In a June 17 blog post, Consumer Financial Protection Bureau (CFPB or Bureau) Director Rohit Chopra announced that the CFPB intends to “move away from highly complicated rules” in favor of “simpler and clearer rules.” As part of this effort, the CFPB will be “dramatically increasing the amount of guidance it is providing to the marketplace” and that it aspires such guidance to be simple and straight forward.

Director Chopra explains that complex rules, regulations, and guidance increase compliance costs, create loopholes, and disadvantage smaller companies competing with larger market players with market power or resources. The post also provides insight into Director Chopra’s perception of market participants. He notes that legal complexity creates the opportunity for companies to evade regulatory compliance and ignore the law by plausible deniability, strategic or intentional “misunderstandings,” and creative lawyering.

Director Chopra stated that the Bureau is specifically reviewing three rules in this vein:

  • Rules related to the Credit CARD Act of 2009;
  • Regulation V, interpreting the Fair Credit Reporting Act; and
  • The CFPB’s Qualified Mortgage Rules.

We found this announcement curious. Throughout its existence, the Bureau has eschewed bright-line rules, instead preferring to use its UDAAP authority to announce new standards of conduct not contained in any specific statute or rule. We believe it is unlikely that the director is signaling a departure from the Bureau’s approach to “regulation by consent order,” even though his statements would facially seem to suggest as such. Second, we doubt that subjects as complex as the CARD Act, Regulation V, and the QM rule can be significantly simplified and streamlined. Not only are the underlying statutes complex to begin with, the manner in which these statutes should be applied to a wide variety of market conditions and the need to balance competing priorities and situations led to the rules’ current complexity. The same is true of the Section 1071 rulemaking in which the Bureau is currently engaged — that rulemaking release was approximately 900 pages long because of the inherent complexity of the subject matter and because of the Bureau’s desire to cover a wide variety of scenarios that could affect reporting related to small business loans.

Simple, bright-line rules would be welcomed by the industry, but the prospect of such rules emerging seems fairly unlikely in our view.

Sarah Pruett

Sarah defends banks, fintechs, and financial services companies facing state and federal government investigations, enforcement proceedings, and individual and class action lawsuits involving the Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Equal Credit Opportunity Act (ECOA), Truth in Lending…

Sarah defends banks, fintechs, and financial services companies facing state and federal government investigations, enforcement proceedings, and individual and class action lawsuits involving the Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Equal Credit Opportunity Act (ECOA), Truth in Lending Act (TILA), Title X of the Dodd-Frank Act (UDAAP), state consumer protection laws, and fraud.

Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Photo of David N. Anthony David N. Anthony

David Anthony handles litigation against consumer financial services businesses and other highly regulated companies across the United States. He is a strategic thinker who balances his extensive litigation experience with practical business advice to solve companies’ hardest problems.

Photo of Stefanie Jackman Stefanie Jackman

Stefanie takes a holistic approach to working with clients both through compliance counseling and assessment relating to consumer products and services, as well as serving as a zealous advocate in government inquiries, investigations, and consumer litigation.

Photo of James Kim James Kim

As a former senior enforcement attorney with the CFPB, James provides the industry knowledge and expertise that fintechs and financial institutions require when launching new products or facing regulatory scrutiny.

Photo of Alan D. Wingfield Alan D. Wingfield

Alan Wingfield helps consumer-facing clients navigate compliance, litigation and regulatory risks posed by the complex web of state and federal consumer protection laws. He is a trusted advisor and tireless advocate, helping clients develop practical compliance and dispute-resolution strategies.