Earlier this week AFSA encouraged other trade organizations to join a letter requesting that President Joe Biden support clear rules of the road in the financial services industry that take into account both the benefits and costs of regulation. The letter highlighted that large and small financial institutions alike share the Consumer Financial Protection Bureau’s (CFPB) goal of making consumer financial markets work for consumers, responsible providers, and the overall economy. However, this goal is only achievable when the rules are clear. Compliance becomes difficult when traditional rulemaking is superseded by blog posts that contradict law or regulation, vague guidance that deems such common practices as using form contracts or including certain terms and conditions in contracts as alleged violations of law, proclamations of the CFPB’s novel interpretation of law via amicus briefs, or enforcement actions that contradict state law.

The letter asked President Biden to emphasize the need for rulemaking within the administration. Rulemaking includes an opportunity for notice and comment, giving stakeholders the opportunity to ask questions, review (and replicate) the underlying data and analysis in support of a proposed rule, point out potential inconsistences with other laws, and outline potential impacts on consumers and businesses. Unfortunately, the CFPB continues to creatively avoid following the notice and comment rulemaking process as required under the Administrative Procedure Act. This type of avoidance seems poised to continue as the CFPB is planning to hire 50% more enforcement attorneys during the next few months. In the CFPB’s 2022 financial report, 44% of the Bureau’s entire workforce was already dedicated to its Supervision, Enforcement & Fair Lending Division. However, only 10% of the CFPB’s workforce is in the Research, Markets & Regulations Division. Pursuing enforcement actions against a few players with the hopes of influencing the behavior of all other market participants is not nearly as effective in improving compliance as writing rules that apply clear standards across the industry.