NASCUS Summary: Proposed Rule, CFPB Inherited Rules

Prepared by the NASCUS Regulatory Affairs Department

The Bureau of Consumer Financial Protection (CFPB) has published a Notice of request for comments from the public on how the CFPB could streamline regulations it recently inherited from other Federal agencies. The CFPB's Notice: 1) asks the public to identify provisions of the inherited regulations that should be made the highest priority for updating, modifying, or eliminating because they are outdated, unduly burdensome, or unnecessary; 2) discusses several specific requirements that may warrant review; and 3) seeks suggestions for practical measures to make complying with the regulations easier.

COMMENTS DUE:

Comments are due to the CFPB March 5, 2012.  In addition, after the initial comment period, the CFPB will provide another 30 days for response to comments submitted during the initial comment period.

Comments should be submitted to NASCUS no later than February 24, 2012.

A copy of the request for comments may be viewed here.

Summary

In 2012, the CFPB will begin reviewing the regulations it inherited under the Dodd-Frank Act to identifying where the regulations can be streamlined to provide better results for both consumers and industry.  As the Notice reads, "[t]he principal goal of this initial, targeted review is to identify the highest priority areas for attempting to streamline the inherited regulations by updating, modifying, or eliminating outdated, unduly burdensome, or unnecessary provisions."  The CFPB notes that it wishes to focus on improvements it can make without Congressional action.

The CFPB states it will consider the following five factors in evaluating recommendations and prioritizing regulations for streamlining:

1) The potential benefits and costs of a potential regulatory change for both consumers and industry;
2) The likelihood that the CFPB could achieve benefits consistent with the statute underlying the regulation being amended;
3) The speed with which the public would realize the benefits of any changes;
4) The governmental and private resources it would take to realize the benefits; and
5) The availability of metrics to evaluate the above factors.

In discussing the above criteria, the CFPB makes clear that it will not consider changes that would undermine public policy objectives simply to reduce compliance burdens.  The CFPB will also consider the fact that regulatory stability sometimes outweigh the benefits of minor improvements to a regulation.

The CFPB's Notice provides commentators with several examples of areas within its inherited regulation where it is particularly interested in receiving comments:

  • Consistent and Sufficient Definitions

The CFPB notes that several of the inherited regulations define key terms differently, citing as an example, Regulation Z's, Regulation E's, Regulation V's, Regulation P's, and NCUA's different definitions of the term "consumer."  Likewise, the terms "business day" and "credit" are also defined differently throughout the inherited regulations. While acknowledging that sometimes different definitions are needed to satisfy different statutory objectives, the CFPB asks for input on which terms should be defined more consistently across the regulations and how those terms, if any, should be defined.

  • Annual Privacy Notices

The CFPB seeks input on whether exceptions to certain annual privacy notices should be created.

  • ATM Fee Disclosure

            The Notice seeks comment on whether the Regulation E requirement that fee notices be physically posted on ATMs should be eliminated and whether other disclosures of ATM fees are adequate to inform consumers.

  • Coverage/Scope of Regulation C (Home Mortgage Disclosure)

The CFPB asks for comments regarding whether depositories that make or refinance small numbers of loans should be exempted from Regulation C's HMDA requirements. If an exemption should be created, the CFPB requests commentators recommend what the threshold for exemption should be.

  • Coverage/Scope of Regulation B (Equal Credit Opportunity)

The Notice asks for comments regarding Regulation B and Regulation C provisions regarding the collection of data on prospective borrowers race and ethnicity. The Notice asks whether the regulations should have a consistent exemption from data collection.

  • Coverage/Scope of Regulation Z (Truth in Lending)

Creditors that have extended credit either 25 times in total in the past calendar year, or 5 times when the extension is secured by a dwelling, are generally subject to regulation Z. The CFPB is asking whether these thresholds should be raised, if so what should the thresholds be, and whether similar exemptions should be granted to RESPA's disclosure requirements. The CFPB also asks whether different types of consumer loans should have different exemption thresholds.

  • Ability to Pay Credit Card Debt

Pursuant to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act), Regulation Z requires credit card companies to evaluate an applicant's ability to repay before extending credit. As a result of concerns that these rules may have the unintended consequence of precluding individuals such as non-working spouses from obtaining credit the CFPB is asking whether Regulation Z should be amended.

  • Electronic Disclosures

Some of the CFPB's inherited regulations require certain disclosures in writing while other permit disclosures electronically if certain conditions are met.  The CFPB requests comments on whether it should permit disclosures now required to be in writing to be delivered in electronic form. The Notice also specifically asks for detail on what form electronic disclosures could take. For example, should text message be permitted even though such messages are not readily retainable.

  • Interstate Land Sales Full Disclosure Act

The Interstate Land Sales Full Disclosure Act imposes reporting, disclosure, and anti-fraud protections on some interstate land sales. In response to questions from commentators in the past, the CFPB asks whether updates and changes are warranted for these requirements.