Appleseed Network Submits Comments to CFPB on Guidance Materials and Activities

Appleseed recently submitted formal comments to the CFPB on guidance materials and activities. For further information, please contact Annette LoVoi, Appleseed’s Director of Financial Access and Asset Building.

July 5, 2018

Dear Acting Director Mulvaney,

Thank you for giving the Appleseed Foundation the chance to submit this comment on the CFPB’s guidance materials and activities, including implementation support, to the general public. In summary, our views are as follows:

1. We support steps that maximize industry compliance with consumer protection statutes and regulations. As a whole, the agency’s guidance materials have promoted this result, so we encourage the CFPB to continue to issue these guidance and compliance aids.

2. Another benefit of the CFPB’s program is that it has provided guidance while formal rulemaking is planned or underway but not yet completed. The guidance program gives the agency the ability to point industry in the right direction while formal rulemaking is being completed or a final rule has not yet become fully effective.

3. Guidance documents such as FAQs and quick reference summaries are likely to help businesses comply with the laws and regulations that the CFPB administers. This is particularly true for small businesses, but even if a business has a large compliance staff, FAQs and quick reference summaries can help that staff gain an overview of a rule’s requirements and find relevant parts of a rule.

4. FAQs, quick reference summaries, and the like are helpful to consumers, consumer advocates, and the general public for the same reasons. Consumers can benefit from guides setting out what to expect from new rules coming into effect that will be of assistance to them, such as increased disclosures regarding sending remittances to family and friends in other countries.

5. All guidance of any type, whether an official interpretation, an FAQ, a webinar, or something else, should be readily accessible to the public in an easily searchable form.

These views are spelled out in more detail below.

1. We Support the CFPB’s Issuance of Guidances and Compliance Aids.

In the seven years of its existence, the CFPB has done an exemplary job of crafting rules that protect consumers from marketplace abuses while impinging as little as possible on legitimate business operations. However, rules will benefit consumers only if industry understands and complies with them. Guidance and compliance aids promote compliance with the consumer protection laws and rules that fall within the CFPB’s jurisdiction. We support the CFPB’s program of issuing these guides because they promote compliance with the laws and rules that benefit consumers.

Consumers, responsible companies, and government agencies all benefit when there is widespread compliance and full implementation of a law. Guidance materials are especially helpful with respect to the statutes that fall within the CFPB’s jurisdiction because these statutes and the rules under them can be complex. Some deal with topics–such as disclosure of consumer credit terms– that are inherently complex and materials aimed at clearly explaining laws and regulations can be very helpful in consumers understanding their rights.

Guidance materials also can help businesses comply with CFPB rules. Even for large businesses, these aids can help their legal departments get an initial grasp of the scope of a rule and its relevance for the business. Guidance documents that provide a sample form businesses can use and that can assist in a business setting up its systems to comply with a new rule enhance the efficiency of businesses large and small, by making it unnecessary for each business to tread the same ground with different rights. And they are particularly helpful for small businesses that may not have in-house legal staff. Guidance materials that can set out a suggested format for disclosures and forms can deal with practical questions that a business faces when implementing a new rule in a way that a formal rule or an official interpretation cannot.

Guidance materials and other compliance aids are also useful to consumers and other members of the public. A guidance document can be more concise, and more in the form of a summary, and it can avoid highly technical language and arcane legal or economic terms. Consumers who are trying to understand their rights or determine what the standards are for businesses they are dealing with are far more likely to find useful basic information if a guidance, a summary, or a FAQ document is available than if they have to locate and read the relevant rules.

Even though attorneys are trained to be able to read and analyze complex regulations, agency guidance can be helpful to them, too. First, not all attorneys are familiar with consumer law. Guidance materials, summaries, webinars and FAQs can be particularly helpful to non-specialist attorneys who are seeking to determine whether there is a law or regulation on a particular topic. Even for attorneys who focus on consumer law, these documents can make it easier to find relevant provisions of regulations and confirm the attorney’s understanding of a regulation. Giving a big-picture summary of a regulation in a guidance or summary document can make it easier for a consumer law specialist to absorb and understand the regulation.

The CFPB’s guidance materials also have proven helpful in filling in the gap between the time a statute becomes effective and the time rulemaking implementing the statute has been finalized and is effective. Effective guidance can help a business chart a path that will make it easier for it to comply with regulations once they are finalized.

Guidance can also serve the purpose of putting businesses on notice of the practices that the agency’s enforcement and supervision divisions consider to be violations. This information is, of course, invaluable to businesses. Businesses benefit when an agency puts this guidance into a publicly-available document, because then a business that disagrees with the agency’s position knows about it and can persuade the agency to revise it. When the agency informs businesses that it will consider certain practices that are harmful to consumers to be violations, consumers also benefit because then businesses are likely to avoid those practices.

2. The CFPB could provide informal nonbinding advice on a limited basis.

CFPB could put together a program where informal non binding advice can be provided over the phone but must be confirmed in writing; they could seek comment on interpretive rules that would accompany the regulation and any individual letters sent by the agency can be placed on the website. Regulatory attorneys on both the agency and private side know the limitations of informal guidance. Agencies should be providing advice on how to comply with the law and clarity as to whether particular law or regulation applies in a given situation.

3. The CFPB should commit itself to seeking broad input from stakeholders when it issues guidances.

We urge the CFPB to adopt a broad program of seeking input from stakeholders whenever it issues a guidance document that is not subject to formal notice-and-comment rulemaking. The formal notice-and-comment rulemaking that the APA specifies is by no means the only way an agency can obtain the views of stakeholders. Other methods include surveys, round tables, less formal meetings, and requests for information.

The CFPB should have a system in place to identify persons and entities who may be affected by proposed guidance documents. It should make sure to reach out to trade groups or other organizations that speak for persons who may be affected, but it should remember that there may be affected entities that are not part of any organization and take particular care to obtain the perspective of consumers and consumer groups. The CFPB staff should seek out opinions from all sides so that a well-reasoned interpretation may be of the most use to the public and the industry.

4. All guidance documents should be made public in a form that is readily searchable.

A potential problem with guidance documents is that, even though they are intended to make the law clearer, they can have the counter-effect of making it more complicated to determine what the law is. Typically, guidance documents are not codified. Legal research databases may not include them. There may or may not be an overall index to them.

These potential problems are not reasons to stop issuing guidance documents. But the CFPB should take care to post all of its guidance documents in an organized, easily-searchable way. It should also have an internal system for reviewing guidance documents to make sure they are consistent with each other and consistent with the statute and rules and any amendments thereto. It should review its guidance documents regularly to delete any that are obsolete or duplicative. And, when a guidance document was issued because of a lack of clarity of a rule, the agency should keep a central record of these ambiguities and systematically propose corresponding revisions to the rule itself.

Thank you for considering these views. If you would like to discuss our comments further, please contact us.