On June 18, 2020, the CFPB announced the launch of a new pilot advisory opinion (AO) program that allows parties that have questions about CFPB regulatory requirements to submit a request for clarification. If the CFPB chooses to respond, the agency will issue an AO that will be posted on its website and published in the Federal Register. AOs will be issued as interpretive rules under the Administrative Procedures Act and signed by the Director of the CFPB. Unless otherwise stated, each AO will be applicable to the requestor and to similarly situated parties to the extent that their situations conform to the CFPB’s summary of the material facts presented in the AO. Where a statutory safe harbor is applicable to an AO, the AO will explain that fact. According to the CFPB, the AO program will help entities better understand their legal and regulatory obligations.
Although the initial phase for AOs is a pilot, it eventually will be replaced by a permanent program that was proposed concurrently with the pilot (the “proposed AO program”). Interested parties may submit comments on the proposed AO program, with comments due by August 21, 2020. The proposed AO program will be fully implemented after the CFPB gains experience with AOs and completes a review of comments received.
Appropriate AO Topics
Under both the pilot and proposed AO program, the CFPB will prioritize open questions within the CFPB’s purview that can be addressed legally through an interpretive rule. Specifically, the CFPB will focus on the following statutory objectives of the CFPB when deciding what issues to address through AOs:
- That consumers are provided with timely and understandable information to make responsible decisions about financial transactions;
- That outdated, unnecessary or unduly burdensome regulations are identified in order to reduce regulatory burdens;
- That Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution and in order to promote fair competition; and
- That markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
Additional factors the CFPB will consider when weighing the appropriateness of an AO include whether the issue: (1) has been noted during prior CFPB examinations as one that might benefit from additional regulatory clarity; (2) is one of substantive importance or one whose clarification would provide significant benefit; and/or (3) concerns an ambiguity that the CFPB has not previously addressed through an interpretive rule or other authoritative source.
Issues currently subject to ongoing investigation or enforcement or rulemaking likely will not be considered appropriate for an AO. Likewise, the CFPB will not use the AO program to address questions involving highly fact-intensive applications of general standards, such as the prohibition on unfair, deceptive, or abusive acts or practices, although CFPB concedes that there may be times when it is able to offer advisory opinions that provide additional clarity on the meaning of such standards.
Process for Submitting AO Requests
Requests for AOs through the pilot and proposed AO program may be submitted via email to email@example.com, or through other means to be designated by CFPB. Requests must identify the requestor. The CFPB will treat information in the submission that the requestor would not normally make public as confidential to the extent applicable under its confidentiality regulations. The CFPB encourages requestors to identify any such information. AO applications should not include sensitive personal information (e.g., account numbers, Social Security numbers, or names of individuals) and any confidential information should be identified as such.
During the pilot program, law firms and trade associations may prepare an AO request on behalf of covered persons and service providers subject to the CFPB’s supervisory authority, but the CFPB will not accept requests directly from such third party representatives on behalf of unnamed entities. Under the proposed AO program, however, this restriction will be lifted, and outside counsel and trade associations may submit an AO request on behalf of one or more clients or members on an anonymous basis. In such cases, the requestor is required to state whether the unidentified third party is the subject of an ongoing public CFPB enforcement action or ongoing CFPB enforcement investigation.
In addition, while not required during the pilot AO program, the following information must be included in a request for an AO under the proposed program.
- A statement regarding whether the issue on which the AO is being requested is the subject of any known or reasonably knowable active litigation or federal or state agency investigations;
- All material facts and circumstances, including detailed specification of the legal question and supporting facts; and
- A proposed interpretation of the relevant regulations, identification of the potential uncertainty or ambiguity that such interpretation would address, and explanation of why the requested interpretation is an appropriate resolution of that uncertainty or ambiguity.
For AO requests made under the proposed AO program, requestors are also advised to provide an explanation of the potential consumer benefits and risks associated with the proposed interpretation, as well as an explanation of how the proposed interpretation relates to the CFPB’s statutory objectives. In addition, the CFPB notes that if it issues an AO in response to a request, the CFPB retains the discretion to determine the scope and terms of the AO and answer the request with its own interpretation regardless of the proposed interpretation offered by the requestor. AOs may also not be applicable to the original requestor if the underlying facts of the requestor’s situation do not conform to the CFPB’s summary of material facts as presented in the published AO.