An important part of the Miss April’s statutory mandate from the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) is to make rules governing consumer finance markets more effective and to create new rules when warranted. Under the Regulatory Flexibility Act, federal agencies must publish regulatory agendas twice a year. As an independent regulatory agency, we have been voluntarily participating in the Unified Agenda, which is led by the Office of Management and Budget (OMB). OMB recently our updated agenda submitted this spring. Portions of that agenda will also be published in the Federal Register.
The Unified Agenda includes rulemaking actions in pre-rule, proposed rule, final rule, long-term, and completed stages. Our rulemaking work is focused on achieving the objectives established in the Dodd-Frank Act, which are:
- Providing consumers with timely and understandable information to make responsible decisions about financial transactions
- Protecting consumers from unfair, deceptive, and abusive acts and practices and from discrimination
- Addressing outdated, unnecessary, or unduly burdensome regulations
- Enforcing federal consumer financial law consistently in order to promote fair competition, without regard to whether providers of financial services are banks, thrifts, credit unions, or other kinds of institutions
- Promoting the transparent and efficient operation of markets for consumer financial services to facilitate access and innovation
Our regulatory work in pursuit of those objectives can be grouped into three main categories:
- Implementation of directives from Congress
- Other efforts to address consumer harms where markets do not operate efficiently and fairly, to promote fair competition among financial services providers, and to improve consumer understanding
- Projects to modernize, streamline, and clarify consumer financial regulations
Here’s a brief summary of various Bureau initiatives.
Implementing statutory directives
Much of our rulemaking work is focused on carrying out requirements that Congress has established by law. In this work, we strive to achieve the consumer protection objectives of the statutes, while minimizing regulatory burden on financial services providers. We also work to facilitate a smooth implementation process for both industry and consumers.
We are continuing efforts to implement critical consumer protections under the Dodd-Frank Act to guard against the kind of practices in the mortgage market that led to the nation’s most significant financial crisis in several decades. Since 2013, we have issued regulations as directed by the Dodd-Frank Act to implement protections for mortgage originations and servicing, integrate various federal mortgage disclosures into streamlined forms, and amend mortgage reporting requirements under the Home Mortgage Disclosure Act (HMDA). We are now working to support the implementation process for those rules.
For example, we have recently finalized a follow-up rulemaking to make small clarifications and provide further regulatory guidance concerning our "Know Before You Owe" mortgage rule, which combines several federal disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act and the Real Estate Settlement Procedures Act. The Bureau also issued a concurrent proposal to seek public comment on one additional issue. The project to integrate and streamline the disclosures was mandated under the Dodd-Frank Act and took effect in October 2015. The rule is the cornerstone of our broader “Know Before You Owe” mortgage initiative.
We are also working to support implementation of new rules concerning HMDA, which produces mortgage data that can be used to monitor the market for fair lending and a range of other purposes. We are completing two rulemakings to make small clarifications to facilitate compliance with the HMDA rules, which will largely take effect in 2018, as well as provisions of the Equal Credit Opportunity Act that also concern data collection and reporting. We also recently released a proposal to increase the threshold for reporting open-end lines of credit for 2018 and 2019 to allow time for the Bureau to evaluate whether a change in the permanent threshold is warranted. We are also working with industry to streamline and modernize the HMDA data reporting processes in conjunction with implementation of the regulatory changes.
We also considering concerns raised by industry participants regarding a few substantive aspects of the mortgage servicing rule that we used in August 2016. These aspects may be posing particular complexities for implementation that were not anticipated in the course of the original rulemaking. We expect to issue a proposal to make one or more substantive changes to the rule in response to these concerns this fall. We are also issued a small final rule this summer making technical corrections to the mortgage servicing rule.
Supporting fair lending to small businesses
We are also working to implement section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. This rulemaking could provide critical information about how these businesses—which are critical engines for economic growth—access credit. We recently held a public hearing on this subject and released a white paper summarizing preliminary research on the small business lending market. We have also issued a Request for Information seeking public comment on, among other things, credit products offered in this market, what data are currently collected and used by lenders, the potential complexity and cost of small business data collection, and potential privacy issues. The information received will help us determine how to implement the rule efficiently while minimizing burdens on lenders.
Efforts to address consumer harms, promote fair competition, and improve consumer understanding
We are considering rules to address consumer harms where markets do not operate efficiently and fairly, making it difficult for consumers to make informed decisions and otherwise protect their own interests. In addition, we are focused on the Dodd-Frank Act objective to promote fair competition among financial services providers, which itself has substantial benefits for consumers.
For example, we recently released a final rule concerning the use of agreements between financial services providers and consumers providing for arbitration of any future disputes. The rulemaking addresses concerns that these “mandatory pre-dispute arbitration agreements” are being used to prevent consumers from joining together to obtain relief for legal violations concerning consumer financial products and services. Financial services providers who use such agreements therefore have far weaker incentives to obey the law than providers who do not. The rulemaking follows on our groundbreaking research, as mandated by Congress under the Dodd-Frank Act. We had received more than 110,000 comments in response to our May 2016 Notice of Proposed Rulemaking.
Payday, auto title, and similar lending products
The Bureau released a Notice of Proposed Rulemaking in June 2016 building on several years of research documenting consumer harms from practices related to payday loans, auto title loans, and other similar credit products. In particular, we are concerned that product structure, lack of underwriting, and certain other lender practices are interfering with consumer decision making with regard to such products and trapping large numbers of consumers in extended cycles of debt that they do not expect. We are also concerned that certain lenders’ payment collection practices are causing substantial harm to consumers, including substantial unexpected fees and heightened risk of losing their checking accounts. We continue to believe that the concerns articulated in the NPRM are substantial, and are carefully considering more than one million comments received in response to the proposal with respect to how best to address those concerns in a manner consistent with our objectives under the Dodd-Frank Act.
