CFPB Rescinds Policies Giving Financial Institutions Flexibility Due to Pandemic

The CFPB on Wednesday rescinded a series of policy statements that provided some regulatory leeway for financial institutions as a result of the coronavirus crisis.

The agency said it expects institutions to again begin following the letter of the CFPB’s rules, adding that they will not avoid sanctions merely for making a good faith effort in light of the pandemic.

The revised policies represented another indication that the Biden Administration’s CFPB intends to maintain a far stricter regulatory regime than the Trump Administration’s agency.

“With the rescissions, the CFPB is providing notice that it intends to exercise the full scope of the supervisory and enforcement authority provided under the Dodd-Frank Act,” the agency said as it released a series of new policies.

Acting CFPB Director Dave Uejio said the pandemic hit families and individuals the hardest.

“Providing regulatory flexibility to companies should not come at the expense of consumers,” he said. “Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities.”

In announcing the revised policies, agency officials said that they intend to:

• No longer measure financial institutions’ good faith efforts to follow rules when considering supervisory and enforcement actions.
• Require financial institutions to resume filing their quarterly data under the Home Mortgage Disclosure Act. Agency officials said that institutions have had sufficient time to adapt to the pandemic. Last year’s policy stated that the bureau would not cite in an examination or take an enforcement action against an institution that failed to file the required report. That policy has now been rescinded.
• Require financial institutions to again file with the agency information regarding credit cards and prepaid accounts. Due to the pandemic, the agency last year said it was necessary to provide credit card and prepaid account issuers with “flexibility and reduce their administrative burden to allow them to focus their attention on making sure consumers have access to credit and other funds.” On Wednesday, the bureau said that “this tradeoff is no longer necessary.”
• No longer offer regulatory flexibility under the Fair Credit Reporting Act and instead, will exercise the agency’s supervisory and enforcement authority to taken enforcement or supervisory action when a financial institution is not in compliance.
• Resume issuing statements of Matters Requiring Attention, which are not legally enforceable, but that the agency may use in assessing a financial institution. “The Bureau is committed to using the full range of its authorities to promote compliance with the law and to ensure that supervised entities protect consumers,” the agency said.

Consumer advocates immediately praised the agency’s decision to enforce its rules more strictly.

“The CFPB’s announcement sends an unequivocal message that it’s back in the business of putting consumers first,” Lauren Saunders, associate director of the National Consumer Law Center, said. “Using the excuse of the coronavirus crisis to give industry unnecessary flexibility about whether to comply with consumer protection laws is inconsistent with its core consumer protection mission.”