The CFPB will issue circulars on consumer financial protection
The Consumer Financial Protection Bureau (CFPB or the Bureau) has announced that it will begin issuing Consumer Financial Protection Circulars (Circulars) to a “broad set of government agencies responsible for enforcing federal consumer law. consumer finance”. Director Rohit Chopra explained in a May 16, 2022 blog post that while the CFPB is the “primary regulatory body responsible for administering federal consumer finance laws,” it is not the only body responsible. of the app. By issuing circulars, the CFPB hopes to align enforcement across different regulators, ensuring consistency.
The CFPB was created by Congress in 2010. The Dodd-Frank Act established the Bureau as the primary regulator of consumer financial laws, alongside pre-existing regulators. The Bureau regulates both banking and non-banking entities and enforces the Consumer Financial Protection Act’s prohibition against unfair, deceptive, and abusive acts or practices, as well as 18 other “listed consumer laws.” Given the scope of the laws for which it is responsible and the time in which the CFPB was created, the Bureau shares regulatory responsibilities with the following federal agencies (as well as state regulators):
|1.||Federal Deposit Insurance Corporation|
|2.||Office of the Comptroller of the Currency|
|3.||Board of Governors of the Federal Reserve System|
|4.||National Administration of Credit Unions|
|6.||Federal Trade Commission|
|7.||Agricultural Credit Administration|
Consumer Financial Protection Circulars are advisory policy statements issued by the Bureau under the Administrative Procedure Act, 5 USC 553(b). Circulars provide general information on applicable law and set out “considerations relevant to the exercise of its powers by the Office”. They also provide guidance to relevant regulators on how to enforce federal consumer finance law. Although the circulars are issued in the name of transparency, they do not limit or otherwise restrict the authority of the Office, or impose further legal requirements on external parties.
First CFPB circular coincides with FDIC UDAP rule
On May 17, 2022, the Bureau issued its first circular, “Misleading Representations Involving the Name or Logo of the FDIC or Deposit Insurance,” which answered the question: “When representations involving the name or logo of the Federal Deposit Insurance Corporation (FDIC) or deposit insurance constitutes a deceptive act or practice in violation of the Consumer Financial Protection Act (CFPA)? In the circular, the CFPB wrote that covered entities, particularly fintechs and crypto firms, “likely violate the CFPA’s deception prohibition if they misuse the FDIC name or logo or engage in false advertising or misrepresentation to consumers about deposit insurance, regardless of whether such conduct (including misrepresentation of insured status) is knowingly committed.”
The CFPB issued its first circular the same day the FDIC issued its Unfair or Deceptive Acts or Practices (UDAP) rule prohibiting misuse of the FDIC name and logo. The rule also prohibits entities from making false claims about FDIC deposit insurance. The rule outlines how the FDIC will identify and investigate violations of Section 18(a)(4) of the Federal Deposit Insurance Act (prohibiting UDAP). The FDIC, hoping to increase transparency, enacted the rule in response to increasing observed incidents of deceptive practices by financial service providers.
The Bureau’s decision to issue circulars demonstrates its support for the Biden administration’s stated goal of protecting consumers. The CFPB has acted to both expand its reach and clarify existing federal law to covered entities and other regulators.
©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 140