On June 18, 2020, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a procedural rule to launch a new pilot advisory opinion (AO) program to publicly address regulatory uncertainty in the Bureau’s existing regulations. The pilot AO program will allow entities seeking to comply with regulatory requirements to submit a request where uncertainty exists, and the Bureau will then select topics based on the program’s priorities and make the responses available to the public. The Bureau states that it is establishing the pilot AO program in response to feedback received from external stakeholders encouraging the Bureau to provide written guidance in cases of regulatory uncertainty. For the pilot AO program, requestors will be limited to covered persons or service providers that are subject to the Bureau’s supervisory or enforcement authority.
The pilot AO program will focus on the following four key priorities:
- Consumers are provided with timely and understandable information to make responsible decisions
- Identify outdated, unnecessary, or unduly burdensome regulations in order to reduce regulatory burdens
- Consistency in enforcement of federal consumer financial law in order to promote fair competition
- Ensuring markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation
According to the Bureau, initial factors weighing for the appropriateness of an AO include: (i) that the interpretive issue has been noted during prior Bureau examinations as one that might benefit from additional regulatory clarity; (ii) that the issue is one of substantive importance or impact or one whose clarification would provide significant benefit; and/or (iii) that the issue concerns an ambiguity that the Bureau has not previously addressed through an interpretive rule or other authoritative source.
Further, initial factors weighing strongly for a presumption that an AO is not an appropriate tool include: (i) that the interpretive issue is the subject of an ongoing Bureau investigation or enforcement action; (ii) that the interpretive issue is the subject of an ongoing or planned rulemaking; (iii) that the issue is better suited for the notice-and-comment process; (iv) that the issue could be addressed effectively through a Compliance Aid; or (v) that there is clear Bureau or court precedent that is already available to the public on the issue.
The Bureau will prioritize open questions within the Bureau’s purview that can legally and appropriately be addressed through an interpretive rule. The pilot AO program will focus primarily on clarifying ambiguities in the Bureau’s regulations, but the CFPB leaves open the possibility for AOs to clarify statutory ambiguities. Although the Bureau states that highly fact-intensive applications of general standards, such as of the statutory prohibition on unfair, deceptive, or abusive acts or practices (UDAPs/UDAAPs), pose particular challenges for issuing advisory opinions, the Bureau does not close the door on the possibility of offering AOs that provide additional clarity on the meaning of such standards.
If deemed appropriate, the Bureau will issue an AO based on its summary of the facts presented that would be applicable to other entities in situations with similar facts and circumstances. The AOs would be posted on the Bureau’s website and published in the Federal Register. Where a statutory safe harbor is applicable to an AO, the Bureau states that the AO will explain that fact. The Truth in Lending Act (TILA), Equal Credit Opportunity Act (ECOA), Electronic Fund Transfer Act (EFTA), and Real Estate Settlement Procedures Act (RESPA) provide certain protections from liability for acts or omissions done in good faith in conformity with an interpretation by the Bureau. The Fair Debt Collection Practices Act (FDCPA) contains similar protections, specifically using the term “advisory opinion.”
The Bureau is initiating its program for AOs in the form of a pilot, which will allow the Bureau to gain additional experience with AOs. Public comments on the Bureau’s concurrent AO program proposal, together with the Bureau’s experience with the pilot, will inform how the Bureau uses AOs in the future.
We note that AOs issued under the pilot AO program will be deemed interpretive rules under the Administrative Procedure Act (APA), which the CFPB believes will minimize potential for confusion as to the significance of different types of guidance. Further, AOs will be signed by the CFPB Director, addressing concerns that an AO program could lead to the proliferation of conflicting staff-level opinions.
- Along with the Bureau’s revised No-Action Letter (NAL) Policy, revised Trial Disclosure Policy, and Compliance Assistance Sandbox Policy (which we previously reported on), this new initiative has the potential to help facilitate innovation and reduce regulatory uncertainty with respect to the provision of consumer financial services and products.
- Fintech market entrants and entrepreneurs seeking to utilize new methodology may wish to clear that in advance rather than relying on their own interpretation. These entities and individuals may have identified issues that are within the Bureau’s purview and that concern actual facts or a course of action that they are considering engaging in, but are nonetheless hesitant to dedicate manpower and resources to the development or extension of a consumer financial product or service without additional regulatory guidance.
- While these AO’s will not likely bind other federal or state entities such as the FTC or the state attorneys general, an AO would most likely be persuasive in advocacy before one of those entities, in litigation with those entities, and in defending against putative class actions based on alleged violations of CFPB authorities.