This PDF is the current document as it appeared on Public Inspection on 12/15/2011 at 08:45 am.
Bureau of Consumer Financial Protection.
Interim final rule with request for public comment.
Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) transferred rulemaking authority for a number of consumer financial protection laws from seven Federal agencies to the Bureau of Consumer Financial Protection (Bureau) as of July 21, 2011. The Bureau is in the process of republishing the regulations implementing those laws with technical and conforming changes to reflect the transfer of authority and certain other changes made by the Dodd-Frank Act. In light of the transfer of the Federal Trade Commission's (Commission's) rulemaking authority for section 43(b)-(f) of the Federal Deposit Insurance Act (FDIA) to the Bureau, the Bureau is publishing for public comment an interim final rule establishing a new Regulation I (Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance). This interim final rule does not impose any new substantive obligations on persons subject to the existing regulations, previously published by the Commission.
This interim final rule is effective December 30, 2011. Comments must be received on or before February 14, 2012.
You may submit comments, identified by Docket No. CFPB-2011-0024 or RIN 3170-AA06, by any of the following methods:
- Electronic: http://www.regulations.gov. Follow the instructions for submitting comments.
- Mail: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1500 Pennsylvania Avenue NW., (Attn: 1801 L Street), Washington, DC 20220.
- Hand Delivery/Courier in Lieu of Mail: Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20006.
All submissions must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. In general, all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW., Washington, DC 20006, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect the documents by telephoning (202) 435-7275.
All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or social security numbers, should not be included. Comments will not be edited to remove any identifying or contact information.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Krista Ayoub or Jane Gao, Office of Regulations, at (202) 435-7700.End Further Info End Preamble Start Supplemental Information
The Federal Deposit Insurance Act (FDIA), among other things, establishes the Federal Deposit Insurance Corporation which must insure the deposits of banks and savings associations entitled to the benefits of insurance under the FDIA. Not all depository institutions are required to maintain Federal deposit insurance. The FDIA requires that depository institutions lacking Federal deposit insurance make certain insurance-related disclosures in periodic statements, account records, locations where deposits are normally received, and advertising. The FDIA also requires such depository institutions to obtain a written acknowledgment from depositors regarding the institution's lack of Federal deposit insurance. Prior to July 21, 2011, the FDIA required that the Federal Trade Commission (Commission), by regulation or order, prescribe the manner and content of these disclosures.
Historically, the disclosure requirements required by the FDIA for depository institutions lacking Federal deposit insurance have been implemented by the Commission in 16 CFR Part 320. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)  amended a number of consumer financial protection laws, including the FDIA. In addition to various substantive amendments, the Dodd-Frank Act transferred rulemaking authority for implementing the disclosure requirements for depository institutions lacking Federal deposit insurance, as described above, to the Bureau of Consumer Financial Protection (Bureau), effective July 21, 2011.5 See sections 1061 and 1090 of the Dodd-Frank Act. Pursuant to the Dodd-Frank Act and the FDIA, as amended, the Bureau is publishing for public comment an interim final rule establishing a new Regulation I (Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance), 12 CFR Part 1009, implementing the disclosure requirements in the FDIA for depository institutions lacking Federal deposit insurance.
II. Summary of the Interim Final Rule
The interim final rule substantially duplicates the Commission's rule in 16 CFR Part 320 as the Bureau's new Regulation I, 12 CFR Part 1009, making only certain non-substantive, technical, formatting, and stylistic changes. To minimize any potential confusion, other than republishing the Commission's existing rule in 16 CFR Part 320 with the Bureau's part number, the Bureau is preserving where possible the numbering the Commission used in its existing rule. Additionally, while this interim final rule generally incorporates the Commission's existing regulatory Start Printed Page 78127text, the rule has been edited as necessary to reflect nomenclature and other technical amendments required by the Dodd-Frank Act. Notably, this interim final rule does not impose any new substantive obligations on regulated entities.
