It’s hard not to gasp at the CFPB’s estimate that the final remittance transfer rule will require more than 3.4 million employee hours to implement and an ongoing burden of nearly 4.3 million employee hours annually to comply. The rule, which represents the first example of substantive rulemaking by the CFPB, amends Regulation E (Electronic Fund Transfer Act) to require new disclosures, error resolution procedures, and cancellation and refunds rights for remittance transfers to consumers or businesses in a foreign country. It also makes transfer providers liable for violations of the rule by their agents.
Remember the so-called “Speed Bump” amendment to Dodd-Frank? That provision added the CFPB to the two other federal agencies (OSHA and EPA) that must comply with special requirements of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). Among other requirements, SBREFA requires the CFPB to convene a small business panel before rolling out regulations that the CFPB director expects to have a significant impact on a substantial number of small business entities. The panel is tasked with reviewing the CFPB’s proposed impact analysis and making recommendations for changes to the regulations.
In its discussion of the final remittance rule, the CFPB acknowledges that the rule will have a significant economic impact on a substantial number of small entities. So why is there no mention of SBREFA? When asked about SBREFA during his recent testimony to Congress, CFPB Director Cordray indicated that the CFPB was not required to comply with SBREFA because it had “inherited” the proposed remittance rule from the Fed. Since SBREFA requires a panel to be convened before an agency publishes an initial regulatory flexibility analysis and that analysis was conducted by the Fed, the law does seem to support Mr. Cordray’s position.
However, it looks like the CFPB will be hitting the SBREFA “speed bump” very soon. According to the CFPB’s first Semi-Annual Report to Congress (on which we commented in another blog post), the rules it has planned for the first six months of 2012 include TILA/RESPA mortgage loan rules to implement Dodd-Frank Title XIV. To avoid the SBREFA panel process for those rules, Mr. Cordray would need to certify that the CFPB’s proposals “will not, if promulgated, have a significant economic impact on a substantial number of small entities.” Given the multitude of new requirements those rules are expected to contain, we think it unlikely Mr. Cordray could reasonably make such a certification (unless he’s contemplating exemptions for small lenders–something else about which we shared our thoughts in a prior blog post.)