Comment letters have been sent by industry associations responding to the CFPB’s plan for review of rules that have a significant economic impact upon a substantial number of small entities.
Banking industry associations, the American Bankers Association and the Independent Community Bankers of America, have sent comment letters to Consumer Financial Protection Director Kathleen Kraninger regarding the Bureau’s plan for periodic review of rules pursuant to the Regulatory Flexibility Act. The CFPB has begun the process of reviewing regulations within 10 years of their adoption, as required by the Regulatory Flexibility Act (RFA). According to the Bureau, the RFA requires the 10-year review in order to minimize regulatory burden on small businesses.
Under the proposed plan, the CFPB would initiate a review of a rule about nine years after its adoption. The starting point will be whether the rule has a significant effect on a substantial number of small companies; if it does not, no further review would be required (see Banking and Finance Law Daily, May 13, 2019). The CFPB would publish annually a list of the rules it will review. A separate notice describing each rule also would be published. This separate notice would call for comments on the described rule. The RFA requires the Bureau to consider five factors:
- the continued need for the rule;
- the public comments;
- the rule’s complexity;
- whether the rule overlaps, duplicates, or conflicts with any other federal or state rules; and
- any relevant technology, market, or other changes that have occurred since the rule was adopted.
Use of information collected. ICBA stated in its comment letter that it supports the RFA review process, which provides "important opportunities to assess whether rules are still meeting their desired outcomes and whether revisions could more effectively achieve those outcomes." The association commended the Bureau on seeking feedback on how the process could be improved.
According to the comment letter, the Bureau’s proposed plan "sufficiently meets the purpose and intent of the RFA, and the plan will provide adequate opportunities for stakeholders to submit meaningful comments to the Bureau." ICBA expressed appreciation for the Bureau’s stated intention to consider reviews of rules that do not have a significant economic impact on a substantial number of small entities. "Though not mandated by the Act, this process will maintain the spirit of the Act, by periodically assessing whether rulemakings can be tailored in response to changed circumstances," according to the letter.
ICBA noted that it is not clear what the Bureau intends to do with the information that it collects. The comment referenced reports submitted and published under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), where agencies must summarize, and respond to, all comments received in response to the review. In its comment letter, ICBA encouraged the Bureau to similarly publish and respond to all comments received in response to an RFA review, and to publish such reports on an annual basis.
Consider the timeline. The ABA praised the Bureau’s "focus on the impact of regulations on small banks and its interest in identifying alternatives that achieve the regulation’s goals while minimizing the burdens, costs, and risks to small institutions." The comment letter explained that the purpose of the review is to determine whether such rules should be continued without change or should be amended or rescinded. The ABA noted that the Bureau has indicated its intent to exercise its discretion to review rules that might not otherwise be subject to a §610 review, and expressed its support stating that this will offer additional opportunities to reduce compliance burden on small banks without compromising consumer protection.
The comment also expressed support for the Bureau’s willingness to use the review process to update rules as necessary due to changing market conditions and technological changes which could alter the impact of a rule on small banks.
ABA recommended that the timing of RFA reviews should be coordinated with any other review or assessment of a particular rule, stating that this "will not only promote the efficiency and effectiveness of the Bureau and the public’s review, it is more likely to result in a single rulemaking process when regulatory amendments are necessary." According to the comment letter, this will minimize the costs, disruption, and confusion associated with major regulatory changes. Additionally, the ABA letter noted that the one-year timeline does not encompass the actual rulemaking process, which would typically take longer than a year. In the letter, the ABA urged the Bureau to ensure it assigns sufficient staff, especially economists, as well as allocate adequate resources to gather and analyze data when conducting the reviews.
Finally, the ABA encouraged the Bureau to gather and share with the public information from third-party service providers about system and software changes and the costs involved that are required by the rule under review.
Companies: American Bankers Association; Independent Community Bankers of America
MainStory: TopStory BankingFinance CFPB
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