ALERT - CFPB Issues Final List of Rules and Orders That Will Be Enforced By the Bureau

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August 1, 2011

On July 21, 2011 the Consumer Financial Protection Bureau (CFPB or Bureau) issued, pursuant to the directive of Section 1063(i) of the Consumer Financial Protection Act, Section 1063(i) (the “Act”) (Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)) a list of the rules and orders that will be enforced by the CFPB. Because the Senate has not confirmed a director for the CFPB, the Department of the Treasury has published the list on behalf of the CFPB under Section 1066 of the Act. Importantly, the Bureau has provided that “rulemaking authority for all the rules contained on the list” transfers to the CFPB on the transfer date July 21, 2011. The Bureau intends (later this year) to publish in Chapter X of Title 12 of the Code of Federal Regulations “the rules for which rulemaking authority transfers to the CFPB.” Until that publication, “the existing rules will continue in effect and the changes made by the Act to transfer authority to the CFPB will be effective as of the designated transfer date by operation of law.” The Bureau may in what it describes as this “interim period” provide guidance on its website, regarding procedural matters relating to compliance with existing regulations (for example, how to make filings with the CFPB).

Until a director is in place for the Bureau, the Treasury Secretary will be defacto director under Section 1066 of the Act, but his powers are arguably limited to those until subtitle F of Title X, the Title covering transfer of functions and personnel. Since organic rulemaking powers are granted to the Bureau under other subtitles of Title X, some have said that the Bureau is not in a position to exercise those powers absent an “in place” director. However, on July 22, 2011, the Bureau issued an Interim Final Rule (76 Fed. Reg. 141, pp 44226-44) covering new Regulation D - Alternative Mortgage Transaction Parity (AMTPA) - and noted:

     “… Section 1066 of the Dodd-Frank Act grants the Secretary of the Treasury interim authority to perform certain functions of the CFPB. Pursuant to that authority, Treasury is publishing this interim final rule on behalf of the CFPB. …”

Moreover, the Bureau makes it clear in the issuance of this Interim Rule that it believes that the Bureau now has rulemaking authority:

    “… Effective July 21, 2011, Section 1061 of the Dodd-Frank Act transfers to the CFPB the “consumer financial protection functions” previously vested in certain other federal agencies. The term “consumer financial protection function” is defined to include “all authority to prescribe rules or issue orders or guidelines pursuant to any federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.” AMTPA and TILA are federal consumer financial laws. Accordingly, effective July 21, 2011, the authority of the OCC, NCUA, and OTS to issue regulations pursuant to AMTPA and the authority of the Board of Governors of the Federal Reserve System (Federal Reserve Board) to issue regulations pursuant to TILA transfer to the CFPB.”

To make matters more clear, the Bureau noted in its AMTPA rulemaking that on July 21, 2011, it inherited all “powers and duties” previously vested in the transfer agencies:

    “… Effective on the designated transfer date, the CFPB also is granted “all powers and duties” vested in each of the federal agencies, relating to the consumer financial protection functions, on the day before the designated transfer date.”

A. It would, therefore, appear that:

1. The CFPB believes that notwithstanding the absence of a director it has “organic”, “substantive” rulemaking authority under the designated Consumer Financial Laws.
2. Henceforth and until a director is in place, the Treasury will publish rules on the Bureau’s behalf under the authority of Section 1066 of the Act.

In its July 21 advice, the Bureau also spoke to guidance previously issued by the transferor agencies (Board of Governors, Federal Deposit Insurance Corporation, Federal Trade Commission1, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and the Department of Housing and Urban Development). The “official commentary, guidance, and policy statements issued prior to July 21, 2011, by a transferor agency with exclusive rulemaking authority for the law in question” will be applied by the CFPB pending further CFPB action. Like treatment will be given to similar documents jointly agreed to by all relevant agencies in the case of shared rulemaking. All other written guidance, interpretations and policy statements issued prior to July 21, 2011 by a transferor agency will be given “due consideration” in light of all relevant factors:

  • did the agency have rulemaking authority?;
  • formality of document in question;
  • weight the issuing agency afforded the document;
  • the persuasiveness of the document; or
  • whether the document conflicts with guidance or interpretations issued by another agency.

