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(1) “Consumers are provided with timely and understandable information to make responsible decisions”; (2) “Identify outdated, unnecessary or unduly burdensome regulations in order to reduce regulatory burdens”; (3) “Consistency in enforcement of Federal consumer financial law in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.
In the same vein, the Bureau will be less likely to answer questions that are related to ongoing investigations, enforcement actions, and pending rulemakings. Additionally, the CFPB does not intend to provide an advisory opinion that would revise a regulation, or in instances where standards may be applied only through “fact-intensive analysis”, and where such analysis cannot merely be replaced with a bight-line rule. For example, the Bureau does not anticipate publishing advisory opinions related to fact-intensive reviews such as the application of UDAAP standards. These advisory opinions will be shared publicly so that others in the industry might benefit from the Bureau’s analysis. While the CFPB already makes guidance available through various resources, both formal and informal, it believes that both companies and consumers will benefit from opinions that provide broader clarifications as opposed to answers tailored to discrete matters and individual companies.
The Bureau’s advisory opinions will specify whenever they involve statutes which provide safe harbors for acts or omissions taken in good faith with Bureau interpretations. Potentially applicable financial services statutes which provide such cover include TILA, RESPA, ECOA, EFTA, and FDCPA. Advisory opinions will be based on the specific fact scenarios stated in making the request, and setting forth the applicable facts in detail will be critical. As noted in the CFPB’s notice, “unless otherwise stated, each advisory opinion will be applicable to the requestor and to similarly situated parties to the extent that their situations conform to the Bureau’s summary of material facts in the advisory opinion.”
The Federal Register rule notice addresses some of the concerns raised about the advisory opinions. “With respect to comments that advisory opinions could create confusion, the Bureau believes that clear communication of the status of advisory opinions issued under the Pilot Advisory Opinion Program as interpretive rules under the Administrative Procedure Act (“APA”) will minimize potential for confusion as to the significance of different types of guidance. Further, advisory opinions will be signed by the Director, addressing concerns that an advisory opinions program could lead to the proliferation of conflicting staff-level opinions.”
Entities may submit requests for advisory opinions by email to advisoryopinion@cfpb.gov. However, the CFPB will not permit anonymous requests from trade associations or law firms on behalf of unnamed entities. Each advisory opinion will be published in the Federal Register and on the CFPB’s website and will include requestor-specific facts and the Bureau’s accompanying legal analysis. The Bureau also noted in its announcement that the public comment period remains open for the advisory opinions program (distinct from the Pilot). These developments and proposals are evidence, in our view at least, of the Bureau hearing and responding to industry concerns. It evidences tacitly that institutions do want to do the right thing and need additional support. A good thing.
As the CFPB gains a deeper understanding of the impact of its proposed program, it may offer further information and supervisory guidance related to the provision of Advisory Opinions. Entities may choose to consult directly with the prudential regulator when determining how their financial services products might impact consumers and the broader consumer financial services market.
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