CFPB Issues Final Rule on Role of Supervisory Guidance

The Consumer Financial Protection Bureau yesterday released a final rule on the role of supervisory guidance, which clarifies the differences between regulations — which have the full force and effect of law — and guidance — which does not.

A copy of the final rule can be accessed by clicking here. It will go into effect 90 days after it is published in the Federal Register.

The CFPB, along with other regulators of companies in the financial services industry, had previously issued a statement clarifying that guidance is not the same as a regulation and should not be treated as such. It is, perhaps a little ironic, that the regulators then chose to issue a rule ensuring that companies in the financial services industry did not treat guidance like an official regulation.

While the original statement was issued jointly by the CFPB, Federal Reserve, Federal Deposit Insurance Corp., National Credit Union Administration, and Office of the Comptroller of the Currency, the CFPB chose to enact the final rule on its own, because having “separate final rules has enabled agencies to better focus on explaining any agency-specific issues to their respective audiences of supervised institutions and agency employees.”

Among the changes that might be noticed going forward are:

  • Fewer instances where numerical thresholds or other “bright lines” are used in supervisory guidance
  • No criticisms or enforcement actions based on an organization’s violation or non-compliance with supervisory guidance.
  • Fewer supervisory guidance documents on the same topic

Supervisory guidance “outlines the Bureau’s supervisory expectations or priorities and articulates the Bureau’s general views regarding appropriate practices for a given subject area. Supervisory guidance often provides examples of practices that the Bureau generally considers consistent with applicable laws and regulations, including those designed to protect consumers. Supervised institutions at times request supervisory guidance, and such guidance is important to provide insight to industry, as well as supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach.”

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