The CFPB has issued a plan for the periodic review of its rules that have a significant economic impact upon a substantial number of small business entities. It also announced that it was launching the first such review, which will look at the overdraft rule adopted in 2009.
Rules Review Plan. Section 610 of the Regulatory Flexibility Act requires every agency to publish in the Federal Register a plan for the periodic review of the agency’s rules that have a significant impact on a substantial number of small business entities (610 Review). The plan must provide for a review of the relevant rules within 10 years of a rule’s publication as a final rule. The purpose of a 610 Review is to determine whether a rule should be continued without change, or amended or rescinded, consistent with the objectives of the relevant statute, to minimize any significant economic impact of the rule on a substantial number of small business entities.
The Bureau plans to initiate 610 Reviews every year, with the review of a particular rule to begin about 9 years after its publication and completed within 10 years of the publication date. A rule subject to a 610 Review can be one issued by the Bureau or by another agency whose authority was transferred to the Bureau, such as the Federal Reserve Board. The Bureau plans to publish a list of rules that it plans to review in the upcoming plan year and, for each rule to be reviewed, a notice that invites public comment on the rule.
It intends to conduct a 610 Review “based on information on hand, relevant literature, and information submitted by the public in response to the Bureau’s request for comment.” Also, the Bureau “may exercise its discretion to request additional data from relevant parties on a voluntary basis or otherwise obtain data from other sources, for example, by purchasing data from a third-party vendor.” Factors to be considered by the Bureau in determining whether a rule should be continued without change, or amended or rescinded, consistent with relevant statute’s objectives, to minimize any significant economic impact of the rule on a substantial number of small business entities include: the continued need for the rule, the extent to hich the rule overlaps, duplicates, or conflicts with federal, state, or other rules, and the time since the rule was evaluated or the degree to which technology, economic conditions, or other factors have changed the relevant market.
Comments on the Bureau’s review plan must be filed within 60 days of its publication in the Federal Register. The 610 Reviews are separate from, and in addition to, the assessments the Bureau conducts pursuant to Dodd-Frank Section 1022(d) of each significant rule or order and about which the Bureau publishes a report not later than 5 years after the effective date of the rule or order. The Bureau has so far published three such assessment reports concerning the remittance transfers rule, the mortgage servicing rule, and the ability to repay/qualified mortgage rule.
Review of Overdraft Rule. The first rule to be subjected to a 610 Review is the rule adopted by the Federal Reserve Board in 2009 that amended Regulation E (which implements the EFTA) to add a rule limiting the ability of financial institutions to charge overdraft fees for paying ATM and one-time debit card transactions that overdraw a consumer’s account. The rule prohibits overdraft fees from being charged on such overdrafts unless the consumer has affirmatively consented or opted-in to the institution’s payment of such overdrafts. The Dodd-Frank Act transferred authority to implement the EFTA from the Board to the Bureau.
In the Supplementary Information, the Bureau states that it has found that the share of consumers who have opted in varies widely by institutions but generally is considerably less than half. The Bureau notes that it estimated in a June 2013 white paper that the rule led to a material decrease in the amount of overdraft fees paid by consumers. It also notes that there has been substantial growth in debit-card based transactions and that it has observed several changes in overdraft practices at financial institutions, including changes in the order in which transactions are posted, daily limits on overdraft fees, and “cushions” that preclude overdraft fees from being assessed on de minimis amounts. The Bureau states that it “does not have reason to believe that these changes are attributable to the rule.”
The Bureau also references the four alternative versions of a revised opt-in model that were released in 2017 and that it has heard concerns regarding the requirement that the opt-in notice be substantially similar to the model form, including a desire among financial institutions to add additional information to the notice that they believe may be relevant to the consumer’s decision.
The Bureau ask for comment on the following topics:
- The nature and extent of the economic impacts of the rule as a whole and of its major components on small business entities
- Whether and how the Bureau by rule could reduce the costs of the overdraft rule on small business entities
Comments on the overdraft rule must be received within 45 days of the date the Bureau’s notice of the 610 Review and RFI is published in the Federal Register.
In November 2017, the CFPB published a notice in the Federal Register announcing that it planned to seek OMB approval to conduct online testing of ATM/overdraft disclosures with 8,000 individuals. In addition to the June 2013 white paper, the CFPB has issued a July 2014 report and an August 2017 report on checking account overdraft services.