CFPB’s Spring 2022 Regulatory Agenda and Director Chopra’s Blog Post: Potential CFPB Registration Requirements for Non-Banks and a Review of the QM Rule

I.   The Spring 2022 Regulatory Agenda

The Office of Management and Budget (OMB) has published the CFPB’s Spring 2022 Semi-Annual Regulatory Agenda on its website (which was posted on June 21, 2022).   The Regulatory Agenda contains five rulemakings that the CFPB is currently working on, which are at various stages:

 ·       Interagency Rulemaking on Automated Valuation Models (AVMs) – This rule would implement Dodd-Frank Act section 1473(q), which amended the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to require that AVMs meet four statutory quality control standards.  The CFPB’s Small Business Regulatory Enforcement Fairness Act (SBREFA) outline also proposes a fifth quality control factor focused on fair lending.  The Regulatory Agenda notes that the SBREFA outline for this rule was posted in February 2022, and states that a proposed rule is planned for December 2022.  We discussed this rule on our firm’s recent April 29th webinar you can find here.

·       The PACE Ability to Repay Rule – This rule would implement 2018’s Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) amendments to TILA that require the CFPB to prescribe specific ability-to-repay requirements for PACE financing.  The Regulatory Agenda notes that an Advanced Notice of Proposed Rulemaking was issued back in 2019 and states that a proposed rule is expected in May 2023. We’ve written about this rule before here.

·       The Dodd-Frank Act Section 1071 Rulemaking to Require Reporting of Small Business Lending Data – This rule would implement the Dodd-Frank Act Section 1071’s amendments to ECOA to require financial institutions to collect and report data on small business lending, including the race, ethnicity, and sex of the principal owners of the business.  The Regulatory Agenda notes the proposed rule issued in 2021 and states that a final rule is planned for March 2023. We’ve written about the proposed rule before here.

·       The Dodd-Frank Act Section 1033 Rulemaking to Require Consumer Access to Financial Records – This rule would implement the Dodd-Frank Act Section 1033’s requirement that the CFPB issue rules to require covered persons to provide consumers with access to their financial data.  The Regulatory Agenda states that the CFPB plans to issue a SBREFA outline for this rule in November 2022.  We discussed this rule on our firm’s June 24, 2021 webinar you can find here.

·       FCRA Prohibition on Inclusion of Adverse Information in Consumer Reporting in Cases of Human Trafficking  - This rule would implement a recent amendment to FCRA by the National Defense Authorization Act for Fiscal Year 2022, which prohibits consumer reporting agencies from furnishing a consumer report containing any adverse item in cases of human trafficking.  The final rule is expected in June 2022. 

Interestingly, the OMB website does not list any long-term regulatory agenda items for the CFPB.  However, it appears that the CFPB’s Director Rohit Chopra does have some other longer-term rulemaking activities planned, which he announced in a blog post on June 17, 2022, right before OMB published the CFPB’s Regulatory Agenda on its website.

II.   Director Chopra’s Blog Post Announcing New Regulatory Initiatives

In Director Chopra’s blog post, he announced an initiative to review certain aspects of several existing rules and CFPB authority under the Dodd-Frank Act, including the Ability-to-Repay/Qualified Mortgage rule (QM rule).  Director Chopra also discussed his views generally on the existing consumer finance rules that the CFPB has authority over, stating that they are “highly complicated” and “the failed approach of the past.” 

Director Chopra stated that, “regulators have historically issued overly complicated and tailored rules for the existing regulatory landscape, as opposed to providing basic bright-line guidance and rules that can withstand evolution of the marketplace over time.”  He described the past rules as the “failed approach of the past.”  He also described his view that complex rules, in addition to impeding consumer protection, increase compliance costs, which benefits “high-priced lawyers” and places new market entrants and smaller companies at a disadvantage.   He also described the benefit of “simple bright-lines,” stating that they “allow all parties to better understand the law and policy priorities,” and prevent use of “loopholes” with “creative lawyering” or intentional misunderstandings of the law.  He also stated that simpler rules will promote consistency among other regulatory agencies that enforce the rules. 

The Director also noted the CFPB’s several current rulemakings that were listed in the Spring 2022 Regulatory Agenda discussed above, stating that they “implement[] longstanding Congressional directives, many of which have gone ignored.”  Interestingly, the Director’s blog post also announces several other potentially significant rulemaking initiatives that were not listed in the Spring 2022 Regulatory Agenda either as current activities or long-term actions. 

