12 CFR Part 1074 (CFPB)
Prepared by NASCUS Legislative and Regulatory Affairs Division
November 2020
The OCC, Board, FDIC, NCUA and Bureau (collectively, “the agencies”) are inviting comment on a proposed rule that would codify the Interagency Statement Clarifying the Role of Supervisory Guidance issued by the agencies on September 11, 2018. The proposed rule is intended to confirm that the agencies will continue to follow and respect the limits of administrative law in carrying out their supervisory responsibilities. The 2018 statement reiterated well-established law by stating that, unlike a law or regulation, supervisory guidance does not have the force and effect of law. As such, supervisory guidance does not create binding legal obligations for the public. The proposal would also clarify that the 2018 Statement, as amended, is binding on the agencies.
Comments are due by January 4, 2021. The proposed rule can be found here.
Summary
The agencies recognize the important distinction between issuances that serve to implement acts of Congress (known as “regulations” or “legislative rules”) and non-binding supervisory guidance. Regulations create binding legal obligations. Supervisory guidance is issued by an agency to “advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power” and does not create binding legal obligations.
The agencies issued the Interagency Statement Clarifying the Role of Supervisory Guidance in 2018 to explain the role of supervisory guidance and the agencies’ approach to supervisory guidance. The Statement noted that supervisory guidance outlines the agencies’ supervisory expectations or priorities and articulates the agencies’ general views regarding appropriate practices for a given subject area. Supervisory guidance often provides examples of practices that mitigate risks, or that the agencies generally consider to be consistent with safety and soundness standards or other applicable laws and regulations, including those designed to protect consumers.
The 2018 Statement reiterates existing law and reaffirms the agencies’ understanding that supervisory guidance does not creating binding, enforceable legal obligations. The Statement also reaffirms that the agencies do not issue supervisory criticisms for “violations” of supervisory guidance and describes the appropriate use of supervisory guidance by the agencies. The agencies also expressed the following intentions within the Statement:
- Agencies will limit the number of numerical thresholds in guidance;
- Agencies will reduce the issuance of multiple supervisory guidance documents on the same topic;
- Agencies will continue efforts to make the role of supervisory guidance clear in communications to examiners and supervised institutions; and
- Agencies encourage supervised institutions to discuss their concerns about supervisory guidance with their appropriate agency contact.
This proposal is being issued in response to a petition that requested the agencies codify the 2018 interagency statement as well as provide additional clarification concerning questions that have arisen since the statement was issued.
Request for Comment
The agencies request comment on the following questions:
- Questions specific to communications regarding the supervisory guidance
- Should examiners reference supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations when criticizing (through the issuance of matters requiring attention, matters requiring immediate attention, matters requiring board attention, documents of resolution, supervisory recommendations or otherwise) a supervised financial institution?
- Are there specific situations where providing such examples would not be appropriate?
- Is it sufficiently clear what types of agency communications constitute supervisory guidance? If not, what steps could the agencies take to clarify this?
- Are there any additional clarifications to the 2018 Statement that would be helpful?
- Are there other aspects of the proposal where you would like to offer comment?
- Questions specific to the plain language requirements re: Section 722 of Gramm-Leach Bliley Act
- Have the agencies organized the material to suit your needs? If not, how could they present the proposed rule more clearly?
- Are the requirements in the proposed rule clearly stated? If not, how could the proposed rule be more clearly stated?
- Do the regulations contain technical language or jargon that is not clear? If so, which language requires clarification?
- Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would achieve that?
- Would more, but shorter, sections be better? If so, which sections should be changed?
- What other changes can the agencies incorporate to make the regulation easier to understand?