On June 22, 2020, the Consumer Financial Protection Bureau (CFPB or Bureau) published two notices in the Federal Register announcing (1) the launch of a pilot advisory opinion (AO) program (“Pilot AO Program”); and (2) a proposed permanent AO program (“Proposed Permanent AO Program”), which will replace the Pilot AO Program after the Proposed Permanent AO Program is finalized.  Both programs are intended to provide guidance to address uncertainty regarding the Bureau’s existing regulations, and are part of the Bureau’s broader efforts to provide additional and clearer guidance to regulated entities.  

The Pilot AO Program and the Proposed Permanent AO Program are similar in many respects to advisory opinion programs offered by other agencies, such as interpretive letters issued by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), where the fundamental purpose of the opinions is to clarify how a law or regulation applies to a specific set of facts. The Pilot AO Program and the Proposed Permanent AO Program are expressly applicable not just to the party that submitted the request, but also to similarly situated parties.  It is important to note, however, that advisory opinions issued under the Pilot AO Program and the Proposed Permanent AO Program are interpretive rules and not binding rules with the force and effect of law, like rules that have undergone the notice‑and‑comment process.  In other words, unlike formal regulations, which are binding upon all persons and courts to the same extent as a congressional statute, the advisory opinions will not bind other federal or state agencies, but may be persuasive in advocacy before or litigation with such agencies.  The Bureau developed the programs after receiving feedback from stakeholders in support of an AO program, in response to the CFPB’s March 2018 Request for Information Regarding Bureau Guidance and Implementation Support and its December 2018 Proposed Policy on No-Action Letters and the BCFP Product Sandbox.   

Purpose of the Pilot and Proposed Permanent AO Programs 

Under the Pilot and Proposed Permanent AO Programs, a party may submit a request for interpretive guidance to resolve regulatory uncertainty on a particular topic. The programs will mainly focus on addressing ambiguities in the Bureau’s regulations, although AOs also may clarify statutory uncertainty.

For the Pilot AO Program, AO requestors are limited to covered persons or service providers subject to the CFPB’s supervisory or enforcement authority (meaning that third parties such as trade associations cannot submit requests on behalf of another party), and the requestor must identify itself in the request. Under the Proposed Permanent AO Program, a third party (e.g., a trade association) could submit a request on behalf of another party.

The CFPB does not set out any specific requirements for the contents of an AO request under the Pilot AO Program. However, under the Proposed Permanent AO Program, parties would be required to submit certain information for an AO request to be considered, including:

• All material facts and circumstances;
• A detailed description of the legal question and supporting facts with respect to which the requestor seeks an AO;
• A proposed interpretation;
• Identification of the potential uncertainty or ambiguity that the interpretation would address;
• An explanation of why the requested interpretation is an appropriate resolution of the uncertainty or ambiguity; and
• A statement regarding whether the issue is the subject of any known or reasonably knowable active litigation or federal or state agency investigations.   

The Bureau also noted that the issue raised in the request must be within the Bureau’s purview, and must concern actual facts or a course of action that the requestor is considering engaging in. Parties may, but are not required to, submit additional information, such as an explanation of the potential benefits and risks to consumers associated with resolution of the question.

AO Request Process

Generally, in selecting topics for an AO, the Bureau intends to “prioritize open questions within the Bureau’s purview that can legally be addressed through an interpretive rule, where an AO is an appropriate tool relative to other Bureau tools for resolving the identified uncertainty.” The Bureau will weigh various factors in determining which requests to select for an AO, including whether the issue:

• Is one that has previously been noted by the CFPB as one that might benefit from additional regulatory clarity;
• Is one of substantive importance or impact;
• Is the subject of an ongoing CFPB investigation or enforcement action or an ongoing or planned rulemaking proceeding; or
• Concerns an ambiguity that the CFPB has not previously addressed through an interpretive rule or other authoritative source.

The CFPB also noted that it will select topics for an AO based on the following statutory priorities of the Bureau:

• To provide consumers with timely and understandable information to make responsible decisions;
• To identify outdated, unnecessary, or unduly burdensome regulations to reduce regulatory burdens;
• To provide consistency in enforcement of Federal consumer financial law, and to promote fair competition; and
• To ensure that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation. 