Significantly, the Director indicated that he is considering requiring non-depository institutions to register with the CFPB.  The Director stated that the CFPB is “reviewing other authorities authorized by Congress that have gone unused,” and provided as an example, “Congressional authority to register certain nonbank financial companies to identify potential scammers and others that repeatedly violate the law.”  This appears to be a reference to Dodd-Frank Act section 1022 and 1024’s authority for the CFPB to require registration of non-depository entities over which the CFPB has supervisory jurisdiction to “ensure that such persons are legitimate entities and are able to perform their obligations to consumers” and to “prescribe rules regarding registration requirements applicable to a covered person….”

The Director also stated that the CFPB is “reviewing a host of rules that the agency inherited from other agencies…as well as other rulemakings the CFPB pursued in its first decade of existence.”  He stated that “many of these rules…are in need of a fresh look.”  He stated that these reviews include:

·       “Rules originally developed by the Federal Reserve Board of Governors under the Credit CARD Act of 2009, including the enforcement immunity and inflation provisions when imposing penalties on customers.

·       Rules originally developed by the Federal Trade Commission to implement the Fair Credit Reporting Act in an effort to identify potential enhancements and changes in business practices.

·       The CFPB’s Qualified Mortgage Rules to explore ways to spur streamlined modification and refinancing in the mortgage market, as well as assessing aspects of the ‘seasoning’ provisions.”

The Director also noted the CFPB’s recently announced rulemaking petition process, which we wrote about here.  In addition, the Director also noted that the CFPB’s Advisory Opinion program is “a way to quickly provide interpretive rules to industry so that they can better understand the rules of the road.”  The Director stated that the CFPB is “accepting requests for future advisory opinions as well as feedback on any existing advisory opinions….” Finally, the Director also mentioned the CFPB’s plans to issue Consumer Financial Protection Circulars to “provide greater clarity to financial institutions by encouraging consistent enforcement among government agencies of laws passed by Congress.”

In fact, the CFPB just issued today, June 22, 2022, an Advance Notice of Proposed Rulemaking to address “the Fed’s immunity provision and determine whether adjustments are needed to address late fees.” You can find this ANPR here.

III.  My Brief Thoughts

The announcement about a review of the QM rule is significant because, as you know, the mandatory compliance date for the new APR-based general QM definition (which we wrote about here) was delayed to October 1, 2022 by Acting Director Uejio.  The Acting Director indicated that, “the Bureau will consider at a later date whether to initiate a rulemaking to revisit other aspects of the General QM loan definition and the Seasoned QM loan definition.”  Although neither the Regulatory Agenda or the Director’s blog post mentions a rulemaking to entirely revisit the new general QM definition before the mandatory compliance date, it is possible this “review” could include work on that issue (in addition to addressing streamlined refinances).  In addition, it does appear that the Seasoned QM could be on the chopping block.  

Also, I think there is a chance that Director Chopra will initiate a rulemaking to create a new requirement for certain non-depository institutions to register directly with the CFPB.  As noted above, the CFPB just today announced an ANPR related to one of the regulatory reviews that the Director mentioned in his blog post. And remember that Director Chopra also recently announced that he plans to use authority under Dodd-Frank Act section 1024(a)(1)(C), which the agency has not used before, to give the CFPB supervisory authority over covered persons the agency believes pose a risk to consumers (we also spoke out about this on our firm’s April 29th webinar you can find here).  These two recent statements, and the rulemaking action taken today, indicate that the Director Chopra is seriously looking at expanding the CFPB’s supervisory power, which could very well include a new registration requirement.  Whether such a rulemaking could be issued in final form and become effective before leadership of the CFPB changes hands is another question. 

Also note that the Director’s statement about such regulatory reviews is that the list is not exhaustive.  There may be other rulemakings that the CFPB will review under Director Chopra.  It may be prudent to take Director Chopra up on submitting a rulemaking petition with the goal of getting ahead of such regulatory reviews, or at the very least to attempt to set the agenda for them.

As a final note, it is interesting that Director Chopra describes the current rules under the CFPB’s authority as “highly complicated,” “overly complicated,” “unnecessarily complex,” a “failed approach,” and placing new companies and “small firms at a disadvantage.”  Such descriptions of the current rules could lead to potential defenses to compliance issues raised by regulatory agencies in examinations and enforcement actions based on a lack of clarity due to the Director’s admitted complexity and “failed approach” in the rule in question. 

If you would like to discuss any of the issues in this post, or submit a petition for rulemaking to the CFPB, please contact me at rich@garrishorn.com.