CFPB to Issue Consumer Financial Protection Circulars

The Customer Economical Protection Bureau (CFPB or the Bureau) declared it would start out issuing Shopper Economical Safety Circulars (Circulars) to a “broad set of federal government organizations accountable for implementing federal client economic law.” Director Rohit Chopra discussed in a Might 16, 2022, site put up that when the CFPB is the “principal regulator accountable for administering the federal client monetary legislation,” it is not the only agency tasked with enforcement. By issuing Circulars, the CFPB hopes to align enforcement across various regulators, making sure consistency.

Qualifications

The CFPB was established by Congress in 2010. The Dodd-Frank Act recognized the Bureau as the primary regulator for shopper fiscal regulations, along with preexisting regulatory companies. The Bureau regulates the two lender and non-lender entities and enforces the Client Financial Defense Act’s prohibition on unfair, deceptive, and abusive acts or tactics, as perfectly as 18 other “enumerated buyer legislation.” Specified the scope of guidelines for which it is dependable and the time at which the CFPB was created, the Bureau shares regulatory obligations with the subsequent federal organizations (jointly with condition regulators): 

1.		Federal Deposit Insurance policy Corporation
2.		Business office of the Comptroller of the Forex
3.		Board of Governors of the Federal Reserve Procedure
4.		Nationwide Credit history Union Administration
5.		Section of Justice
6.		Federal Trade Commission
7.		Farm Credit history Administration
8.		Office of Transportation
9.		Office of Agriculture

Purchaser Monetary Protection Circulars are advisory plan statements the Bureau troubles under the Administrative Method Act, 5 U.S.C. 553(b). Circulars present track record on an applicable law and condition “considerations applicable to the Bureau’s workout of its authorities.” They also provide steerage for linked regulators on how to enforce federal client monetary law. Although Circulars are issued in the name of transparency, they do not restrict or normally limit the Bureau’s authority, nor do they impose more authorized prerequisites on external parties.

1st CFPB Circular Coincides with FDIC’s UDAP Rule

On May 17, 2022, the Bureau issued its 1st circular, “Deceptive representations involving the FDIC’s title or emblem or deposit insurance plan,” which answered the query, “When do representations involving the name or brand of the Federal Deposit Insurance plan Corporation (FDIC) or about deposit insurance plan represent a misleading act or observe in violation of the Shopper Monetary Defense Act (CFPA)?” In the Circular, the CFPB wrote that lined entities, specifically fintechs and crypto providers, “likely violate the CFPA’s prohibition on deception if they misuse the name or brand of the FDIC or interact in untrue advertising or make misrepresentations to consumers about deposit insurance plan, irrespective of irrespective of whether this kind of carry out (which include the misrepresentation of insured position) is engaged in knowingly.”

The CFPB issued its very first Circular the very same working day the FDIC issued its Unfair or Deceptive Acts or Procedures (UDAP) rule prohibiting the misuse of the FDIC’s identify and brand. The rule also prohibits entities from generating misrepresentation about the FDIC’s deposit insurance plan. The rule sets forth how the FDIC will discover and look into violations of Area 18(a)(4) of the Federal Deposit Coverage Act (prohibiting UDAP). The FDIC, hoping to maximize transparency, promulgated the rule in response to amplified noticed incidents of financial services providers misleading practices.  

Summary

The Bureau’s choice to difficulty Circulars demonstrates its guidance of the Biden administration’s stated purpose of preserving customers. The CFPB has acted to both expand its reach and explain existing federal regulation to covered entities and other regulators.