The Consumer Financial Protection Bureau (CFPB) recently released its updated Unified Agenda submitted to the Office of Management and Budget (OMB), which provides a glimpse of the bureau’s various rulemaking initiatives.
Per the agenda, the bureau has five items in the “Final Rule” stage, six in the “Proposed Rule” stage and one in the “Prerule” stage.
Below is a brief overview of some rulemaking activities that have gained attention in the industry and/or may become more prevalent in the near future:
Credit Card Penalty Fees – Final Rule: The CFPB is in the process of finalizing a rule to amend Section 149 of the Credit Card Accountability Responsibility and Disclosure (CARD) Act to accomplish three objectives: “(1) adjust the safe harbor dollar amount for late fees to $8 and eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type; (2) provide that the current provision that provides for annual inflation adjustments for the safe harbor dollar amounts would not apply to the late fee safe harbor amount; and (3) provide that late fee amounts must not exceed 25 percent of the required minimum payment.” The final rule has spurred pushback from financial institutions, trade advocates and some Republican congressmen.
Personal Financial Data Rights – Proposed Rule: Under Sec. 1033 of the Consumer Financial Protection Act (CFPA), the bureau is required to issue a rule mandating covered entities to make consumers’ personal data available to them upon request. This information includes transaction data and other information concerning a consumer financial product or service the consumer utilizes from the covered entity. Dec. 29 will mark the end of comment period for the proposed rule, more than seven years after the CFPB issued its first Request for Information on the matter in November 2016.
Financial Data Transparency Act – Proposed Rule: In addition to its rulemaking activity required by Sec. 1033, the CFPB is coordinating efforts alongside other federal agencies (Treasury, Federal Reserve, Office of the Comptroller of the Currency, Securities and Exchange Commission, Federal Deposit Insurance Corp., Federal Housing Finance Agency and National Credit Union Administration) to establish data standards for collecting information reported to each agency by financial entities under their jurisdiction. The proposed rule would also apply to data collected from the agencies on behalf of the Financial Stability Oversight Council. The agencies plan to issue a notice of proposed rulemaking in June 2024 and a final rule next December.
Overdraft Fees – Proposed Rule: The CFPB indicated it is considering developing proposed amendments to Regulation Z to potentially modernize the 1969 law, promulgated by the Federal Reserve, and how it applies to financial entities that charge overdraft fees. The bureau notes in its Unified Agenda that although the nature of overdraft services has significantly changed, overdraft rules remain largely unchanged. The bureau has cited illegal overdraft practices in numerous enforcement actions and at times referred to some overdraft fees as “junk fees” under certain circumstances. With its proposed rule, the bureau seeks to address how accounts can be overdrawn and how financial institutions may determine whether to advance funds to pay the overdrawn amount. Financial industry advocates have been vocal in their opposition to the CFPB’s proposed changes, arguing most overdraft fees charged by covered entities are legitimate charges.
Fees for Insufficient Funds – Proposed Rule: Separate from its Regulation Z proposed rulemaking, the CFPB also lists in its Unified Agenda a proposed rule addressing instances where companies employ strategies the bureau deems to be unfair, deceptive and abusive acts and practices (UDAAP). The bureau explains the difference between overdraft fees and non-sufficient funds (NSF) fees lies in how a depository institution chooses to handle situations where a consumer has insufficient funds for a transaction. Depository institutions sometimes will cover the cost of transactions in which borrowers exceed their account balance, resulting in an overdraft. In many cases, however, the depository institution will decline to pay the transaction and charge the consumer an NSF. The bureau further notes that some financial institutions have voluntarily stopped charging such fees and that it is “considering developing a proposed rule that would preliminarily identify the assessment of NSF fees in certain circumstances as an unfair, deceptive, or abusive act or practice (UDAAP) under section 1031(b) of the CFPA and impose requirements to prevent such UDAAPs.”
Fair Credit Reporting Act (FCRA) – Prerule: The Prerule stage is where the CFPB discusses whether possible rulemaking activities may be appropriate related to a particular law or existing regulation. The bureau has indicated it is in the process of considering whether to amend Regulation V, which implements key provisions of the FCRA. Regulation V imposes legal requirements on consumer reporting agencies, the use of consumer reports, and furnishers of information to consumer reporting agencies. The bureau has invoked FCRA provisions in multiple enforcement actions in the past year.
Additional CFPB rulemaking activity: Mortgage Servicing (proposed rule); Supervision of Larger Participants in Consumer Payment Markets (proposed rule); Amendments to FIRREA Concerning Automated Valuation Models (final rule); Property Assessed Clean Energy Financing (final rule); Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders (final rule); Registry of Supervised Nonbanks That Use Form Contracts to Impose Terms and Conditions To Waive Or Limit Consumer Legal Protections (final rule). More details about these items can are available here.