Query whether the balance of 2011 and all of 2012 will be a period of “regulatory freeze” as rulemaking for the consumer protection rules transferred comes to a complete halt at the Board, OCC, and other federal agencies. The hostility of Congress and the absence of a director will likely inhibit any bold initiatives by the Bureau. Pending consumer initiatives relative to the rules transferred at the Board, OCC and FDIC are, however, now aborted. The Bureau may feel compelled, as it did in the case of the Interim Financial Rule under AMTPA, to act in certain areas.

What You Should Do
 
Institutions should enhance their compliance functions and diligence for the laws on the Bureau’s list. Institutions should examine any formal and informal regulatory advice they may have received from the transferor agencies and any opinions of counsel upon which they may be relying which in turn relied upon transferor agency advice. Institutions should closely monitor the Bureau website for further posted advice regarding the Bureau’s activities under the listed laws.

The Bureau’s list is as follows:

A. Board of Governors of the Federal Reserve

1. 12 CFR part 202—Equal Credit Opportunity Act (Regulation B)
2. 12 CFR part 203—Home Mortgage Disclosure (Regulation C)
3. 12 CFR part 205—Electronic Fund Transfers (Regulation E)
4. 12 CFR 208.101-.105 & Appendix A to Subpart I—Registration of
    Residential Mortgage Loan Originators (Regulation H, Subpart I)
5. 12 CFR part 213—Consumer Leasing (Regulation M)
6. 12 CFR part 216—Privacy of Consumer Financial
    Information (Regulation P)
7. 12 CFR part 222—Fair Credit Reporting (Regulation V), except with
    respect to Sec.:
    222.1(c) (effective dates),
    222.83 (Disposal of consumer information),
    222.90 (Duties regarding the detection, prevention,
    and mitigation of identity theft),
    222.91 (Duties of card issuers regarding changes of address), &
    Appendix J (Interagency Guidelines on Identity Theft Detection,
    Prevention, and Mitigation)
8. 12 CFR part 226—Truth in Lending (Regulation Z)
9. 12 CFR part 230—Truth in Savings (Regulation DD)

B. Federal Deposit Insurance Corporation

1. 12 CFR part 332—Privacy of Consumer Financial Information
2. 12 CFR part 334—Fair Credit Reporting, except with respect
    to Sec.:
    334.83 (Disposal of consumer information),
    334.90 (Duties regarding the detection, prevention, and mitigation
    of identity theft),
    334.91 (Duties of card issuers regarding changes of address), &
    Appendix J (Interagency Guidelines on Identity Theft Detection,
    Prevention, and Mitigation)
3. 12 CFR 365.101-.105 & Appendix A to Subpart B—Registration of
    Residential Mortgage Loan Originators

C. Office of the Comptroller of the Currency

1. 12 CFR 34.20-.25—Adjustable-Rate Mortgages (but only as applied
    to non-federally chartered housing creditors under the AMTPA).
2. 12 CFR 34.101-.105 & Appendix A to Subpart F —
    Registration of Residential Mortgage Loan Originators
3. 12 CFR part 40—Privacy of Consumer Financial Information
4. 12 CFR part 41—Fair Credit Reporting, except with respect to Sec.:
    41.83 (Disposal of consumer information),
    41.90 (Duties regarding the detection, prevention, and
    mitigation of identity theft),
    41.91 (Duties of card issuers regarding changes of address), &
    Appendix J (Interagency Guidelines on Identity Theft Detection,
    Prevention, and Mitigation)

D. Office of Thrift Supervision

1. 12 CFR 560.35—Adjustments to home loans (but only as applied
    to non-federally chartered housing creditors under AMTPA)
2. 12 CFR 560.210-220—Alternative Mortgage Transactions
    (but only as it relates to AMTPA)
3. 12 CFR 563.101-.105 & Appendix A to Subpart D—Registration of
    Residential Mortgage Loan Originators
4. 12 CFR part 571—Fair Credit Reporting, except with
    respect to Sec.:
    571.83 Disposal of consumer information
    571.90 Duties regarding the detection, prevention, and mitigation
    of identity theft),
    571.91 (Duties of card issuers regarding change of address), &
    Appendix J (Interagency Guidelines on Identity Theft Detection,
    Prevention, and Mitigation)
5. 12 CFR part 573—Privacy of Consumer Financial Information