B. Specific Changes
A paragraph that was not enumerated in the Commission's rule (16 CFR 320.5) is enumerated as paragraph (c)(2) in § 1009.5, and other provisions in § 1009.5 are renumbered accordingly. In § 1009.7, the provision specifying enforcement authority for the requirements set forth in Regulation I is revised from that in the Commission's rule (16 CFR 320.7) to reflect changes made to the enforcement authority by the Dodd-Frank Act. In addition, references to the Commission and its administrative structure have been replaced with references to the Bureau. Conforming edits have been made to internal cross-references. Conforming edits have also been made to reflect the scope of the Bureau's authority pursuant to the FDIA to issue implementing regulations for disclosures required of depository institutions lacking Federal deposit insurance, as amended by the Dodd-Frank Act.
III. Legal Authority
A. Rulemaking Authority
The Bureau is issuing this interim final rule pursuant to its authority under the FDIA and the Dodd-Frank Act. Effective July 21, 2011, section 1061 of the Dodd-Frank Act transferred to the Bureau all of the Commission's authority under an enumerated consumer law to prescribe rules, issues guidelines, conduct studies, or issue reports. Section 43(b)-(f) of the FDIA is an enumerated consumer law. Accordingly, effective July 21, 2011, the authority of the Commission to issue regulations pursuant to section 43(b)-(f) of the FDIA transferred to the Bureau.
Section 43(c) of the FDIA, as amended, provides that the Bureau, by regulation or order, must prescribe the manner and content of disclosures required under section 43 of the FDIA that must be given by depository institutions lacking Federal depository insurance. In addition, section 43(d) of the FDIA, as amended, authorizes the Bureau, by regulation or order, to make exceptions to certain disclosure requirements set forth in section 43(b) of the FDIA for any depository institution that, within the United States, does not receive initial deposits of less than an amount equal to the standard maximum deposit insurance amount from individuals who are citizens or residents of the United States, other than money received in connection with any draft or similar instrument issued to transmit money.
B. Authority To Issue an Interim Final Rule Without Prior Notice and Comment
The Administrative Procedure Act (APA)  generally requires public notice and an opportunity to comment before promulgation of substantive regulations. The APA provides exceptions to notice-and-comment procedures, however, where an agency for good cause finds that such procedures are impracticable, unnecessary, or contrary to the public interest or when a rulemaking relates to agency organization, procedure, and practice. The Bureau finds that there is good cause to conclude that providing notice and opportunity for comment would be unnecessary and contrary to the public interest under these circumstances. In addition, substantially all the changes made by this interim final rule, which were necessitated by the Dodd-Frank Act's transfer of FDIA authority under section 43(c) and (d) from the Commission to the Bureau, relate to agency organization, procedure, and practice and are thus exempt from the APA's notice-and-comment requirements.
The Bureau's good cause findings are based on the following considerations. As an initial matter, the Commission's existing regulation was a result of notice-and-comment rulemaking to the extent required. Moreover, the interim final rule published today does not impose any new, substantive obligations on regulated entities. Rather, the interim final rule only makes non-substantive, technical changes to the existing text of the regulation, such as renumbering, changing internal cross-references, and replacing appropriate nomenclature to reflect the transfer of authority to the Bureau. Given the technical nature of these changes, and the fact that the interim final rule does not impose any additional substantive requirements on covered entities, an opportunity for prior public comment is unnecessary. In addition, recodifying the Commission's regulation to reflect the transfer of authority to the Bureau will help facilitate compliance with FDIA and its implementing regulations, and the new regulations will help reduce uncertainty regarding the applicable regulatory framework. Using notice-and-comment procedures would delay this process and thus be contrary to the public interest.
The APA generally requires that rules be published not less than 30 days before their effective dates. See 5 U.S.C. 553(d). As with the notice and comment requirement, however, the APA allows an exception when “otherwise provided by the agency for good cause found and published with the rule.” 5 U.S.C. 553(d)(3). The Bureau finds that there is good cause for providing less than 30 days notice here. A delayed effective date would harm consumers and regulated entities by needlessly perpetuating discrepancies between the amended statutory text and the implementing regulation, thereby hindering compliance and prolonging uncertainty regarding the applicable regulatory framework.
In addition, delaying the effective date of the interim final rule for 30 days would provide no practical benefit to regulated entities in this context and in fact could operate to their detriment. As discussed above, the interim final rule published today does not impose any new, substantive obligations on regulated entities. Instead, the rule makes only non-substantive, technical changes to the existing text of the regulation. Thus, regulated entities that are already in compliance with the existing rules will not need to modify business practices as a result of this rule.
