Is the CFPB using its enforcement tool as de facto rulemaking?

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[author: Alan S. Kaplinsky]

Overshadowed by the publicity surrounding the announcement of the CFPB’s settlement of its first enforcement action was the CFPB’s concurrent release of a bulletin providing general guidance on marketing credit card add-on products. While focused on credit card add-on products, the bulletin is also intended to serve as guidance for the marketing of similar products offered in connection with other forms of credit or deposit services. In the bulletin, the CFPB reviews applicable federal consumer protection laws and regulations and describes steps the institutions it supervises are expected to take to avoid statutory and regulatory violations.

While it is useful for the CFPB to make its expectations known to the industry, the CFPB’s issuance of the bulletin could be seen as de facto rulemaking.  We hope the bulletin does not portend a trend by the CFPB to use its enforcement authority as a method for imposing  industry-wide standards that instead should be established through the rulemaking process required by Dodd-Frank and the Administrative Procedure Act.  For a fuller description of the bulletin, see our legal alert.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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