Weekly RoundUp
October 27, 2022

FINRA Requests Comment on Its Machine-Readable Rulebook Initiative

In This Weekly Roundup Issue. The Financial Industry Regulatory Authority (FINRA) released a special notice requesting comment on the launch of its machine-readable rulebook (MRR) initiative; the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion addressing “junk” data in credit reports; and the CFPB issued guidance to banks on unfair “junk” fees. These and other developments are discussed in more detail below.

Regulatory Developments

FINRA Requests Comment on Its Machine-Readable Rulebook Initiative

On October 21, FINRA released a special notice requesting comment on the launch of its MRR initiative. The MRR is designed to enhance compliance efforts, reduce costs and aid firms in risk management. The MRR was developed through the creation of an embedded taxonomy that classifies and categorizes a hierarchy of key terms. It was then applied to the 40 most frequently viewed FINRA rules through an Application Programming Interface (API) that will allow users to apply an enhanced search feature to locate specific content.

FINRA is seeking comments on the MRR initiative, the embedded taxonomy methodology, search features, content made available through the API, and the user experience. The deadline for comment is December 20, 2022. 

At the same time, the FDIC announced that it would maintain the Designated Reserve Ratio (DRR) for the Deposit Insurance Fund (DIF) at two percent for 2023. The new rate schedules are intended to help the DIF progress towards the FDIC’s long-term goal of a two percent DRR. The revised assessment rate schedules will be effective on January 1, 2023, and applicable to the first quarterly assessment period of 2023.

CFPB Issues Advisory Opinion Addressing “Junk” Data in Credit Reports

On October 20, the CFPB issued an advisory opinion, cautioning consumer reporting agencies to maintain reasonable policies, procedures, and internal controls to assure maximum possible accuracy and prevent the inclusion of, screen for, reliably detect, and eliminate obviously false data and logically inconsistent information in consumer credit reports. Examples of inconsistent or inaccurate data include an account paid in full that still shows a balance, a date of first delinquency that predates an account’s opening, and a tradeline that predates the consumer’s date of birth. Highlighting that it receives more complaints about credit reporting than any other subject, the CFPB further cautioned that this advisory opinion is only one in a series of actions it is taking to ensure consumer reporting agencies comply with Federal consumer financial laws.

“When a credit report accuses someone of defaulting on a loan before they were born, this is nonsensical, junk data that should have never shown up in the first place. Consumer reporting companies have a clear obligation to use better procedures to screen for and eliminate conflicting information, or information that cannot be true.”
- CFPB Director Rohit Chopra

CFPB Issues Guidance to Banks on Unfair “Junk” Fees

On October 26, as part of its larger “junk” fee initiative, the CFPB issued a Consumer Financial Protection Circular on surprise overdraft fees and a compliance bulletin on surprise depositor fees, cautioning banks that indiscriminately charging consumers fees that they cannot reasonably avoid likely constitutes an unfair practice in violation of the Consumer Financial Protection Act. Such fees include when a bank displays that a customer has sufficient available funds to complete a debit card purchase at the time of the transaction, but later charges the consumer an overdraft, or when a consumer deposits a check in good faith, with no control over whether it will clear, and is charged a fee when the check bounces. As an alternative, the CFPB endorses tailored fee policies that charge consumers only in situations where consumers could avoid the fee — for example, when a depositor repeatedly deposits bad checks from the same originator.

Goodwin News

State Enforcement in Mortgage Lending

Goodwin partner Allison Schoenthal recently co-authored an article examining state enforcement of federal consumer financial protection laws in light of the Consumer Financial Protection Bureau’s recent press release and interpretive rule encouraging more enforcement of federal consumer financial protection laws by state regulators.

Read the article published in The Review of Banking & Financial Services. 

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