C. Section 1022(b)(2) of the Dodd-Frank Act
In developing the interim final rule, the Bureau has conducted an analysis of Start Printed Page 78128potential benefits, costs, and impacts. The Bureau believes that the interim final rule will benefit consumers and covered persons by updating and recodifying the Commission's rules in 16 CFR Part 320 to reflect the transfer of authority to the Bureau and certain other changes mandated by the Dodd-Frank Act. This will help facilitate compliance with section 43(b)-(f) of the FDIA and its implementing regulations and help reduce any uncertainty regarding the applicable regulatory framework. The interim final rule will not impose any new substantive obligations on consumers or covered persons and is not expected to have any impact on consumers' access to consumer financial products and services.
Although not required by the interim final rule, covered entities may incur some costs in updating compliance manuals and related materials to reflect the new numbering and other technical changes reflected in the new Regulation I. The Bureau has worked to reduce any such burden by preserving the existing numbering to the extent possible and believes that such costs will likely be minimal. These changes could be handled in the short term by providing a short, standalone summary alerting users to the changes and in the long term could be combined with other updates at the firm's convenience. The Bureau intends to continue investigating the possible costs to affected entities of updating manuals and related materials to reflect these changes and solicits comments on this and other issues discussed in this section.
The interim final rule will have no unique impact on depository institutions or credit unions with $10 billion or less in assets as described in section 1026(a) of the Dodd-Frank Act. Also, the interim final rule will have no unique impact on rural consumers.
In undertaking the process of recodifying the Commission's rules in 16 CFR Part 320, as well as regulations implementing thirteen other existing consumer financial laws, the Bureau consulted the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, the Board of Governors of the Federal Reserve System, the Federal Trade Commission, and the Department of Housing and Urban Development, including with respect to consistency with any prudential, market, or systemic objectives that may be administered by such agencies. The Bureau also has consulted with the Office of Management and Budget for technical assistance. The Bureau expects to have further consultations with the appropriate Federal agencies during the comment period.
IV. Request for Comment
Although notice and comment rulemaking procedures are not required, the Bureau invites comments on this notice. Commenters are specifically encouraged to identify any technical issues raised by the rule. The Bureau is also seeking comment in response to a notice published at 76 FR 75825 (Dec. 5, 2011) concerning its efforts to identify priorities for streamlining regulations that it has inherited from other Federal agencies to address provisions that are outdated, unduly burdensome, or unnecessary.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires each agency to consider the potential impact of its regulations on small entities, including small businesses, small governmental units, and small not-for-profit organizations. The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required.
The IRFA and FRFA requirements described above apply only where a notice of proposed rulemaking is required, and the panel requirement applies only when a rulemaking requires an IRFA. As discussed above in part III, a notice of proposed rulemaking is not required for this rulemaking.
In addition, as discussed above, this interim final rule has only a minor impact on entities subject to Regulation I. The rule imposes no new, substantive obligations on covered entities. Accordingly, the undersigned certifies that this interim final rule will not have a significant economic impact on a substantial number of small entities.
VI. Paperwork Reduction Act
At the time it adopted its existing regulation (16 CFR Part 320), the Commission determined that the rule's disclosures and written acknowledgement statements were a “public disclosure of information originally supplied by the Federal Government to the recipient for the purpose of disclosure to the public,” and thus did not constitute a collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501, et seq., as set forth in the Office of Management and Budget regulations. The Bureau has determined that this interim final rule does not impose any new recordkeeping or reporting requirements on covered institutions or members of the public beyond those already imposed by the Commission's existing regulation. Accordingly, this interim final rule contains no collections of information Start Printed Page 78129requiring approval under 44 U.S.C. 3501, et seq.Start List of Subjects
List of Subjects in 12 CFR Part 1009
- Credit unions
- Depository institutions
- Federal Deposit Insurance Act
- Federal Trade Commission Act
- and Federal deposit insurance
Authority and IssuanceStart Amendment Part
For the reasons set forth above, the Bureau of Consumer Financial Protection adds part 1009 to Chapter X in Title 12 of the Code of Federal Regulations to read as follows:End Amendment Part Start Part
PART 1009—DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE (REGULATION I)
This part, known as Regulation I, is issued by the Bureau of Consumer Financial Protection. This part applies to all depository institutions lacking Federal deposit insurance. It requires the disclosure of certain insurance-related information in periodic statements, account records, locations where deposits are normally received, and advertising. This part also requires such depository institutions to obtain a written acknowledgment from depositors regarding the institution's lack of Federal deposit insurance.
