June 24, 2020
Authored by: Douglas Thompson, Benjamin Saul and Ross Handler
The devil is in the details. The best intentioned new financial services rules and regulations can present challenges for compliance folks trying to implement the rules into their institutions’ existing systems and practices. Requirements, which may seem simple in the abstract, sometimes create herculean challenges because of system limitations, programming challenges, or simple ambiguity when loaded into real world operations. To hopefully overcome these compliance obstacles, on Thursday, June 18, 2020, the Consumer Financial Protection Bureau (“CFPB”) began its trial phase of a pilot program offering advisory opinions aimed at “reduc[ing] ambiguity and increas[ing] regulatory certainty, support[ing] proactive consumer protection, and enhanc[ing] the timeliness of guidance.” The CFPB first previewed this pilot program in March 2020 so that financial services providers could solicit provisional legal opinions on matters pertaining to the interpretation of the Bureau’s rules and laws.
Joining other agencies, like HUD who have had a no action letter procedure in place for years, the CFPB pilot will focus on four stated priorities: (1) “Consumers are provided with timely and understandable information to make responsible decisions”; (2) “Identify outdated, unnecessary or unduly burdensome regulations in order to reduce regulatory burdens”; (3) “Consistency in enforcement of Federal consumer financial law in order to promote fair competition”; and (4) “Ensuring markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”
As the pilot program is new and untested, the CFPB will pick which company questions to answer based on a review of the various petitions, granting priority to those questions that are novel and whose answers might benefit those in the greater consumer financial services community. The Bureau has said it will consider questions such as those arising during CFPB exams and those that have not otherwise been authoritatively addressed. In this regard, the CFPB noted the following factors that will drive its prioritization of requests:
- The request’s alignment with the CFPB’s statutory objectives;
- The scope of the impact on consumers if the CFPB is to provide an answer or interpretation;
- In the event where two regulators share concurrent jurisdiction over a specific consumer protection measure, whether the CFPB’s advisory opinion will impact the manner in which the other regulator regulates the same measure; and
- The impact the advisory opinion would have on the CFPB’s existing resources and personnel.