E. National Credit Union Administration

1. 12 CFR 701.21—Loans to members and lines of credit to members
    (but only as applied to non-federally chartered housing creditors
    under AMTPA)
2. 12 CFR part 707—Truth in Savings
3. 12 CFR part 716—Privacy of Consumer Financial Information
4. 12 CFR part 717—Fair Credit Reporting, except with respect
    to Sec.:
    717.83 (Disposal of consumer information)
    717.90 (Duties regarding the detection, prevention,
    and mitigation of identity theft),
    717.91 (Duties of card issuers regarding changes of address), &
    Appendix J (Interagency Guidelines on Identity Theft Detection,
    Prevention, and Mitigation)
5. 12 CFR part 741—Requirements for Insurance, but only with
    respect to Sec.:
    741.217 (Truth in Savings),
    741.220 (Privacy of consumer financial information), &
    741.223 (Registration of residential mortgage loan originators)
6. 12 CFR part 761—Registration of Mortgage Loan Originators

F. Federal Trade Commission

*Footnote 12 to the Bureau's rule states: "Rulemaking authority for all the rules contained on the list below, except items 1 and 6 through 12 in Section F (Federal Trade Commission) will transfer to the CFPB on the designated transfer date." As to these rules, the CFPB has authority "in some circumstances" to enforce these rules. 

*1.   16 CFR part 310—Telemarketing Sales Rule
  2.   16 CFR part 313—Privacy of Consumer Financial Information
  3.   16 CFR part 320—Disclosure Requirements for Depository
        Institutions Lacking Federal Depository Insurance
  4.   16 CFR part 321—Mortgage Acts and Practices—Advertising
  5.   16 CFR part 322—Mortgage Assistance Relief Services
*6.   16 CFR part 425—Use of Prenotification Negative Option Plans
*7.   16 CFR part 429—Rule Concerning Cooling-Off Period for
        Sales Made at Homes or at Certain Other Locations
*8.   16 CFR part 433—Preservation of Consumers’ Claims
        and Defenses
*9.   16 CFR part 444 —Credit Practices
*10. 16 CFR part 435—Mail or Telephone Order Merchandise
*11. 16 CFR part 436—Disclosure Requirements and Prohibitions
        Concerning Franchising
*12. 16 CFR part 437—Disclosure Requirements and Prohibitions
        Concerning Business Opportunities
  13. 16 CFR Subchapter F, Parts 603, et seq.—
        Fair Credit Reporting Act, except with respect to:
        Part 681 (Identity Theft Rules),
        Part 682 (Disposal of Consumer Report Information
        and Records), & Appendix A to Part 681 (Interagency
        Guidelines on Identity Theft Detection, Prevention,
        and Mitigation)
14.   16 CFR part 901—Procedures for State Application for
        Exemption from the Provisions of the
        [Fair Debt Collection Practices] Act

G. Department of Housing and Urban Development

1. 24 CFR 26.28-.56—Hearing Procedures Pursuant to the
    Administrative Procedure Act
2. 24 CFR part 30—Civil Money Penalties: Certain Prohibited Conduct
    (but only as applied to the Real Estate Settlement Procedures Act
    of 1974 (RESPA), the Interstate Land Sales Full Disclosure Act
    (ILSA), and the Secure and Fair Enforcement for Mortgage
    Licensing Act of 2008)
3. 24 CFR part 1710—Land Registration
4. 24 CFR part 1715—Purchasers’ Revocation Rights, Sales Practices,
    and Standards
5. 24 CFR part 1720—Formal Procedures and Rules of Practice
6. 24 CFR part 3400—SAFE Mortgage Licensing Act: Minimum
    Licensing Standards and Oversight Responsibilities
7. 24 CFR part 3500—Real Estate Settlement Procedures Act
8. 24 CFR part 3800—Investigations in Consumer Regulatory
    Programs (but only as applied to RESPA and ILSA)

For more information please contact your Briggs and Morgan attorney.

1In a possible harbinger of things to come, the Federal Trade Commission has withdrawn its previously issued commentary on the Fair Credit Reporting Act, citing the transfer of rulemaking authority to the CFPB (76 Fed. Reg. 143, pp 44462-63).