On June 18, 2020, the Consumer Financial Protection Bureau (“Bureau”) announced the launch of a pilot advisory opinion program (“Pilot Program”) to publicly address regulatory uncertainty in the Bureau’s existing regulations. The Bureau also announced that the public can now comment on the proposed advisory opinion program, which the Bureau intends to implement at the conclusion of the Pilot Program. As we previously covered, on March 6, 2020, the Bureau announced the creation of the advisory opinion program.
Pilot Advisory Opinion Program
According to the Bureau, “[t]he primary purpose of the [Pilot Program] is to provide a mechanism through which the Bureau may more effectively carry out its statutory purposes and objective by better enabling compliance in the face of regulatory uncertainty.”
The Bureau issued a Procedural Rule detailing the parameters of the Pilot Program. The Bureau expects that the Pilot Program will focus on four key priorities: (1) providing consumers with timely and understandable information to make responsible decisions; (2) identifying outdated, unnecessary, or unduly burdensome regulation to reduce regulatory burden; (3) creating consistency in enforcement of federal consumer financial law to promote fair competition; and (4) ensuring markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
Submission and Content of Requests
The Pilot Program is limited to covered persons or service providers that are subject to the Bureau’s supervisory authority under sections 1024, 1025, or 1026(e) of the Dodd-Frank Act or are subject to the Bureau’s enforcement authority under subtitle E of the Dodd-Frank Act.
Such persons may submit requests to the Bureau via email, and requests must identify the requestor. For purposes of the Pilot Program, the Bureau will not accept requests from third parties, such as trade associations or law firms, on behalf of unnamed entities. This differs from the proposed advisory opinion program, under which “[o]utside counsel or a trade association, for example, could submit a request for AOs on behalf of one or more client or members, and those entities would not need to be named.”
If a requestor wants to have any information remain confidential, the Bureau encourages the requestor to identify any such information to the extent it is included in a submission. The Bureau will treat information as confidential in accordance with its Disclosure of Records and Information Rule.
A person submitting a request under the Pilot Program need not include many of the items required under the proposed advisory opinion program. For example, the Pilot Program does not require a requestor to provide a proposed interpretation, identify potential uncertainty or ambiguity that the interpretation would address, or to explain why the requested interpretation is an appropriate resolution of the ambiguity or uncertainty.
Characteristics of Advisory Opinions
Advisory opinions will be interpretative rules under the Administrative Procedures Act that will respond to specific requests for clarity on an interpretive question. As such, the Bureau’s advisory opinions will provide further clarity regarding the Bureau’s statutes and regulations, but the Bureau will not impose new requirements or provide changes to the law that would require a notice and comment process. The Bureau will publish advisory opinions in the Federal Register and on consumerfinance.gov. Each advisory opinion will be applicable to the requestor and to similarly situated parties to the extent that their situations conform to the Bureau’s summary of material facts in the advisory opinion.
Factors in Bureau Selection of Topics for Advisory Opinions
When selecting topics for advisory opinions, the Bureau will prioritize open questions within its purview that can legally be addressed through an interpretive rule. When selecting topics for an advisory opinion the Bureau intends to evaluate potential topics for: (i) alignment with the Bureau’s statutory objectives; (ii) the size of the benefit offered to consumer by resolution of the interpretive issue; (iii) the known impact on the actions of other regulations; and/or (iv) the impact on the Bureau’s resources.
Factors Supporting Advisory Opinion Issuance
Initial factors that weigh into the appropriateness of issuing an advisory opinion include whether: (i) the interpretive issue has been noted during prior Bureau examinations as one that would benefit from additional regulatory clarity; (ii) the issue is of substantive importance or impact or is one whose clarification would provide significant benefit; and/or (iii) the issue concerns an ambiguity that the Bureau has not previously addressed through an interpretive rule or other administrative source.
Factors Opposing Advisory Opinion Issuance
Factors weighing against issuing an advisory opinion include that: (i) the issue is the subject of an ongoing investigation or enforcement action; (ii) the issue is the subject of an ongoing or planned rulemaking; (iii) the issue is better suited for the notice-and-comment process; (iv) the issue could be addressed by a Compliance Aid; and/or (v) there is clear Bureau or court precedent that is already available to the public on the issue.
For example, the Bureau does not intend to issue an advisory opinion that would change a regulation. Similarly, where a regulation or statute establishes a general standard that can be only applied through a factual analysis, the Bureau does not intend to replace it with a bright-line standard that eliminates required analysis. The Bureau anticipates that highly fact-specific interpretations, such as requests for advisory opinions for UDAAP interpretations, may present challenges. However, according to the Bureau, “there may be times when the Bureau is able to offer advisory opinions that provide additional clarity on the meaning of such standards.”
This is a measured step forward in developing the Advisory Opinion program that the Bureau first announced on March 6, 2020. The Bureau is seeking public comment on its proposed procedural rule for a period of 60 days from publication in the Federal Register, and in addition will gain practical knowledge of how to process requests for advisory opinions through its pilot program.
If finalized, this program holds real promise as a demand-driven mechanism for resolving areas of regulatory uncertainty through the issuance of public, agency-level interpretive rules that can be relied upon in good faith as definitive statements of the Bureau’s view of what a law or regulation means. Over time, greater regulatory certainty afforded by successive Bureau advisory opinions can be positive for financial institutions and consumers alike.