In late April, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra was grilled by lawmakers during the Bureau’s semi-annual report to Congress, and NAFCU raised several concerns about the Bureau’s recent actions and inaction ahead of the hearings. From inquiries sent to large tech firms regarding their payment services and associated data collection and expansions of the CFPB unfair, deceptive, and abusive acts or practices (UDAAP) authority to shots across the bow on fees charged by institutions (aka January’s Request for Information (RFI) on “Junk Fees”), Director Chopra has made quite the splash in the public eye.
Since being sworn in late last year, Director Chopra has quickly returned the agency to something reminiscent of the Obama Administration, when former Director Richard Cordray was at the helm, pursuing regulation by enforcement and using inflammatory language to publicly shame institutions for allegedly violating consumer protection laws. But Director Chopra has only filed a handful of enforcement actions and consent orders and hasn’t done much on the regulatory front, so now that his tenure is beyond six months, you may be wondering what to expect from the CFPB in terms of rulemaking and changes to its supervision process. The answer: not much…yet. This will be a slow, but powerful burn.
WHAT TO EXPECT
The biggest item on the CFPB’s near-term agenda is revisiting the rules regarding overdraft protection, as evidenced by the focus placed on this product in the RFI on “junk fees.” Of course, NAFCU continues to publicly push back on the mere insinuation that overdraft fees or any of the fees charged related to deposit accounts, credit cards, and mortgage lending, among other products and services mentioned in the RFI, are the type of hidden, surprise fees the Bureau is defining as “junk fees.” But that likely will not change the course of the CFPB’s path toward re-evaluating the overdraft rule. Although overdraft fees are subject to and limited by state law and therefore cannot currently be capped by the CFPB, the Bureau may require additional disclosures to consumers and attempt to limit the number of fees that may be charged within a certain period. Above all else, the Bureau will use its enforcement authority to monitor overdraft practices. Late last year Director Chopra told reporters that institutions that have a “higher share of frequent overdrafters or a higher average fee burden for overdrafting” will receive increased supervisory attention. The Bureau will also rely on the consumer complaint process to coordinate with the NCUA for those institutions under $10 billion in assets. This is all being pursued under the guise of fostering greater competition in the financial services marketplace, but we at NAFCU know it threatens to fundamentally change credit union fee income structures.
Unfinished Business: The Dodd-Frank Act
In terms of other rulemaking, unfinished business from the Dodd-Frank Act will be the focus. The CFPB will continue to forge ahead with its Section 1071 rule on small business data collection and the Section 1033 rule on consumer access to personal financial data, also referred to as the Bureau’s foray into making open banking a reality for consumers sooner rather than later. We’ve heard that the Section 1033 rulemaking, has been bogged down, understandably, by concerns surrounding data privacy and protection.
Pushing the UDAAP Boundaries
As referenced above, the CFPB in March announced changes to its examination procedures to target non-credit discrimination outside of the scope of the Equal Credit Opportunity Act as it claims this sort of discrimination may be an “unfair” act or practice. We fully anticipate the Bureau will continue to push the bounds of its UDAAP authority through similar pronouncements to advance the Biden Administration’s priorities regarding equity, inclusion, and access to financial services.
Bottom line is, so far, we at NAFCU are not overly concerned by what Director Chopra has done, but we have every right to be worried about what may be headed our way soon. With all of their direct messaging through blog posts, RFIs, and appearances on CNBC, the past few months have been an exercise in laying the groundwork for what’s to come. I do not mean to frighten you, but I am warning you that this will be no walk in the park. Never hesitate to reach out to NAFCU’s Regulatory and Compliance teams should you have any questions or concerns. We’re here to serve you and will continue to be a strong advocate for you in Washington.
NAFCU has a complimentary, member-only online community exclusively for leaders involved in examinations at NAFCU member credit unions above $5 billion in assets. Learn more about the NAFCU ONES + CFPB Supervision Network at www.nafcu.org/ones-network.