On Thursday, June 18, 2020, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced a new pilot program to issue advisory opinions (“Pilot AO Program”) on areas of regulatory or statutory uncertainty. The CFPB simultaneously issued a proposed procedural rule on a permanent advisory opinion program (“AO Program”). The Bureau intends to issue advisory opinions (“AOs”) to address ambiguities in legal requirements that are not suited to be addressed through other Bureau programs such as the Regulatory Inquiries Function and Compliance Aids. The proposed AO Program comes more than two years after industry participants requested such a program in response to the Bureau’s March 2018 Request for Information Regarding Bureau Guidance and Implementation Support.
The proposed AO Program is similar to those offered by other state and federal regulators and, if implemented properly, could provide much needed certainty for regulated entities and consumers alike. The AO Program is intended to address areas of regulatory and statutory uncertainty and provide publicly available guidance for similarly situated parties and affected persons. AOs will be issued as interpretive rules under the Administrative Procedures Act, published in the Federal Register, and signed by the Director of the CFPB. Where information submitted to the Bureau is information the requestor would not normally make public, however, the Bureau will treat it as confidential to the extent applicable under its confidentiality regulations. The CFPB will summarize the material facts of the request, and the AOs will apply to situations that conform to those facts. The AO will also indicate where a safe harbor may apply, such as those under certain consumer financial protection laws. The AO Program is not intended for situations that would require a regulatory change or to create bright-line rules where the regulation or statute is intended to require a fact-intensive analysis.
The AO Program will focus on four of the Bureau’s five statutory objectives under 12 U.S.C. 5511(b)—namely, that: (1) consumers are provided with timely and understandable information to make responsible decisions about financial transactions; (2) outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens; (3) Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and (4) markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
Notably, the Bureau will not use the AO Program to address the statutory objective that “consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination,” stating that “other regulatory tools are often more suitable for addressing” these issues.
Pilot AO Program
The Pilot AO Program is limited to covered persons and service providers subject to the CFPB’s supervisory authority, and the identity of the requesting entity must be disclosed. During the pilot, the CFPB will not accept requests from third parties, such as law firms or trade groups, on behalf of anonymous entities. The CFPB will consider issues that have been identified during examinations as benefiting from additional clarity, issues of substantive import or impact, and matters that have not previously been clarified. The CFPB does not intend to issue AOs on topics that are subject to ongoing investigation or enforcement or rulemaking, or items that are better suited for other venues such as compliance aids or the notice-and-comment process.
Requests under the Pilot AO Program can be submitted to firstname.lastname@example.org.
Under the Proposed Rule, requests will not be limited to covered entities. Instead, third parties can submit requests on behalf of unnamed clients or members. Under the Proposed Rule, a request must concern actual facts or a course of action that the requestor is considering engaging in. The requestor must indicate whether the party is subject to an ongoing CFPB enforcement action or investigation, and whether the issue is subject to “known or reasonably knowable” active litigation or other federal or state investigation. The Proposed Rule outlines specific items that must be included in the request for an AO, including the requestor’s proposed interpretation and why that interpretation is appropriate.
The Proposed Rule is open for a 60-day comment period from the day it is published in the Federal Register. The CFPB seeks comments on all aspects of the AO Program, including: (a) application elements the Bureau should require from parties requesting AOs, and accommodations that should be made for requestors with limited legal resources; (b) how the Bureau should prioritize requests for AO guidance; (c) how the Bureau should quantify the benefit to consumers when evaluating AO requests; (d) improvements that could be made to the Proposed AO Program to further enhance compliance; (e) how the Bureau should handle sensitive information submitted by requestors; and (f) how the Bureau can make AO guidance that has not been incorporated into the Official Interpretations codified in the Code of Federal Regulations (or Commentary) available to the public in a useful format.
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The proposed AO Program has the potential to “fill the gap” in existing CFPB vehicles for regulatory interpretations and provide certainty on sticky regulatory questions. However, it remains to be seen whether the proposed carve-outs will hinder the ability for the AO Program to live up to its promise.