Consumer Finance Insights
May 8, 2018

House Bill Proposes to Set New Framework for CFPB Regulation

On April 17, 2018, House members Sean Duffy (R-WI) and Ed Perlmutter (D-CO) co-sponsored bi-partisan legislation aimed at providing more certainty to companies subject to the Consumer Financial Protection Bureau’s (CFPB) regulation.  The bill, H.R. 5534, titled the “Give Useful Information to Define Effective Compliance Act” or “GUIDE Compliance Act,” is aimed at requiring the CFPB to specifically define the type of guidance it issues to regulated entities, and prohibits the CFPB from penalizing any regulated entity that relies on any guidance issued by the CFPB.

The bill would require the CFPB to issue guidance where “necessary or appropriate to enable the Bureau to carry out Federal consumer financial law, including facilitating compliance with such law.”  Within one year, the CFPB would be required to issue a new proposed rule defining the types of guidance it will provide to regulated entities, and the proposed criteria that it would use to select each type of guidance.  Additionally, the bill proposes to require the CFPB to put in place a process through which regulated entities can request guidance, and to outline a time frame in which the CFPB must respond to those requests.  The law would also require the CFPB to create a system for formally amending or revoking guidance, as well as provide a notice period to provide an opportunity for public comment before repealing or amending guidance—with the limited situation in which the CFPB concludes that “public exigency” exists, in which case the CFPB could forego the notice and comment period.

The bill would also protect regulated entities that act “in good faith in conformity with any applicable guidance from the [CFPB] that was in effect.”  So long as entities rely in good faith on the CFPB’s guidance at the time of a given act, the CFPB cannot punish an entity for that act, even if the guidance was subsequently revoked, amended, or otherwise nullified.  Finally, the bill requires the CFPB to develop a “penalty matrix” within 18 months, which would provide some certainty to regulated entities by standardizing the size of the penalties the CFPB can impose, depending on the severity of the conduct at issue and the level of culpability.

The bill has only just been introduced into committee, so it is still far from certain whether the bill will be passed or, if passed, whether it will remain in its current form.  However, it is a bi-partisan move to provide certainty to the financial services industry, and is philosophically in line with Republicans’ larger goal of reforming the CFPB, so it is certainly possible that the bill gains traction.  LenderLaw Watch will continue to monitor the bill as it moves through the legislative process, and will bring you updates as they occur.

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