The Consumer Financial Protection Bureau (CFPB) recently announced a regulatory review plan for regulations under Section 610 of the Regulatory Flexibility Act (RFA). Section 610 of the RFA directs agencies to review certain rules within 10 years after they are published, consider the rules' effect on small entities, and invite public comments on each rule under review. Under the RFA, the Bureau is required to consider multiple factors, including 1) the continued need for the rule; 2) the nature of public complaints or comments; 3) the complexity of the rule; 4) the extent the rule overlaps, duplicates, or conflicts with other federal and state laws; and 5) the effect of technology, economic conditions, and the passage of time on the relevant market. The RFA review is distinct from other CFPB regulatory review requirements, including Section 1022(d) of the Dodd-Frank Act.
CFPB's Plan for RFA Reviews
The congressional intent for the RFA review is to determine whether such rules should be continued without change, or be amended or rescinded, consistent with the stated objectives of the applicable statutes, and to minimize any significant economic impact the rules may have on small entities.
Under the CFPB's RFA 610 Review Plan, the Bureau will review rules approximately nine years after publication. The CFPB will assess the regulation under the RFA to determine whether the rule is subject to Section 610 because of its significant economic impact on a substantial number of small entities, or the Bureau may choose to review rules outside of the scope of the RFA, at its discretion. The CFPB plans to publish a list of rules subject to RFA 610 review for the following year, and solicit public comment on the rule. Reviews are scheduled to be complete within ten years of the applicable final rule. Subsequent rulemaking activities pursuant to the Bureau's findings will then be added to the CFPBS regulatory agenda.
Public comments on the Bureau's RFA 610 Review Plan are due July 15, 2019.
First Up: Regulation E's Overdraft Rule
The CFPB's first RFA 610 review is of the 2009 Overdraft Rule. The Federal Reserve Board issued the rule in 2009 to limit the ability of financial institutions to assess overdraft fees for automated teller machine (ATM) and one-time debit card transactions that result in an overdraw of consumers' accounts. The rule amended Regulation E, which implements the Electronic Funds Transfer Act (EFTA).
The CFPB cited several changes it has observed with respect to overdraft practices at a number of financial institutions. In particular, it observed 1) changes to the order in which different categories of transactions are posted, resulting in a decrease in the number of overdraft transactions; 2) limits on the number of overdraft fees that some financial institutions may charge in a single business day; and 3) "cushions" that prevent overdraft fees from being assessed on de minimis amounts. However, the CFPB notes that it does not have reason to believe that these changes are a result of the Rule.
In formulating its review plan, the CFPB considered the results of previous inquiries, outreach initiatives, and public requests for information. It noted concerns from financial institutions and trade groups regarding the requirement that the opt-in notice be substantially similar to the Model Form A-9 under Regulation E. These groups expressed concern that stringent adherence to the model excludes information that may be relevant to the consumer's decision, such as an institution's policies for making overdraft- and balance-related calculations.
The CFPB's request for public comment is focused on the following topics:
- The nature and extent of the economic impacts, including benefits, of the Overdraft Rule on small entities, including impacts of the reporting, recordkeeping, and other compliance requirements of the Overdraft Rule;
- Whether and how the CFPB could reduce the costs of the Overdraft Rule for small entities through its rulemaking authority while remaining consistent with the stated objectives of the EFTA and the Overdraft Rule;
- Other relevant information that the CFPB should consider in completing a Section 610 review.
Public comments on the Overdraft Rule review are due July 1, 2019.