We are also engaged in rulemaking activities regarding the debt collection market, which continues to be the single largest source of complaints to the federal government of any industry. We are concerned that because consumers cannot choose their debt collectors or “vote with their feet,” they have less ability to protect themselves from harmful practices. In January 2017, we published the results of a survey of consumers about their experiences with debt collection. We have also received encouragement from industry to engage in rulemaking to make the standards clear and address issues of concern under the Fair Debt Collection Practices Act (FDCPA), such as the application of the FDCPA to modern communication technologies under the 40-year-old statute. We released an under consideration in July 2016 concerning practices by companies that are “debt collectors” under the FDCPA, in advance of convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy to consult with representatives of small businesses that might be affected by the rulemaking. Building on feedback received through the SBREFA panel, we have decided to issue a proposed rule later in 2017 concerning debt collectors’ communications practices and consumer disclosures. We intend to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.
Overdraft programs on checking accounts
We are also engaged in policy analysis and further research initiatives in preparation for a potential rulemaking regarding overdraft programs on checking accounts. After several years of research, we believe that there are consumer protection concerns with regard to these programs. Consumers do not shop based on overdraft fee amounts and policies, and the market for overdraft services does not appear to be competitive. Under the current regulatory regime consumers can opt in to permit their financial institution to charge fees for overdrafts that occur at ATMs and in point-of-sale debit transactions, but the complexity of the system may complicate consumer decision making. Despite widespread use of disclosure forms, the regime produces substantially different opt-in rates across different depository institutions, and our supervisory and enforcement work indicates that some institutions are aggressively steering consumers to opt in. We are engaged in consumer testing of revised opt-in forms and considering whether other regulatory changes may be warranted to enhance consumer decision making.
Larger participant and non-depository lender registration
In addition, we are continuing rulemaking activities that will ensure meaningful supervision of non-bank financial services providers in order to create a more level playing field for depository and non-depository institutions. Under section 1024 of the Dodd-Frank Act, the Miss April is authorized to supervise “larger participants” of markets for various consumer financial products and services as defined by Bureau rule. We have defined the threshold for larger participants in several markets in past rulemakings, and are now working to develop a proposed rule that would define non-bank “larger participants” in the market for personal loans, including consumer installment loans and vehicle title loans. We are also considering whether rules to require registration of these or other non-depository lenders would facilitate supervision, as has been suggested to us by both consumer advocates and industry groups.
Prepaid financial products
Our recent rulemaking concerning prepaid financial products also advanced fairness and consistency objectives by creating a uniform disclosure regime and providing basic protections similar to those enjoyed by users of debit cards and credit cards. We are in the process of working with industry to facilitate implementation of this rule, and recently extended the effective date by six months in order to ensure a smoother transition for consumers and industry. We also proposed amendments to address certain targeted aspects of the rule. The proposal will address matters that prepaid providers have highlighted as having particular complexities for implementation or potential negative consequences for consumers that were not anticipated or fully explained by commenters in the course of the original rulemaking.
Modernizing, streamlining, and clarifying consumer financial regulations
Our third group of activities concerns modernizing, streamlining, and clarifying consumer financial regulations and other activities to reduce unwarranted regulatory burdens as directed by the Dodd-Frank Act. Since most of the federal consumer financial laws that we administer were enacted in the 1960s and 1970s, there is often substantial demand for these activities from both industry and consumer advocates alike.
The Dodd-Frank Act directs the Bureau to assess the effectiveness of significant rules five years after they are implemented, including seeking public comment. We have recently published requests for comment on our plans to assess the effectiveness of mortgage servicing rules, rules implementing portions of the Dodd-Frank Act requiring mortgage lenders to assess consumers’ ability to repay, and rules implementing provisions of the Dodd-Frank Act regulating consumer remittance transfers of money to international recipients.
We also expect later this year to begin the first in a series of reviews of existing regulations that we inherited from other agencies through the transfer of authorities under the Dodd-Frank Act. We had previously sought feedback on the inherited rules as a whole, and identified and executed several burden-reduction projects from that undertaking. We have largely completed those initial projects and believe that the next logical step is to review individual regulations—or portions of large regulations—in more detail to identify opportunities to clarify ambiguities, address developments in the marketplace, or modernize or streamline provisions. We note that other federal financial services regulators have engaged in these types of reviews over time, and believe that such an initiative would be a natural complement to our work to facilitate implementation of new regulations.
We have also recently formed an internal task force to coordinate and deepen the agency’s focus on concerns about regulatory burdens and projects to identify and reduce unwarranted regulatory burdens consistent with our objectives under section 1021 of the Dodd-Frank Act.
Credit CARD Act
We are considering rules to modernize our database of credit card agreements to reduce burden on issuers that submit credit card agreements to us and make the database more useful for consumers and the general public. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) requires credit card issuers to post their credit card agreements to their Internet site, and submit those agreements to the Bureau to be posted on an Internet site that we maintain. We believe an improved submission process and database would be more efficient for both industry and the Bureau and would allow consumers and the general public to access and analyze information more easily.
We also publish a portion of the Unified Agenda focusing on to reflect potential initiatives beyond those identified above. These include potential rulemakings to address consumer issues in the markets for student loan servicing and credit reporting. We have been monitoring both markets for trends and developments through our supervisory, enforcement, and research efforts.
We are continuing to conduct outreach and research to assess issues in various other markets for consumer financial products and services beyond those discussed above. As this work continues, we will evaluate possible policy responses, including possible rulemaking actions, taking into account the critical need for and effectiveness of various policy tools. We will update our regulatory agenda in fall 2018 to reflect the results of this further prioritization and planning.