Guest Opinion: CFPB’s ‘Public’ Regulatory Philosophy
With a long to-do list and a director in place, the folks at the Consumer Financial Protection Bureau are off and running. Interestingly, they are off and running on a different path than traditional federal agencies. The CFPB has taken a different approach to public involvement and, most notably, the rulemaking process. The bureau has a unique regulatory philosophy that includes seeking early consumer and industry feedback and doing so in a nontraditional manner and in more contemporary forums. While questions remain about the appropriateness and impact of this approach, credit unions should take note. Early involvement in the rulemaking process may be key to ensuring your voice is heard.
The Dodd-Frank Wall Street Reform and Consumer Protection Act created the CFPB as an independent bureau with a mission to “make markets for consumer financial products and services work for Americans.” To this end, the CFPB has provided consumers with myriad educational resources as well as opportunities to seek out feedback on consumer financial products and services, including an online complaint-filing system;
online assistance tools, which allow consumers to ask for help on issues such as mortgage relief and student debt repayment; and an “Ask CFPB,” a tool that provides consumer-friendly definitions and answers to a variety of financial services questions.
To engage in a dialogue with consumers, the CFPB has used traditional (hotline, website, and snail mail) and nontraditional (blog, Facebook and Twitter) mechanisms.
Additionally, the CFPB is tasked with promulgating a variety of consumer financial regulations. What intrigues me is the approach the CFPB has taken with its regulatory process. The bureau has truly put the “public” in “public involvement” at each stage of the regulatory process, including what I call the pre-rulemaking stage. Last year, the agency launched the “Know Before You Owe” campaign for mortgages, credit cards and student loans. As part of its mortgages campaign, which seeks to provide streamlined and combined disclosures at two different points in the mortgage process, the CFPB released prototype disclosures. It then tested those prototypes with consumers and sought comments in old and new media forums. The agency considers this prototype review to be the first stage of the mortgage review process, which will be followed by the second stage of the process, proposing rules.
Public comment before proposed rules—are you scratching your head? The agency’s approach to appears to tweak traditional rulemaking procedures. Although the issuance of prototypes and early solicitation of public feedback are smart, practical approaches to involving the public, doing this prior to initiating a rulemaking is not typical and is, arguably, problematic. Furthermore, it impacts how credit unions and their trade associations may approach commenting on regulations.
Why is the agency taking this approach? Arguably, it stems from a lack of authority before Director Richard Cordray’s appointment in conjunction with a Dodd-Frank deadline to issue proposed rules on mortgages this summer. On the other hand, one could argue philosophy trumps procedure at the CFPB. If the latter is the case, is it appropriate?
Since Cordray’s appointment, the bureau has followed more traditional rulemaking procedures. In February, for example, the agency issued a notice and request for information on the impact of overdraft programs. In conjunction with issuing the notice, the CFPB also issued a prototype of a monthly checking account statement that would provide consumers more information on overdraft fees assessed and opportunities to reduce those fees. And, in March the CFPB issued a notice and request for comment on payday lending issues raised in an Alabama hearing. The issuance of Federal Register notices demonstrates a shift from the pre-Cordray “Know Before You Owe” approach and lends credence to the thought that the procedural change is due to Cordray’s appointment.
On the other hand, the argument could also be made that the issuance of a monthly checking account statement prototype segregated from a Federal Register notice is reminiscent of the pre-Cordray pre-rulemaking approach. Although the bureau’s approach to rulemaking has procedurally varied, the philosophy is consistent with the bureau’s initiatives and outreach: solicit and facilitate feedback from consumers at every stage of a thought process (not just the rulemaking process). So, perhaps it’s not a change in response to the appointment of a director but rather a continuation of the bureau’s regulatory philosophy that is prioritized over procedure—what I call putting the public in public involvement.
The CFPB has certainly taken one of the Administrative Procedure Act purposes to heart– involve the public in the rulemaking process. And your credit union, as “the public,” should consider modifying the timing of your involvement in the rulemaking process if the CFPB continues on its current path of initiating a pre-rulemaking stage. You should also work with your trade associations earlier in the process to ensure relevant issues are being raised in a timely fashion. While the early opportunity for involvement will require credit unions to modify their current comment submission procedures, you should certainly take advantage of the fact that the bureau truly does want to hear your voice.
Lauren Calhoun is a regulatory compliance manager at CUNA Mutual Group.
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