.svg)
The US Consumer Financial Protection Bureau’s (CFPB) decision to withdraw dozens of guidance documents is unlikely to have a significant impact on compliance and legal teams as it is not official law or regulations, panellists on Vixio’s latest webinar suggested last week.
In May, the CFPB’s new leadership rescinded a variety of guidance documents published under the Biden administration, during which the regulator gained a reputation for taking an interventionist approach to financial regulation.
The move was unsurprising to most, given that it reflected the CFPB’s ongoing shift in approach since the second Trump administration.
However, what was significant was the volume of withdrawn guidance, which affected interpretive rules, advisory opinions, policy statements, bulletins, and circulars.
“We have been dealing with rescinded regulations for a while, but never to this volume,” said Cherud Wilkerson,former Chief Compliance Officer SVP, The First Bank, during Vixio’s webinar, Decoding the Rise of Deregulation in the US.
Speaking about “the sheer number that came down”, he stated that firms will need to look at the withdrawals from a risk perspective.
Wilkerson said that this includes looking at what regulations actually impact the company, and what has been done relative to when the guidance was relevant.
“We’re looking at each one and we’re applying a risk-based approach to whether it's a product or process.”
Just guidance
Allison Schoenthal, partner at Goodwin law firm, said that “in the end, it's just guidance … it is not a rule, it is not a get out of jail free card.”
Schoenthal suggested that some companies may feel “a little freer” to resume or continue a practice that was perhaps not perceived well by the CFPB but said that she did not expect wholesale change for compliance teams.
“I don’t expect a majority of companies to change course or overhaul their compliance just because the CFPB rescinded some guidance.”
Revathi Jose, assistant general counsel at JP Morgan Chase & Co agreed: “A lot of times with guidance that comes out, even when it comes out, there is a risk-based analysis in terms of if it provides some more leniency, and to what extent we can really rely on it.”
“It is always subject to rescission. If it's a blog post, it can be deleted,” she said.
She added that although guidance can be helpful for understanding the CFPB’s perspective on a matter, it is not regulation or the law.
Meanwhile, Matthew Underwood, deputy general counsel at Fifth Third Bank, also pointed out that the now discarded circulars and guidance are not law, but “just one interpretation”.
“There’s no reason to say that that is an incorrect interpretation per se absent any regulation to the contrary.”
He suggested that it is difficult to measure any risk and claim that continuing to comply with the existing advisory opinion would somehow create greater risk for a company.
Regulatory uncertainty
Despite the lack of surprise over the situation that has developed, a considerable amount of regulatory uncertainty has surfaced in light of the new administration’s objectives.
Schoenthal advised compliance teams seeking to manage this uncertainty to track all of the regulatory developments. “This is almost a full time job.”
“You need good, open communication with your regulators so that when things come down the pike, you’re in a good position for it.”
She added that if internal controls are going to be changed, then this needs to be documented, as the next administration may approach things with an entirely different mindset on the policy.
Fellow panellist Chris Garvey, senior vice president and deputy general counsel at Fifth Third Bank urged firms to be “a little patient” to see “where the story ends”.
For example, reacting to daily changes could create a difficult situation.
Wilkinson agreed, noting that firms should have a robust regulatory change management framework in place that documents not just the change but its rationale.
“If my number comes out tomorrow, and I’m gone, because I got a couple of commas behind the zero, then somebody really needs to know what the rationale was behind why we didn’t make a change or we did make a change.”
Next steps
Going forward, the panellists anticipate that some states may wish to fill the void left by the CFPB.
For example, more progressive states that align with the philosophy of Rohit Chopra’s leadership at the CFPB may start to reinforce some of those interpretations.
States such as New York, for example, have shown a keenness to take action in areas of retail consumer finance such as buy now, pay later (BNPL).
“I think the states are going to be very quick to try to fill the gap and try to pass legislation very quickly to make up for the lack of CFPB enforcement,” said Underwood.
He emphasised that it is “more important than ever” to be keeping track of regulatory change in every state where businesses are active.
Jose agreed, stating that there is “a lot going on…both at the federal level and we’re starting to see more activity on the state level as well which just adds a whole new layer of issues to deal with.”
She added that there is a case for “really leaning into” government relations teams for this challenge.
“To the extent that we can get ahead of state level changes or other changes that are in the pipeline, I think that can be really helpful in trying to avoid significant problems.”
After all, Jose pointed out, dealing with an issue subsequent to it happening is always challenging, reinforcing the need to foster beneficial relationships with government and regulatory agencies.
