC and extending the comment period on the advanced notice of proposed rulemaking (ANPR) on the Home Mortgage Disclosure Act (HMDA).
In addition, a group of state attorneys general urged the CFPB not to change the overdraft rule and suggested, instead, that the Bureau expand on it, and the CFPB’s inspector general reported, favorably, on the Bureau’s internal sharing of complaint data.
Regulation CC — Together with the Federal Reserve Board of Governors (FRB), the CFPB published a final rule amending Regulation CC that implemented requirements under the Expedited Funds Availability Act (EFA Act). (A side note: Unlike most regulations promulgated by the CFPB, Regulation CC comes with a twist: The FRB maintains sole rulemaking authority on Regulation CC’s liability provisions, and the FRB approved those provisions back in September 2018.)
The most recent joint rulemaking establishes an inflation adjustment amount that depository institutions must make available to their customers for purposes such as next business day withdrawal of certain check deposits and setting the threshold amount for determining whether an account has been repeatedly withdrawn.
It also extended coverage of the EFA Act to American Samoa, the Commonwealth of the Northern Mariana Islands and Guam.
The final rule will take effect 60 days after publication in the Federal Register, with the exception of the inflation adjustment, which will kick in on July 1, 2020.
In other rule-related news, the Bureau announced an extension of the comment period soliciting input on the new data points in the final rule on the HMDA after receiving multiple requests from stakeholders for more time. The additional time—until October 15, 2019—will allow the industry the chance to consider the CFPB’s overview of residential mortgage lending based on HMDA data collected by financial institutions in 2018, the agency explained.
The original ANPR was issued on May 2, 2019 (https://www.manatt.com/Insights/Newsletters/Financial-Services-Law/CFPB-Rule-Updates-From-HMDA-to-TRID-to-Debt-Collec) and solicited comment on certain data points in the Bureau’s October 2015 final rule (https://www.manatt.com/Insights/Newsletters/Financial-Services-Law/CFPB-Launches-New-Battle-Proposal-to-Ban-Arbitrat#Article3) that were added to Regulation CC or revised to require additional information, as well as on coverage of certain business- or commercial-purpose loans.
Overdraft Rule — Twenty-five state AGs wrote to the Bureau, urging the CFPB not to amend the overdraft rule. In May, the Bureau asked for comment as to whether the overdraft rule should be continued without change, amended or rescinded, including whether to minimize any significant economic impact of the rule on a substantial number of small institutions.
The AGs—a bipartisan mix from California, Colorado, Delaware, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington and Washington, D.C.—not only advocated to leave the rule as is, but encouraged the CFPB to consider extending its reach.
“[T]he overdraft rule has enabled consumers to make more and better-informed choices about overdraft services for the limited set of transactions covered, while reducing the overall number of and aggregate amount of overdraft fees substantially for those who have chosen not to opt in to overdraft services pursuant to the rule,” they wrote.
Calling the rule an “enormous success,” the AGs suggested that it be expanded to cover other transactions such as checks and automated clearinghouse transactions, and to require that all overdraft fees be proportional to the amount paid by a bank to cover the overdrawn transaction (meaning fees of no more than a certain percentage of the covered amount).
In addition to the “overwhelmingly positive” impact the rule has had on consumers, the AGs argued that no basis exists to believe that it has harmed small financial institutions. A reduction in the revenues and profits at banks because millions of consumers chose not to opt in to overdraft services does not support a rollback or rescission of the rule, the regulators said.
“We are aware of no evidence or other basis to believe that the overdraft rule places any economic burdens or costs on smaller financial institutions, or indeed on financial institutions generally,” the AGs wrote, with one-time implementation costs to update disclosures and model forms that have already been incurred.
“While we appreciate that unnecessary economic burdens should not be imposed on small banks and other businesses, we do not believe that protecting the earnings and profits of financial institutions, whether large or small, should come at the expense of consumers or the stability of the U.S. financial system,” the AGs concluded. “The CFPB’s own research on the overdraft rule and the changes in consumer use of overdraft services following implementation of the rule demonstrates that the rule has been an overwhelming success.”
OIG Report — In a generally favorable analysis, the CFPB’s Office of Inspector General issued a report on the Bureau’s efforts to share, internally, consumer complaint data. The OIG found that the CFPB’s Office of Consumer Response effectively shares consumer complaint data within the CFPB but concluded that such office should also enhance “access controls” to ensure that access to complaint data, which can contain sensitive consumer information, is limited to only users who need such information to perform their job functions.
To read Regulation CC final rule, click here.
To read the ANPR for the HMDA, click here.
To read the letter from the state AGs, click here.
To read the OIG report, click here.
Why it matters
After a slow start, the new CFPB is focusing on rulemaking, which is probably a good thing for industry and consumers alike. The recent changes to Regulation CC and the extension of the comment period for stakeholder feedback on the HMDA. The CFPB also heard from almost half of the state attorneys general on the overdraft rule in a letter that urged the Bureau to keep the rule in place—or be expanded.