For purposes of this part:
Depository institution means any bank or savings association as defined under 12 U.S.C. 1813, or any credit union organized and operated according to the laws of any state, the District of Columbia, the several territories and possessions of the United States, the Panama Canal Zone, or the Commonwealth of Puerto Rico, which laws provide for the organization of credit unions similar in principle and objectives to Federal credit unions.
Lacking Federal deposit insurance means the depository institution is neither an insured depository institution as defined in 12 U.S.C. 1813(c)(2), nor an insured credit union as defined in section 101 of the Federal Credit Union Act, 12 U.S.C. 1752.
Standard maximum deposit insurance amount means the maximum amount of deposit insurance as determined under section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)).
Depository institutions lacking Federal deposit insurance must include a notice disclosing clearly and conspicuously that the institution is not federally insured, and that if the institution fails, the Federal Government does not guarantee that depositors will get back their money, in all periodic statements of account, on each signature card, and on each passbook, certificate of deposit, or share certificate. For example, a notice would comply with the requirement if it conspicuously stated: “[Institution's name] is not federally insured. If it fails, the Federal Government does not guarantee that you will get your money back.” The disclosures required by this section must be clear and conspicuous and presented in a simple and easy to understand format, type size, and manner.
(a) Required disclosures. Each depository institution lacking Federal deposit insurance must include a clear and conspicuous notice disclosing that the institution is not federally insured:
(1) At each station or window where deposits are normally received, its principal place of business and all its branches where it accepts deposits or opens accounts (excluding automated teller machines or point of sale terminals), and on its main internet page; and
(2) In all advertisements except as provided in paragraph (c) of this section.
(b) Format and type size. The disclosures required by this section must be clear and conspicuous and presented in a simple and easy to understand format, type size, and manner.
(c) Exceptions. The following need not include a notice that the institution is not federally insured:
(1) Any sign, document, or other item that contains the name of the depository institution, its logo, or its contact information, but only if the sign, document, or item does not include any information about the institution's products or services or information otherwise promoting the institution; and
(2) Small utilitarian items that do not mention deposit products or insurance, if inclusion of the notice would be impractical.
(a) New depositors obtained other than through a conversion or merger. With respect to any depositor who was not a depositor at the depository institution on or before October 13, 2006, and who is not a depositor as described in paragraph (b) of this section, a depository institution lacking Federal deposit insurance may receive a deposit for the account of such depositor only if the institution has obtained the depositor's signed written acknowledgement that:
(1) The institution is not federally insured; and
(2) If the institution fails, the Federal Government does not guarantee that the depositor will get back the depositor's money.
(b) New depositors obtained through a conversion or merger. With respect to a depositor at a federally insured depository institution that converts to, or merges into, a depository institution lacking Federal insurance after October 13, 2006, a depository institution lacking Federal deposit insurance may receive a deposit for the account of such depositor only if:
(1) The institution has obtained the depositor's signed written acknowledgement described in paragraph (a) of this section; or
(2) The institution makes an attempt, sent by mail no later than 45 days after the effective date of the conversion or merger, to obtain the acknowledgment. In making such an attempt, the institution must transmit to each depositor who has not signed and returned a written acknowledgement described in paragraph (a) of this section:
(i) A conspicuous card containing the information described in paragraphs (a)(1) and (2) of this section, and a line for the signature of the depositor; and
(ii) Accompanying materials requesting the depositor to sign the card, and return the signed card to the institution.
(c) Depositors obtained on or before October 13, 2006. (1) Any depository institution lacking Federal deposit insurance may receive any deposit after October 13, 2006, for the account of a depositor who was a depositor on or before that date only if:
(i) The depositor has signed a written acknowledgement described in paragraph (a) of this section; or
(ii) The institution has transmitted to the depositor:Start Printed Page 78130
(A) A conspicuous card containing the information described in paragraphs (a)(1) and (2) of this section, and a line for the signature of the depositor; and
(B) Accompanying materials requesting that the depositor sign the card, and return the signed card to the institution.
