It’s Official. CARD Act, Credit Rules, Now Under CFPB Review

The director of the Consumer Financial Protection Bureau (CFPB), Rohit Chopra, announced in a Friday (June 17) blog post that the agency is planning to change its approach to regulations, and is reviewing some long-standing rules, including the Credit CARD Act of 2009, the Fair Credit Reporting Act and the CFPB’s Qualified Mortgage Rules.

According to Chopra, the CFPB is “seeking to move away from highly complicated rules that have long been a staple of consumer financial regulation and towards simpler and clearer rules.” This new approach, together with a “dramatic increase” of guidance, will help the agency to more clearly communicate the agency’s expectations in a simple and straightforward manner, the agency says.

Chopra believes that the old approach of having overly complicated and tailored rules, as opposed to basic bright line guidelines and rules, has failed in the past and it is time to change the approach. First, complex guidance and rules impede consumer protection and instead simply increase compliance costs, which in turn may place new entrants and small firms at a disadvantage compared to big firms, he argues. Second, simpler rules prevent strategic or intentional “misunderstanding” or plausible deniability. Third, simplicity will also promote consistency among government agencies responsible for enforcement of federal consumer financial law, he said, something the bureau is already concerned about, and it is planning to issue circulars to explain to other agencies how to enforce the law to avoid inconsistencies.

Read more: CFPB Wants Other Agencies to Follow Its Enforcement Views

With respect to rulemaking, Chopra stated the bureau’s priorities in a congressional hearing in April and he repeated them in the blog post. These include rulemakings related to consumer access to their financial records, also known as open banking, increasing transparency in the small business lending marketplace, which could also affect buy now, pay later (BNPL) and implementing regulations for quality control standards for automated valuation models.

But perhaps one of the most important announcements Chopra made is about the rules that the agency is currently reviewing. These include: 1) rules developed by the Federal Reserve under the Credit CARD Act of 2009 which regulate enforcement immunity and inflation provisions when imposing penalties on consumers; 2) rules developed by the Federal Trade Commission to implement the Fair Credit Reporting Act, which aims at identifying potential enhancements and changes in business practices and 3) the CFPB’s Qualified Mortgage Rules.

See also: CFPB’s Chopra Hints at Credit Card Rule Changes in Congress Hearing

During his testimony in Congress in April, Chopra already advanced that the CFPB could review the scope of the Credit CARD Act, possibly, to review the limits established in the law for certain fees. “Certainly, late fees are an area that I expect to be questions where we will solicit input on because it is important that this market is competitive,” said Chopra in his testimony. Yet, in his blog post, Chopra doesn’t specify if this is part of the current revision of the CARD Act.

In addition to rulemaking, Chopra announced that the CFPB will increase its interpretation of existing law through its Advisory Opinion Program. Launched in 2020, this program allows the bureau to quickly provide interpretive rules to the industry to better understand the rules. The agency has issued five opinion letters since 2020, the latest in May 2022 explaining that the Equal Credit Opportunity Act and Regulation B applies to those actively seeking credit and those who sought and have received credit.

Read more: CFPB’s Opinion on Fair Lending Rules Could Extend to AI