The Bureau noted that while its statutory priorities include protecting consumers from unfair, deceptive, or abusive acts or practices and to protect against illegal discrimination—and that this priority is “at least as important” as the above listed priorities—there are other regulatory tools “more suitable” for addressing this priority such that UDAAP will not be a main focus of its AO topics.

The CFPB indicates that it will respond to the request for clarification by publishing an AO in the Federal Register and on its website, along with its summary of the material facts and its legal analysis of the issue. Unlike with other, similar programs – such as the Bureau’s No-Action Letter (NAL) Policy, Trial Disclosure Program (TDP) Policy, and Compliance Assistance Sandbox (CAS) Policy, under which the Bureau will grant or deny an application within 60 days of informing the submitter that its application is complete – neither the Pilot AO Program nor the Proposed Permanent AO Program commits to a timeframe for review of an AO request.

Reliance on the AO

The AOs issued under the Pilot AO Program will constitute interpretive rules under the Administrative Procedure Act (APA), and will be signed by the Director.  The APA exempts certain types of guidance, including policy statements and interpretive rules, from its formal notice-and-comment requirement.  Thus, because the CFPB has deemed AOs to be interpretive rules, the CFPB will issue AOs without public feedback, and the AOs will be based solely on the CFPB’s interpretation of the regulation as applied to the facts.  The Bureau has made clear, however, that it will not issue an AO on a topic that the agency determines requires notice‑and‑comment rulemaking, or that is better addressed through a notice-and-comment process, such as an AO that would change a regulation.   

Significantly, where a statutory safe harbor is applicable to an AO—e.g., under the Truth in Lending Act, the Equal Credit Opportunity Act, the Electronic Fund Transfer Act, or the Real Estate Settlement Procedures Act—the AO will note that fact, and regulated entities should be protected from liability for acts or omissions made in good faith in conformity with a Bureau interpretation. The Fair Debt Collection Practices Act also contains a “safe harbor” provision, and specifically states that liability will not be imposed on any act or omission done in good faith in conformity with an advisory opinion of the Bureau.  The statutory safe harbors should help to insulate regulated entities from liability not only from the Bureau’s enforcement, but also from other federal and state agencies with enforcement authority and private litigation related to the subject of the AO, to the extent provided by the statute that is the subject of the interpretation.  Note that an AO, unless otherwise indicated, will be applicable to the party that submitted the request and to similarly situated parties “to the extent that their situations conform to the Bureau’s summary of material facts in the AO.”  The AOs will apparently not be time-limited, meaning that the requestor and similarly situated parties can expect to be able to rely on the AO so long as the facts upon which the AO were based do not change.  

The Pilot AO Program and the Proposed Permanent AO Program are another aspect of the Bureau’s attempts to promote innovation by clarifying uncertainty relating to compliance and/or providing a safe harbor for entities seeking to launch a new product or service. In September 2019, the Bureau announced the NAL Policy, TDP Policy, and CAS Policy to facilitate such goals. The Bureau also has taken steps recently to issue additional compliance aids and guidance to clarify existing Bureau topics, and to address emerging issues, such as those related to the COVID-19 pandemic.

While the AO Programs and the NAL, TDP, and CAS Policies are all designed to promote innovation, they provide a requestor with different processes for obtaining such relief, and allow for varying degrees of reliance and protection for regulated entities.  For example, a NAL is an exercise of supervisory and enforcement discretion by the Bureau as it relates to a company’s offering of a product or service under certain facts and circumstances; an AO, on the other hand, is an interpretation of law by the Bureau, which generally protects the regulated entity from liability, including, to the extent permitted by applicable law, from enforcement by other law enforcement agencies or private litigation. As another example, the TDP and CAS policies are more limited in scope and duration than either the NAL or AO policies.  With the Pilot AO Program (and, ultimately, the Proposed Permanent AO Program), regulated entities and other consumer financial services market participants have a new, attractive avenue for entities exploring innovative consumer financial services products and services.

The Pilot AO Program is applicable as of its June 22, 2020 publication in the Federal Register. Comments on the Proposed Permanent AO Program are due by August 21, 2020. The CFPB requests that commenters focus on the application elements that should be required from requestors, how the CFPB should prioritize AO requests, and how the CFPB should handle sensitive information.

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