AFSA & Trades: CFPB AO Not A-Okay
Earlier this week AFSA joined the Bank Policy Institute, the Consumer Bankers Association and the U.S. Chamber of Commerce in a letter to the Consumer Financial Protection Bureau (CFPB) raising concerns and requesting clarification on a recent Advisory Opinion (AO) released on October 11, 2023, regarding Section 1034(c) of the Dodd-Frank Act. The letter raises numerous questions about compliance with the AO, including the addition of new requirements that go beyond the scope of statute and the establishment of new legal penalties. Below is a summary of what the letter asks the CFPB to address:
- The AO introduces a new standard of “unreasonably impeded” not found in Section 1034(c) or in any other section of the Consumer Financial Protection Act (CFPA). In announcing this standard, the AO goes beyond merely interpreting the statute. It effectively imposes new legal obligations, such as a new standard for evaluating when and whether particular fees are permissible and new requirements related to the manner in which banks respond to consumers’ requests for information, none of which is contemplated by the plain language of Section 1034(c).
- The AO creates numerous compliance questions that could have been appropriately considered and answered had the CFPB issued the AO via notice and comment rulemaking. While the AO is labeled as “guidance,” the AO in fact fails to provide meaningful guidance on how to comply with the CFPB’s new requirements under Section 1034(c). The AO’s “interpretation” of the statute raises more questions than it answers and is inconsistent with the Bureau’s publicly stated desire of “having more clear, bright lines” in the regulatory space.
- Footnote 3 of the AO states that “the CFPB does not intend to seek monetary relief for violations of section 1034(c) that occur prior to February 1, 2024.” However, the CFPB should commit, in writing, to not seek monetary relief pursuant to this guidance. Enforcement of new obligations would only be permissible if those obligations have been established via notice and comment rulemaking. The AO appears to require financial institutions to significantly change their compliance systems that cannot reasonably be completed in the time provided by the CFPB, especially given the lack of clarity (this serves as further evidence that the AO is in fact a legislative rule that should have been promulgated via Administrative Procedure Act (APA) rulemaking).
- The CFPB criticizes technology that covered institutions have deployed in recent years to improve the consumer experience. The AO and accompanying press release seem to reach the conclusion that new technology and “relationship banking” are mutually exclusive when the opposite is true. Financial institutions have deployed new technology, especially in the last decade, to make banking more accessible, including improvements to online and mobile banking, artificial intelligence to assist with screening calls and fraud detection, and chatbots to respond with increasingly sophisticated responses to customers’ inquiries.
The AO did not provide time for notice and comment, leading to several compliance questions. You can read the full letter here.
December 20th, 2023
