10 minute read | October.16.2023
On October 11, the Consumer Financial Protection Bureau (CFPB) issued new guidance on so-called “junk fees” that large financial institutions charge to fulfill customers’ requests for information about their accounts. This advisory opinion suggests a new area of scrutiny of financial institutions around consumer requests and customer service more generally.
This is the first guidance issued by the CFPB on Section 1034(c) of the Consumer Financial Protection Act (CFPA)—but just the latest development in a broader federal campaign against junk fees that has also involved the White House, Federal Trade Commission and other agencies. Coming in the form of an “advisory opinion,” this guidance goes further than addressing fees to express an expansive view of the obligations of Section 1034(c) and the reach of CFPB advisory opinions more generally. By applying broad interpretations to the terms of a law that had, to date, received little attention, the Bureau is imposing significant requirements on financial institutions to track and respond to customer requests for information.
The advisory opinion also criticizes large financial institutions, claiming that some “have moved away from a traditional relationship banking model” and that “individualized service is now generally reserved for high net-worth individuals, and is difficult for other households to find.”
Section 1034(c) of the CFPA (12 U.S.C. § 5534(c)) requires covered institutions to, “in a timely manner, comply with a consumer request for information in the control or possession of [the institution] concerning the consumer financial product or service that the consumer obtained from [the financial institution], including supporting written documentation, concerning the account of the consumer.” The requirement exempts requests for:
Section 1034(c) applies to insured depository institutions and credit unions that offer consumer financial products or services and have total assets of more than $10 billion, along with their affiliates. The CFPB has not issued any implementing regulations for Section 1034(c), and there has not been any public enforcement activity involving the provision.
Given the lack of guidance or activity around Section 1034(c) since it took effect in 2011, the CFPB’s decision to issue an advisory opinion about it is surprising. The Bureau’s Advisory Opinions Policy (set forth in 85 F.R. 77987 (Dec. 3, 2020)) indicates that such opinions are meant to be issued in response to requests from “interested parties” and “will be interpretive rules issued to resolve regulatory uncertainty.”
As with the 10 other advisory opinions the CFPB has issued previously, there’s no indication whether anyone actually requested guidance on the scope or application of Section 1034(c).
Unlike other advisory opinions, the Section 1034(c) advisory opinion concerns a statutory requirement that stands alone without an existing implementing regulation that was developed through the notice and comment rulemaking process.
Under the Administrative Procedures Act, interpretive rules (a category which includes the CFPB’s advisory opinions) are exempt from the notice and comment process. Accordingly, they do not carry the force of law and instead are meant to advise the public of how the agency interprets a law that it administers. The lack of other interpretive authority—whether an implementing regulation, case law arising from consumer claims that their Section 1034(c) rights were violated, or even well-recognized industry practices for compliance with the rule—may result in regulated entities (and even courts) more heavily weighting the views set forth in the opinion than they might otherwise.
Section 1034(c), without the exceptions, is just 64 words. The Bureau’s advisory opinion spans 17 double-spaced pages and expands on the definitions and ordinary understanding of many of the terms used in the statute.
The advisory opinion gives the following interpretations of Section 1034(c):
The opinion effectively equates requests for information with customer complaints, noting that Section 1034(c) was enacted alongside Sections 1034(a) and (b), which relate to how institutions must respond to customer complaints submitted to the CFPB. The opinion points out that, like customer complaints, requests for information “can lead to the identification and resolution of errors.”
Treating customer requests for information similarly to customer complaints will place additional burdens on institutions to track such requests. Because Section 1034(c) does not specify the manner in which requests must be submitted (and the Bureau’s opinion suggests that institutions cannot limit the methods), this could create a significant challenge for institutions to track requests through a myriad of channels, particularly when they now need to establish that they fully and timely responded to each request. For example, does an institution need to document and track a request made over the phone that a customer service representative was able to resolve immediately during that phone call?
Financial institutions covered by Section 1034(c) will need to assess their ability to track customer requests and determine if their current approach to logging and tracking customer inquiries is sufficient to meet the CFPB’s expectations for timely and fully responding to requests for information.
Section 1034(c) states that an institution must provide the consumer with responsive information in the institution’s “possession or control.” In the advisory opinion, the CFPB explores the scope of this concept by referencing the obligations placed on government agencies in responding to Freedom of Information Act requests and on parties to litigation under Federal Rule of Civil Procedure 34. In particular, the reference to the “possession, custody, or control” standard of Rule 34 is a novel approach and introduces some ambiguity because courts have developed differing tests: Some apply the “practical ability” test, meaning a party must produce documents that it has the practical ability to obtain, even if they don’t have the legal right to obtain them. Other courts apply the “legal right” test, under which parties need only produce documents that they have the legal right to produce on demand. The Advisory Opinion references both standards, suggesting that the Bureau is taking a broad interpretation of the terms “possession and control” used in the statute.
Time will tell how the CFPB will approach the application of this discovery concept to customer requests for information. For now, institutions should review or develop policies and procedures around this issue in consultation with their subpoena and legal order response teams to ensure the institution meets the “possession, custody, or control” standard when responding to customer inquiries.