the people we regulate should have the right to know what the rules are before
being charged with breaking them.” The memo further stated, “This means more
formal rulemaking on which financial institutions can rely, and less regulation
by enforcement.” 15 Clear rules help avoid the confusion and uncertainty about
the legal status of products and practices which limit innovation and consumer
choice. They also allow the government to address objectionable practices on a
prospective basis as they arise, so the industry has fair warning.
Expedited Funds Availability Act
The bureau has recently taken steps to proceed with potential changes to
Regulation CC (Expedited Funds Availability Act) as announced in its Fall
2018 Agenda. On November 20, 2018, it and the Federal Reserve Board jointly
proposed amendments to Regulation CC to implement a statutory requirement to adjust for inflation the amount of funds depository institutions must
make available to their customers. In addition, the agencies are providing
additional opportunity for public comments on proposed Regulation CC
amendments that the Federal Reserve Board published in 2011 regarding the
funds availability schedule provisions, disclosures, and associated definitions.
The agencies note that they “have not made a decision on whether to make
any aspects of the 2011 proposal final.”
Not listed in the Fall 2018 Agenda but discussed in its preamble is the disparate
impact principle. The bureau is “considering” addressing the disparate impact
doctrine on the basis of both the Supreme Court’s 2015 decision in Texas Dept.
of Housing and Community Affairs v. Inclusive Communities Project, Inc. and
the Congressional vote to disapprove the bureau’s indirect automobile lender
compliance bulletin. It is unclear what action the bureau will take, but it could:
1. State affirmatively that ECOA does not support disparate impact analysis
and remove the effects test from Regulation B;
2. Follow HUD’s path and define the elements of a disparate impact claim
consistent with Inclusive Communities; or
3. Define further Inclusive Communities’ insistence on “robust causality” to
require significant proof beyond statistics to curb abuse.
Regardless of the actions the bureau may choose to take, it is apparent that
the industry will at least be more aware of the actions as they are planned.
The “Inactive” List
A couple of items that compliance officers might like to “keep an eye on,”
but which are now inactive include:
■ ■ ■ Overdraft services
■ ■ ■ Any rule to expand the list of “larger participants”
In contrast to the noticeable changes in direction in the bureau’s rulemaking and enforcement activities, banks and their counsel report no dramatic
changes in supervision.
Chris Willis, reports that examiners are raising legal issues and alleging
unfair, deceptive, and abusive acts and practices with the same frequency
and creativity that they did under Director Cordray. He adds, however, that
examiners are more likely to address issues in a manner that avoids expensive business changes and to resolve them in supervision rather than send
them to enforcement.
The CFPB also has begun to take steps to respond to ABA’s recommenda-
tion that the bureau use matters requiring attention (MRAs) more judiciously
and be clear about their basis. On September 25, 2018, the bureau released
a Bulletin16 clarifying that MRAs will be used to correct violations of law
and weaknesses in compliance management systems and that supervisory
recommendations will be used when no violation has been identified but a
weakness in compliance management systems observed. The Bulletin further
notes, “Neither MRAs nor SRs are legally enforceable. The bureau will, how-
ever, consider an institution’s response in addressing identified violations of
Federal consumer financial law, weaknesses in CMS, or other noted concerns
when assessing an institution’s Compliance rating, or otherwise considering
the risks that an institution poses to consumers and to markets.”
Other potential supervisory changes in the future could involve using a
variety of supervisory processes and tools to make the bureau more efficient
and effective. For example, the bureau might monitor institutions that have
demonstrated strong compliance management systems rather than conduct
In Director Mulvaney’s short tenure at the bureau, a conspicuous re-direction
is beginning to take hold. Kathleen Laura Kraninger was confirmed by the Senate
on December 6, to replace Mulvaney as director. She has worked closely with
Director Mulvaney at the White House budget office, and she is expected to
build on Mulvaney’s initiatives and pursue a similar path. Kraninger is expected
to focus on effective and efficient management and the bureau’s core mission.
ABA’s recommendations to the various RFIs can be found at www.aba.
com/Compliance/Pages/ cfpb-rfi.aspx. ■
ABOUT THE AUTHOR
NESSA FEDDIS, J.D., is Senior Vice President and Deputy Chief Counsel for
Consumer Protection and Payments in ABA’s Center for Regulatory Compliance.
She advocates for ABA members on a variety of consumer banking, fraud
prevention, and payment system issues in the federal legislative and regulatory arenas, in particular the Bureau of Consumer Financial Protection. Her
responsibilities include relaying ABA’s position on such issues to Congress and
government agencies and educating bankers on new laws and regulations. She
has testified before Congress on behalf of the banking industry. In addition,
she represents the ABA in press and public forms as ABA spokesperson on
consumer protection issues. In recent years, she has been involved with regulatory and legislative matters relating to consumer credit, credit and debit cards,
arbitration, privacy, deposit accounts, payments systems, emerging electronic
payment systems, and credit card and check fraud prevention.
She received her law degree from Catholic University and is a member of
the Washington, D.C. Bar. She is a fellow and former President of the American
College of Consumer Financial Services Lawyers and former Chair of the
Subcommittee on Electronic Fund Transfers of the American Bar Association’s
Consumer Financial Services Committee. Her articles discussing regulatory and
legislative developments in consumer banking matters have appeared in ABA
Banking Journal, ABA Bank Compliance, and other publications.
Nessa would like to thank Virginia O’Neill, Senior Vice President and Director
of the Center for Regulatory Compliance at ABA for her assistance in writing
Editor’s Note: The CFPB has been in a slow process of rebranding
itself, and ABA will begin using “BCFP” when either ( 1) the
Associated Press stylebook changes or ( 2) the CFPB updates its
website to reflect the different name. As of this edition’s printing, the
bureau website says “Consumer Financial Protection Bureau” and
“CFPB”. ABA made this decision in April 2018 to minimize confusion
for readers who may be more familiar with the CFPB name.