Washington DC -- Bankers are taking the unusual step of asking the government for additional regulations – ones that can be used to block the Consumer Financial Protection Bureau (CFPB) from seeking more data from financial institutions.
The American Bankers Association and the Consumer Bankers Association are urging the Office of Information and Regulatory Affairs (OIRA) to impose requirements on the "generic clearance" process used by government agencies to collect data.
The groups argue that the generic process shouldn't be used to collect information on substantive or policy-related issues. Instead, they want the CFPB to use the standard process, which gives the public a chance to comment.
"We believe the bureau has improperly used the generic clearance process …to conduct collections on matters that clearly will influence the bureau's policy work—such as overdraft—[while] never providing notice to, or receiving comment from, the public," the trade groups said in a July 13 letter to top OIRA administrators.
The Office of Information and Regulatory Affairs, part of the Office of Management and Budget (OMB), is the central authority for granting approval of government information collections.
CUs Weigh In The overdraft fee collection issue goes to the heart of allegations that the CFPB tries to skirt rules and avoids letting industry weigh in on issues, and the topic has generated plenty of feedback from the credit union trade associations.
Alexander Monterrubio, director of regulatory affairs at the National Association of Federal Credit Unions (NAFCU), told CU Journal that although NAFCU has not made any specific request to OIRA, the trade group "strongly opposes frivolous regulatory reporting requirements that amount to fishing expeditions by the CFPB. Every data collection by the bureau should have a specified purpose and limited scope."
Similarly, Elizabeth Eurgubian, the deputy chief advocacy officer and senior counsel at Credit Union National Association (CUNA), said her organization continues to withhold support for broad new regulations on overdraft services that would limit the flexibility of credit unions to structure their services in an appropriate manner, including the regulation of overdraft fees.
"Credit unions offer overdraft services as a convenience and accommodation for their members, and it's a service members appreciate," she added. "Furthermore, as the CFPB has noted on several occasions, the Dodd-Frank Act did not give it the authority to regulate fees, so we are hopeful this would include the reasonable fees that credit unions charge for overdraft services that aim to protect our consumer-members."
Monterrubio noted that NAFCU's November/December Economic & CU Monitor survey results indicated that credit unions "act in good faith when administering their overdraft programs and that their members value the service." Of those credit unions with an overdraft or courtesy pay program, Monterrubio cited, 93.5% of them offer an alternative product, such as an overdraft line of credit (83.9%), a linked savings or money market accounts (61.3%) and short-term, small amount loans (22.6%).
Rules Coming Soon The CFPB is expected to begin writing rules for overdraft fees later this summer, amid criticism from advocacy groups that overdrafts gouge consumers. In February, the CFPB told the 25 largest retail banks to begin offering and promoting products that help consumers avoid overdrafts.
Big banks have recently been raising overdraft fees to compensate for tight profit margins on lending. Wells Fargo, Bank of America and JPMorgan Chase — the three biggest U.S. banking companies by assets — generated a combined 9% more in overdraft fees during the first three months of 2016 than they did a year earlier, according to new data.
Jonathan Thessin, a senior counsel at the ABA's Center for Regulatory Compliance, said industry should have input on the data collection because it is the subject of upcoming rulemaking. He said OIRA should issue revised guidance to ensure government agencies do not misuse the generic clearance process.
"Any data [the CFPB] collects on overdraft is going to necessarily inform that rule-making," Thessin said. "We believe the data they're collecting goes toward a rulemaking and they should use the standard clearance process that provides notice to the public."
The CFPB has said that it is not substantively relying on or utilizing the research on overdraft for rulemaking or other significant policymaking. It has said that the OMB makes the final determination about generic clearance requests and has some restrictions on how the information can be used.
In May, the bankers' trade groups sent a letter to CFPB Director Richard Cordray asking him to stop what they deem an abuse of the Paperwork Reduction Act.
Paperwork Reduction Act requirements apply in cases where government agencies ask identical questions of 10 or more institutions. Guidance interpreting that act states that it cannot be used to collect information that raises "substantive or policy issues."
However, generic requests for data collection are considered routine, and are reviewed on an expedited basis and not generally required to undergo further public comment.
The CFPB had sought approval for a generic clearance in 2013 but the trade groups did not object at the time because the bureau said its stated purpose was "to develop a deeper understanding of effective financial educations and empowerment strategies."
By 2014, the CFPB had submitted a request under the generic clearance to collect qualitative data on overdraft products targeting moderate and heavy overdraft users.
"We have a perspective on [overdraft data collection] that we think would be helpful to ensure the bureau asks the right questions and gets the methodology correct," Thessin said. "The public should be provided notice of the survey and the opportunity to comment."
--Palash Ghosh contributed to this report.