(2) An institution described in paragraph (c)(1) of this section must have made the transmission described in paragraph (c)(1)(ii) of this section via mail not later than three months after October 13, 2006. The institution must have made a second identical transmission via mail not less than 30 days, and not more than three months, after the first transmission to the depositor in accordance with paragraph (c)(1)(ii) of this section, if the institution has not, by the date of such mailing, received from the depositor a card referred to in paragraph (c)(1)(i) of this section which has been signed by the depositor.
(d) Format and type size. The disclosures required by this section must be clear and conspicuous and presented in a simple and easy to understand format, type size, and manner.
The requirements of this part do not apply to any depository institution lacking Federal deposit insurance and located within the United States that does not receive initial deposits of less than an amount equal to the standard maximum deposit insurance amount from individuals who are citizens or residents of the United States, other than money received in connection with any draft or similar instrument issued to transmit money.
Compliance with the requirements of this part shall be enforced under the Consumer Financial Protection Act of 2010, Public Law 111-203, Title X, 124 Stat. 1955, by the Bureau of Consumer Financial Protection, subject to subtitle B of the Consumer Financial Protection Act of 2010, and under the Federal Trade Commission Act, 15 U.S.C. 41 et seq, by the Federal Trade Commission.
Dated: October 24, 2011.
Alastair M. Fitzpayne,
Deputy Chief of Staff and Executive Secretary, Department of the Treasury.
3. Id.Back to Citation
5. Dodd-Frank section 1029 generally excludes from this transfer of authority, subject to certain exceptions, any rulemaking authority over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.Back to Citation
7. Id. Section 1002(12)(I) (defining “enumerated consumer laws” to include section 43(b)-(f) of the FDIA).Back to Citation
8. Section 1066 of the Dodd-Frank Act grants the Secretary of the Treasury interim authority to perform certain functions of the Bureau. Pursuant to that authority, Treasury is publishing this interim final rule on behalf of the Bureau. Until this and other interim final rules take effect, existing regulations for which rulemaking authority transferred to the Bureau continue to govern persons covered by this rule. See 76 FR 43569 (July 21, 2011).Back to Citation
14. This interim final rule is one of 14 companion rulemakings that together restate and recodify the implementing regulations under 14 existing consumer financial laws (part III.C, below, lists the 14 laws involved). In the interest of proper coordination of this overall regulatory framework, which includes numerous cross-references among some of the regulations, the Bureau is establishing the same effective date of December 30, 2011 for those rules published on or before that date and making those published thereafter (if any) effective immediately.Back to Citation
15. Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the consideration of the potential benefits and costs of regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act; and the impact on consumers in rural areas. Section 1022(b)(2)(B) requires that the Bureau “consult with the appropriate prudential regulators or other Federal agencies prior to proposing a rule and during the comment process regarding consistency with prudential, market, or systemic objectives administered by such agencies.” The manner and extent to which these provisions apply to interim final rules and to costs, benefits, and impacts that are compelled by statutory changes rather than discretionary Bureau action is unclear. Nevertheless, to inform this rulemaking more fully, the Bureau performed the described analyses and consultations.Back to Citation
16. The fourteen laws implemented by this and its companion rulemakings are: the Consumer Leasing Act, the Electronic Fund Transfer Act (except with respect to section 920 of that Act), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (except with respect to sections 615(e) and 628 of that act), the Fair Debt Collection Practices Act, Subsections (b) through (f) of section 43 of the Federal Deposit Insurance Act, sections 502 through 509 of the Gramm-Leach-Bliley Act (except for section 505 as it applies to section 501(b)), the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the S.A.F.E. Mortgage Licensing Act, the Truth in Lending Act, the Truth in Savings Act, section 626 of the Omnibus Appropriations Act, 2009, and the Interstate Land Sales Full Disclosure Act.Back to Citation
17. In light of the technical but voluminous nature of this recodification project, the Bureau focused the consultation process on a representative sample of the recodified regulations, while making information on the other regulations available. The Bureau expects to conduct differently its future consultations regarding substantive rulemakings.Back to Citation
[FR Doc. 2011-31732 Filed 12-15-11; 8:45 am]
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