CFPB clarifies role of supervisory guidance

The Consumer Financial Protection Bureau issued a final rule Tuesday clarifying that supervisory guidance is not backed by the same force as law or regulation.

First proposed in October 2020, the CFPB’s final rule codifies the statement, with amendments, that the Bureau and other federal financial regulatory agencies issued in September 2018, which clarified the differences between regulations and supervisory guidance.

In 2018, five federal agencies issued a joint statement explaining the role of supervisory guidance for regulated institutions.

The agencies included the Federal Reserve Board, the CFPB, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Office of the Comptroller of the Currency. They said that supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.

In its new final rule, the bureau confirmed that supervisory guidance does not have the same force and effect of law that is seen in laws or regulations. It said it does not take enforcement actions or issue supervisory criticisms if companies don’t comply with supervisory guidance. Rather, supervisory guidance outlines supervisory expectations and priorities, or articulates views regarding appropriate practices for a given subject area.

“In contrast to supervisory guidance, regulations do have the force and effect of law and enforcement actions can be taken if regulated institutions are in violation,” the bureau explained. “Regulations are also generally required to go through the notice and comment process.”

This new rulemaking formalizes the CFPB’s stance, and makes the original 2018 statement binding on the agency.

This was not the only final rule the CFPB issued on its last day under President Donald Trump’s administration. The CFPB also announced Tuesday some insured depository institutions and insured credit unions will now be exempt from regulations to establish escrow accounts for some higher-priced mortgage loans.

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