In a June 17, 2022 blog post, Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB), declared, “Markets work best when rules are simple, easy to understand, and easy to enforce.” The CFPB is seeking to move away from highly complicated rules that have long been a staple of consumer financial regulation and towards simpler and clearer rules. In addition, the CFPB is dramatically increasing the amount of guidance it is providing to the marketplace, in accordance with the same principles.

  • First, unnecessarily complex guidance and rules impede consumer protection, and instead simply increases compliance costs, which benefits larger market players and their high-priced lawyers. Unnecessary complexity places new entrants and small firms at a disadvantage compared to their larger competitors. The CFPB plans to issue guidance in a manner that strengthens the compliance posture of all market participants, not just those with the most market power or resources.
  • Second, simple bright-lines allow all parties to better understand the law and policy priorities, but also, prevent strategic or intentional “misunderstanding” or plausible deniability that some companies use to ignore the law. Complexity creates unintended loopholes, but it also gives companies the ability to claim there is a loophole with creative lawyering. Where guidance and rules are straight-forward and simple, entities are incentivized to redirect innovation and creativity away from regulatory evasion and towards better serving consumers. Simple bright-lines advantage law-abiding companies and disadvantage law breakers.
  • Third, clarity and simplicity will promote consistency among government agencies responsible for enforcement of federal consumer financial law.

The CFPB has several priorities. The agency is heavily focused on implementing longstanding Congressional directives, many of which have gone ignored. These include rulemakings related to:

  • Consumer access to their financial records;
  • Increasing transparency in the small business lending marketplace;
  • Implementing regulations for quality control standards for automated valuation models under Sections 1033, 1071, and 1473(q) of the Dodd-Frank Act; and
  • Property Assessed Clean Energy financing under Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The agency also reviewing a host of rules that the agency inherited from other agencies, including the Federal Reserve Board of Governors and the Federal Trade Commission, as well as other rulemakings the CFPB pursued in its first decade of existence. Many of these rules have now been tested in the marketplace for many years and are in need of a fresh look. These reviews include:

  • Rules originally developed by the Federal Reserve Board of Governors under the Credit CARD Act of 2009, including the enforcement immunity and inflation provisions when imposing penalties on customers.
  • Rules originally developed by the Federal Trade Commission to implement the Fair Credit Reporting Act in an effort to identify potential enhancements and changes in business practices.
  • The CFPB’s Qualified Mortgage Rules to explore ways to spur streamlined modification and refinancing in the mortgage market, as well as assessing aspects of the “seasoning” provisions.