Consumer Compliance Outlook: Third Issue 2022

News from Washington: Regulatory Updates

The Consumer Financial Protection Bureau (Bureau) will issue the final implementing regulations for §1071 of the Dodd‒Frank Act (DFA) by March 31, 2023.

Section 1071 of the DFA directed the Bureau to issue implementing regulations under the Equal Credit Opportunity Act (ECOA) for financial institutions to collect and report data on applications for credit for women-owned, minority-owned, and small businesses. In 2019, when the rulemaking had not yet been initiated, community groups filed a lawsuit to compel the Bureau to issue the regulations. California Reinvestment Coalition v. CFPB (N.D. Cal. 2019). In response to the lawsuit, the Bureau published a proposed rule in the Federal Register in October 2021 to implement §1071. On July 11, 2022, the Bureau entered into a court-approved stipulation with the community group plaintiffs to issue a final rule by March 31, 2023. In the October 2021 rulemaking, the Bureau proposed a mandatory compliance date of 18 months after the date the final rule is published in the Federal Register.

The Bureau issues Advisory Opinion on permissible purposes for furnishing, using, and obtaining consumer reports under the Fair Credit Reporting Act (FCRA).

On July 12, 2022, the Bureau published an advisory opinion in the Federal Register to clarify the legal requirements under the FCRA for using and providing a consumer report.1 Under §604 of the FCRA (15 U.S.C. §1681b), a consumer reporting agency (CRA) may only provide a consumer report to someone with a permissible purpose, as defined in the FCRA. The Advisory Opinion discusses several circumstances of concern:

The Advisory Opinion clarifies that the “permissible purposes” for obtaining a consumer report in the FCRA only apply to the consumer for whom the CRA received a request and that a CRA’s use of disclaimers about insufficient matching procedures does not cure a permissible purpose violation. A CRA must have reason to believe that the user requesting a consumer report has a permissible purpose and that all of the information it provided in the consumer report relates to the consumer for whom it received the request. In addition, users of credit reports must ensure that they do not violate the FCRA by using a credit report when they lack a permissible purpose for doing so. The Advisory Opinion also discusses potential criminal liability under §619 of the FCRA (15 U.S.C. §1681q) for knowingly or willfully obtaining information on a consumer from a CRA under false pretenses and under §620 of the FCRA (15 U.S.C. §1681r) for any officer or employee of a CRA who knowingly and willfully provides a person’s information to an unauthorized person.

The Bureau issues its spring 2022 regulatory agenda.

On April 1, 2022, the Bureau released its spring 2022 regulatory agenda, as part of the spring 2022 Unified Agenda of Federal Regulatory and Deregulatory Actions. The Bureau indicated the agenda covers the regulatory matters it reasonably anticipates having under consideration from June 1, 2022, to May 31, 2023. The agenda includes:

The Board, the FDIC, and the OCC issue host state loan-to-deposit ratios.

On June 28, 2022, the Board, the FDIC, and the OCC issued the host state loan-to-deposit ratios that the agencies use in evaluating compliance with §109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Congress enacted §109 to ensure that an interstate branch would not take deposits from a community without the bank reasonably helping to meet the credit needs of that community. Accordingly, §109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Additionally, branches of banks controlled by out-of-state bank holding companies are prohibited from operating primarily for the purpose of deposit production.

The Bureau issues an advance notice of proposed rulemaking (ANPR) for information about credit card late fees.

On June 29, the Bureau published an ANPR in the Federal Register to solicit information about credit card late fees and late payments. Under the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card late fees must be “reasonable and proportional” to the card issuer’s costs for a late payment. Issuers must document their costs to show a fee is reasonable and proportionate or use the inflation-adjusted safe harbor in the regulation (currently $30 for the first late payment and $41 for other late payments made within six billing cycles of the initial late payment). The Bureau is soliciting information about late fees to determine whether it should revisit the safe harbor amounts, focusing on the following issues:

The comment period closed on August 1, 2022.

The Federal Financial Institutions Examination Council (FFIEC) releases 2021 data under the Home Mortgage Disclosure Act (HMDA).

On June 16, 2022, the FFIEC released HMDA data for 2021 from 4,338 HMDA filers, including these summary statistics:

The Bureau issues its annual report on consumer complaints of servicemembers for 2021.

Section 1013(d) of the Dodd‒Frank Act requires the Bureau to monitor complaints of servicemembers and their families. In response, the Bureau annually publishes a report analyzing the complaints it has received from servicemembers and their families. On June 13, 2022, the Bureau issued its 2021 report. The report highlighted the following issues:

To address these concerns, the report includes the following recommendations:

Bureau issues guidance on adverse action notice (AAN) requirements for credit decisions based on complex algorithms.

On May 26, 2022, the Bureau issued Circular 2022-03 to clarify the AAN requirements when a creditor uses a complex algorithm in its credit decision.2 Some creditors rely on complex algorithms in making credit decisions. When adverse action is taken based on the algorithm, the specific reason for taking adverse action may not always be clear. Circular 2022-03 clarifies that the “adverse action notice requirements of ECOA and Regulation B, however, apply equally to all credit decisions, regardless of the technology used to make them. Thus, ECOA and Regulation B do not permit creditors to use complex algorithms when doing so means they cannot provide the specific and accurate reasons for adverse actions.” (Emphasis added). The circular notes the Official Staff Commentary requires that “[t]he specific reasons disclosed … must relate to and accurately describe the factors actually considered or scored by a creditor.” Comment 9(b)(1)-2. The Commentary also provides that when a credit scoring system is used, “no factor that was a principal reason for adverse action may be excluded from disclosure. The creditor must disclose the actual reasons for denial (for example, “age of automobile”) even if the relationship of that factor to predicting creditworthiness may not be clear to the applicant.” See Comment 9(b)(2)-4. The circular concludes that “a creditor’s lack of understanding of its own methods is therefore not a cognizable defense against liability for violating ECOA and Regulation B’s requirements.”


1 The Bureau’s Advisory Opinions are “interpretive rules under the Administrative Procedure Act that respond to a specific need for clarity on a statutory or regulatory interpretive quest.”

2 The Bureau issues Consumer Financial Protection Circulars for parties with enforcement authority for federal consumer financial laws for which the Bureau has rulemaking authority “to promote consistency in approach across the various enforcement agencies.”