CFPB Update

The 112^th Congress may be winding down, but the Consumer Financial Protection Bureau (CFPB) keeps chugging. Before Congress scurried off home for electioneering in September, CFPB Director Richard Cordray paid a visit to both the Senate Banking Committee and House Financial Services Committee for a biannual update on the Bureau’s activities. House Financial Services Committee Chairman Spencer Bachus (R-AL) even quipped that Director Cordray “made some news” during his appearance on September 20. Yes, it’s news when an Administration official appears before Congress and says something of interest.

The Consumer Financial Protection Bureau is poised to
issue two important proposed rules on overdraft
protection and prepaid cards.

What did Cordray say of interest? At issue is the 2009 CARD Act’s “ability to pay” rule. The Federal Reserve Board had responsibility for the implementing this provision of the CARD Act (the CFPB had not existed at this time). The Board created a uniform standard requiring all consumers to demonstrate “an independent ability to repay.” The Board’s rule took effect October 1, 2011 and almost immediately Congress began asking questions on the rule’s impact on stay-at-home spouses and their ability to obtain credit. Dodd-Frank gave the CFPB rule-making authority over Regulation Z (Truth in Lending). At another House Financial Services Committee hearing during the summer, Gail Hillebrand of the CFPB did not appear very sympathetic to opening up the rule again. But Cordray believe enough evidence had been produced to warrant a new rule that would disadvantage stay-at-home spouses who may ample “household income” to secure credit. CFPB will likely issue the revised rule for public comment later this year or early 2013.

Senate and House leaders also expressed concerns with CFPB’s final rule on international remittance transfers (Sec. 1073 of Dodd-Frank). Several House members wrote Cordray in August asking for a delay in the effective date (February 2013) while the CFPB studies its impact on consumers. The CFPB’s rule on international remittance transfers required several disclosures to be made to consumers including exchange rates and fees charged by other entities and taxes to be charged by foreign governments. The only relief CFPB has given to exempt those financial institutions providing less than 100 remittances annually from the new disclosure rules. I do not expect this will be the last we hear of this issue. How far will consumer choice be limited as institutions exit the business because compliance requirements are not financially viable? Stay tuned.

Looking ahead to 2013, the CFPB is poised to issue two important proposed rules on overdraft protection and prepaid cards. EFTA has provided comment to the Bureau on both subjects in 2012 as part of an Advanced Notice of Proposed Rule-Making. Gov. Mitt Romney also called out the Bureau for slow progress on issuing rules on qualified mortgages. Expect some busy beavers in the hallways and offices of the CFPB in the weeks and months ahead.

ATM Fee Disclosure: Updating Regulation to Limit Jackpot Justice

   In July of this year Kurt Helwig, president and CEO of the Electronic Funds Transfer Association and Dennis Ambach, director of the Association's Legislative and Regulatory Council, met with the staff of the House Financial Services Committee regarding a regulation that requires ATM owners to display a sign specifying the fee charged to use the machine. There has been evidence of unscrupulous gold diggers ripping the fee signs off of ATMs and then attempting to file class action lawsuits against the owners of the ATMs for failing to post notice of the fees. There are even websites that troll for alleged victims and encourage the filing of these suits.
   Members of the EFTA, which represents a wide spectrum of companies involved in electronic payments, believe that the sticker requirement is an antiquated requirement since modern ATMs post the fee on the ATM screen and ask the user whether he wishes to accept the fee before continuing. They are joined in this belief by members of various other groups including the ATM Industry Association (ATMIA).
   Following the July meeting the Committee's chairman, Rep. Spencer Bachus (R, AL) wrote to Raj Date, a special advisor to Treasury Secretary Tim Geithner and the interim head of the new Consumer Financial Protection Bureau. Chairman Bachus asked whether the CFPB has the authority to amend Regulation E of the Electronic Funds Transfer Act to eliminate what amounts to dual notification.
   The CFPB recently published what the government calls a "Notice for Comment." This is an invitation for the public to comment on some pending regulatory action. In this case, the CFPB is looking for public input on regulations that fall within the Bureau's authority and which could use a little streamlining. Specifically, the CFPB is looking for regulations which it has "inherited" from other regulatory bodies, and which could be updated or modified because they are "outdated, unduly burdensome or unnecessary."

HFSC Chairman Bachus contacted
 the CFPB concerning its authority
to amend the EFT Act to
eliminate dual notification

   Among the suggested areas for comment in the Notice is ATM fee disclosure. The Bureau is looking for comment on whether the requirement to post a sign on the ATM should be eliminated and whether other disclosures, such as the on-screen fee notice, are adequate for informing consumers.

   The Bureau's desire to quickly identify the regulations for which it is now responsible and to streamline those requirements is welcome news. How the newly minted CFPB manages this comment period and deals with the public comment will go a long way in establishing the Bureau's credibility with consumers and with industry.
   In you are interested in commenting to the CFPB on this issue the comment period is open for 90 days. It's hard to believe that we can't find a way to ensure that consumers' rights to know upfront the cost of using someone's ATM can't be balanced with the right of that ATM owner to avoid financial calamity through the jackpot justice of frivolous lawsuits.
   That's my opinion. What's yours?