The Consumer Financial Protection Bureau is making an end run around existing regulations to collect data on overdraft programs, according to the American Bankers Association.
The trade group sent a letter this month urging the CFPB to stop what it deemed an abuse of a process under the Paperwork Reduction Act to collect additional data on overdraft services.
Jonathan Thessin, a senior counsel at the ABA's Center for Regulatory Compliance, said so-called "generic clearances" are not meant to be used to collect information that raises "substantive or policy issues." Instead, it wants the agency to put out a proposal allowing the public to comment on what information is being collected and why.
"If the bureau desires to collect information on a substantive or policy issue, it should seek approval for a standard clearance, which would provide the public with an opportunity to comment on the collection request, including providing suggestions to improve the methodology of the proposed collection," wrote Thessin.
Though technical in nature, the issue gets at the heart of various issues with the CFPB, namely accusations that it skirts rules and avoids letting the industry weigh in on issues both minor and major.
Paperwork Reduction Act requirements apply in cases where government agencies ask identical questions to 10 or more institutions. But the burden is higher for qualitative questions versus so-called "generic" requests, which are considered to be routine.
The ABA claims that the questions on overdraft, however, are far from that. The CFPB has not issued any rules yet on overdraft programs on checking accounts. Yet its generic information request is 43 questions intended to probe consumers' understanding and experiences with overdraft programs.
"We have concerns that the bureau is trying to collect data for its policymaking without subjecting the methodology of that collection to public comment," Thessin said. "If the bureau is collecting information that will be used for its overdraft rule, that collection should follow the precepts of the act and be subject to public comment."
Some analysts expect pre-rulemaking activity on overdraft in August. Regulations that took effect in 2010 already require that banks get customers' permission for most overdraft programs.
The CFPB's request is technically a renewal of a generic clearance it sought in 2013 to collect data to understand consumers' experiences of specific financial products and markets.
David Mayorga, a CFPB spokesman, said the Office of Management and Budget makes the final determination on generic clearance requests. The OMB also has some restrictions around how information can be used when it is collected under a generic clearance.
"As we specified with the OMB in the original clearance, the bureau is not substantively relying on or utilizing this research for rulemaking or other significant policymaking," Mayorga said.
In 2014, the CFPB submitted a request specifically to collect qualitative data on overdraft products. The CFPB said its study of overdraft will target two distinct consumer segments: moderate and heavy overdraft users.
In its request for data on overdraft services, the CFPB said it was engaging in "qualitative information-gathering to better understand the quantitative information that has been generated to-date."
"Although the quantitative data has been informative to answer questions of prevalence and intensity of the use of overdraft, qualitative information will be helpful to better understand how consumers understand the product and how consumers make decisions about using different financial products," the CFPB wrote in its request.
The bureau has contracted with independent research firm Abt SRBI, a unit of Abt Associates in Bethesda, Md., to identify 120 consumers for its study at an estimated cost of $250,000.
Thessin said the CFPB is using the generic clearance process to undermine the accountability structure and purpose of the Paperwork Reduction Act. Collections that fall under the generic clearance generally are reviewed on an expedited basis and are not required to undergo further public comment, he said.
"It is clear that this collection will inform the bureau's rulemaking on overdraft services and, consequently, should have been pursued through a standard clearance," Thessin wrote in the letter dated May 9.
The 60-day comment period on the generic information collection plan ended earlier this month. The CFPB is reviewing comments, including the letter from the ABA, before publishing a 30-day notice and comment period.