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Chairman Williams, Four Committee Republicans Write to CFPB Regarding Rule Negatively Impacting Small Firms
WASHINGTON, D.C. – Today, Congressman Roger Williams (R-TX), Chairman of the House Committee on Small Business, along with Reps. Pete Stauber (R-MN), Beth Van Duyne (R-TX), Jake Ellzey (R-TX), and Aaron Bean (R-FL) penned a letter to Director Rohit Chopra of the Consumer Financial Protection Bureau (CFPB) regarding its proposed rule prohibiting the charging on nonsufficient fund fees on instantaneously declined transactions.
This letter builds on the House Committee on Small Business’ work to ensure federal agencies adhere to the Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act to protect small businesses from burdensome regulations and rulemaking.
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Read the full letter here.
Read excerpts from the letter below:
“The House Committee on Small Business writes to discuss the Consumer Financial Protection Bureau’s (CFPB) proposed rule prohibiting the charging on nonsufficient funds (NSF) fees on instantaneously declined transaction. This rule threatens to further complicate Unfair, Deceptive, or Abusive Act or Practice (UDAAP) law and adds to the myriad of burdens being placed on small financial institutions. The Committee is concerned that the CFPB may not have sufficiently considered the needs of small financial institutions when drafting this rule.
“CFPB is one of the three agencies currently required to convene a Small Business Advocacy Review (SBAR) panel prior to proposing rules that would have a significant economic impact on a substantial number of small entities. However, they certified that this proposed rule did not have a significant impact on a substantial number of small entities and did not convene this panel. The CFPB limited their analysis of the impacts this rule would have on small businesses by stating that only 2 percent of revenue to small financial institutions comes from NFS fees. Unfortunately, that appears to be an inaccurate assessment of the true cost of complying with this rule. The likelihood that this rule could indeed result in a substantial impact on the wellbeing of these small financial institutions should have at the very least triggered a SBAR panel. Yet, the CFPB failed to consider additional costs such as reporting requirements and manhours needed for compliance resulting in an inaccurate estimate.
“Additionally, this rule stipulates that NSF fees on instantaneously declined transactions are inherently ‘abusive’ under UDAAP law because they ‘take unreasonable advantage of consumers' lack understanding of the material risks, costs, or conditions associated with their deposit accounts.’ Despite claiming this practice is abusive due to how uninformed a customer may be, the rule explicitly states that disclosing this fee, either at account formation or during a transaction, would still not be sufficient because it would not stop the practice all together. This appears to be a leap in both logic and authority by the CFPB. To this Committees knowledge, the CFPB was not given the authority to prohibit NSF fees themselves, but rather to prohibit abusive practices. Here the CFPB claims that NSF fees are abusive due to a potential lack of knowledge by customers, but also finds that informing the customers is insufficient to mitigate the ‘abuse.’ This rationale is not logically consistent and appears that the CFPB is granting itself the authority to prohibit business practices at will.
“Notwithstanding the Committee’s concerns that this rulemaking is an improper exercise of authority, this action goes further than prohibiting an abusive practice but prohibits a practice which could be done in a non-abusive manner. Categorizing fees, even when they are disclosed in advance, as ‘abusive’ suggests that the CFPB’s understanding of what is unfair, deceptive, or abusive amounts to things which may not be ideal. Managing UDAAP compliance is already a substantial burden particularly on small businesses, America’s small financial institutions don’t need UDAAP further complicated and watered down based on the whims of the CFPB.”
This letter builds on the House Committee on Small Business’ work to ensure federal agencies adhere to the Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act to protect small businesses from burdensome regulations and rulemaking.
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Read the full letter here.
Read excerpts from the letter below:
“The House Committee on Small Business writes to discuss the Consumer Financial Protection Bureau’s (CFPB) proposed rule prohibiting the charging on nonsufficient funds (NSF) fees on instantaneously declined transaction. This rule threatens to further complicate Unfair, Deceptive, or Abusive Act or Practice (UDAAP) law and adds to the myriad of burdens being placed on small financial institutions. The Committee is concerned that the CFPB may not have sufficiently considered the needs of small financial institutions when drafting this rule.
“CFPB is one of the three agencies currently required to convene a Small Business Advocacy Review (SBAR) panel prior to proposing rules that would have a significant economic impact on a substantial number of small entities. However, they certified that this proposed rule did not have a significant impact on a substantial number of small entities and did not convene this panel. The CFPB limited their analysis of the impacts this rule would have on small businesses by stating that only 2 percent of revenue to small financial institutions comes from NFS fees. Unfortunately, that appears to be an inaccurate assessment of the true cost of complying with this rule. The likelihood that this rule could indeed result in a substantial impact on the wellbeing of these small financial institutions should have at the very least triggered a SBAR panel. Yet, the CFPB failed to consider additional costs such as reporting requirements and manhours needed for compliance resulting in an inaccurate estimate.
“Additionally, this rule stipulates that NSF fees on instantaneously declined transactions are inherently ‘abusive’ under UDAAP law because they ‘take unreasonable advantage of consumers' lack understanding of the material risks, costs, or conditions associated with their deposit accounts.’ Despite claiming this practice is abusive due to how uninformed a customer may be, the rule explicitly states that disclosing this fee, either at account formation or during a transaction, would still not be sufficient because it would not stop the practice all together. This appears to be a leap in both logic and authority by the CFPB. To this Committees knowledge, the CFPB was not given the authority to prohibit NSF fees themselves, but rather to prohibit abusive practices. Here the CFPB claims that NSF fees are abusive due to a potential lack of knowledge by customers, but also finds that informing the customers is insufficient to mitigate the ‘abuse.’ This rationale is not logically consistent and appears that the CFPB is granting itself the authority to prohibit business practices at will.
“Notwithstanding the Committee’s concerns that this rulemaking is an improper exercise of authority, this action goes further than prohibiting an abusive practice but prohibits a practice which could be done in a non-abusive manner. Categorizing fees, even when they are disclosed in advance, as ‘abusive’ suggests that the CFPB’s understanding of what is unfair, deceptive, or abusive amounts to things which may not be ideal. Managing UDAAP compliance is already a substantial burden particularly on small businesses, America’s small financial institutions don’t need UDAAP further complicated and watered down based on the whims of the CFPB.”
