Payments 3.0: An Unfazed CFPB’s Big Agenda for ‘23

Even though the Consumer Financial Protection Bureau will be working to secure its future throughout much of the year, the agency still has big regulatory plans for 2023.

As this column discussed in November, the Bureau will be facing court fights over the prepaid-accounts final rule and, separately, the source of its funding. While both of these could lead to big changes, it is forging ahead with a regulatory agenda that will reach across the financial-services landscape.

In the agenda it released late last year, it has four topics in the “prerule stage,” including overdrafts, Fair Credit Reporting Act rulemaking, personal financial data rights, and fees for insufficient funds. In the proposed rule stage, it has rules on automated valuation models, property assessed clean energy financing, and two rules on nonbank registration. Finally, it has small-business lending data collection under the Equal Credit opportunity Act in the final rule stage.

Even though some of these items do not come as a surprise, compliance teams should not take them for granted. For instance, overdraft has been a target of the regulators long enough that it has led some banks to voluntarily end their overdraft programs. Large players like Bank of America, Citi, and Chase have changed their overdraft programs in the past few years.

The Bureau said in its filing that the rules about whether or not overdraft programs should be subject to Regulation Z have not been updated since 1969, and it is time to review and update them.

“While the nature of overdraft services, including how accounts can be overdrawn and how financial institutions determine whether to advance funds to pay the overdrawn amount, has significantly changed since 1969, the special rules remain largely unchanged,” the filing said.

Industry players might be tempted to shrug their shoulders at the notion of overdraft regulation if they plan to move away from charging fees. But the danger of any rulemaking lies in unintended consequences. Updating rules is a good idea, but the industry needs to ensure regulators understand how products and services work and make sure rules for one set of products do not try to solve perceived problems across the market.

Another example is the proposed rule on consumer access to financial records. The original proposed rule was published in the Federal Register in November 2020. Changes in administrations probably led this to be sidelined until now. Nonetheless, the Bureau has provided clues in its blog posts and speeches that the rule will focus on spurring competition by making it easier for customers to move their data from one provider to another.

In addition to what appears on the Bureau’s formal agenda, payments companies should keep in mind that the CFPB could at any point issue guidance about any products and services it thinks need more regulation. That guidance may carry a lot of weight in exams and enforcement. Buy now, pay later and earned-wage access are not on the formal agenda, but they have received their fair share of attention in the past. Guidance on these products may shape them in the near future.

Also, big events such as anoutage, fraud, or collapse of a company could lead to guidance or rule making. An enforcement action against one bad actor could lead the agency to try to regulate an entire class of products. So compliance still needs to be an integral part of product development.

To keep abreast of unscheduled rules and policies, compliance teams should pay attention to the CFPB’s blog and press statements. These channels offer insights
into the Bureau’s priorities and expectations.

—Ben Jackson bjackson@ipa.org