The CFPB has issued its final Advisory Opinions Policy, which allows stakeholders to request interpretive guidance “to resolve regulatory uncertainty.”  While advisory opinions (AO) may address uncertainty in both statutes and regulations, the Bureau states in the Policy that it “will focus primarily on clarifying ambiguities in its regulations.”  The Policy was accompanied by the release of two AOs, one dealing with earned wage access (EWA) products and the other dealing with certain education loan products that refinance or consolidate a borrower’s pre-existing federal, or federal and private, education loans. 

AO Policy.  The final Policy, which as published in the Federal Register indicates that it was applicable beginning November 30, 2020, supersedes the Bureau’s pilot AO program launched in June 2020.  The final Policy adopts the Bureau’s June 2020 proposal without any significant changes.  It provides for the submission of requests for an AO to the Bureau by email and for the publication of AOs in the Federal Register and on the Bureau’s website.

Key features of the Policy include:

  • A request for an AO must identify the person or entity seeking the AO or any person or entity submitting the request on behalf of a third party.  Third parties such as trade associations and law firms can submit requests for AOs on behalf of clients or members without identifying those entities.
  • A request must concern actual facts or a course of action that the requestor or third party is engaged in or considering engaging in.
  • AOs will be interpretive rules under the Administrative Procedure Act.
  • The Bureau will use the following factors in deciding whether to address an issue through an AO:
    • The issue has been noted in Bureau exams as one that might benefit from additional regulatory clarity
    • The issue is one of substantive importance or impact or one whose clarification would provide significant benefit
    • The issue concerns an ambiguity that the Bureau has not previously addressed through an interpretive rule or other authoritative source
  • The following factors will weigh strongly in favor of a presumption that an AO is not appropriate:
    • The issue is the subject of an ongoing Bureau investigation or enforcement action or the subject of an ongoing or planned rulemaking
    • The issue is better suited for notice-and-comment rulemaking
    • The issue could be addressed more effectively through a Compliance Aid or the Bureau’s regulatory inquiries function
    • Clear Bureau or court precedent on the issue is already publicly available
  • Secondary factors used by the Bureau to evaluate requests for AOs will include alignment with the Bureau’s statutory objectives (such as identifying and addressing outdated, unnecessary, or unduly burdensome regulations), size of the benefit offered to consumers by resolution of the interpretive issue, known impact on the actions of other regulators, and the impact on Bureau resources.
  • Where a statute or regulation establishes a general standard “that can only be applied through highly fact-intensive analysis” (such as the Dodd-Frank UDAAP prohibition), the Bureau does not intend to replace that analysis “with a bright-line standard that eliminates all of the required analysis.”  However, “there may be times when the Bureau is able to offer advisory opinions that provide additional clarity on the meaning of such standards.”

AO on EWA Products.  EWA products provide employees with access to earned but as yet unpaid wages.  As described in the AO, such products typically involve an EWA provider enabling employees to request a certain amount of accrued wages, disbursing the requested amounts to employees prior to payday, and later recouping the funds through payroll deduction or bank account debits on the subsequent payday.

The AO addresses whether an EWA program with the characteristics set forth in the AO is covered by Regulation Z.  Such characteristics include the absence of any requirement by the provider for an employee to pay any charges or fees in connection with the transactions associated with the EWA program and no assessment by the provider of the credit risk of individual employees.  The AO sets forth the Bureau’s legal analysis on which it bases its conclusion that the EWA program does not involve the offering or extension of “credit” within the scope of Regulation Z.

The Bureau could have determined that the EWA program set forth in the AO was not covered by Regulation Z without analyzing the meaning of “credit” under Regulation Z and instead by relying on the absence of a finance charge and the single payment structure.  In the AO, the CFPB describes EWA products as “an innovative way for employees to meet short-term liquidity needs that arise between paychecks without turning to more costly alternatives like traditional payday loans.”  While noting that the AO has no application to any circumstances other than an EWA program meeting all of the characteristics set forth in the AO, the CFPB suggests it could have value to other providers.  More specifically, the CFPB observes that there may be EWA programs with nominal processing fees that nonetheless do not involve the offering or extension of “credit” under Regulation Z and advises that providers of such programs can request clarification about a specific fee structure.  By not relying on the absence of a finance charge and single payment structure for its conclusion that the EWA program was not covered by Regulation Z, the CFPB may have been seeking to promote the development of EWA programs by leaving the door open for programs that do have fees to also be outside the scope of Regulation Z because they do not involve “credit.”

AO on Private Education Loan Refinancing or Consolidation ProductsThe AO addresses whether private education loan consolidation products that satisfy and replace multiple federal, or federal and private education loans, and private education loan refinance products that satisfy and replace a single federal or private education loan are “private education loans” for purposes of the disclosure and other requirements applicable to “private education loans” under TILA and Regulation Z.  The AO sets forth the Bureau’s legal analysis on which it bases its conclusion that such private education loan refinance or consolidation products are covered under the term “private education loan” in TILA and Regulation Z and therefore subject to TILA and Regulation Z’s requirements in subpart F.