Joint Trades Respond to CFPB’s Emerging Payments Interpretive Rule

To Whom It May Concern:

The Clearing House Association L.L.C.,^[1] the Bank Policy Institute,^[2] and the Consumer Bankers Association^[3] submit this comment letter in response to the Notice of Proposed Interpretive Rule and request for comment regarding Electronic Fund Transfers Through Accounts Established Primarily for Personal, Family, or Household Purposes Using Emerging Payment Mechanisms (the "Emerging Payments Rule").^[4] Released after the 2024 Presidential Election and ten days before Inauguration Day, the Emerging Payments Rule suffers from both procedural and substantive deficiencies.

Procedurally, the rule purports to be a proposed interpretive rule for which legislative rulemaking is not required under the Administrative Procedure Act ("APA"). To the contrary, because the rule aims to effect substantive changes to the coverage of the Electronic Fund Transfer Act ("EFTA") and its implementing regulation, Regulation E,^[5] the APA requires full notice and comment rulemaking here. On the merits, the Emerging Payments Rule would adopt a new definition of the term "funds" that is too vague and unclear to provide meaningful notice to the market about which types of asset accounts will be newly covered by Regulation E. Further, application of Regulation E to these new types of asset accounts raises complex compliance questions that the Emerging Payments Rule critically does not address. As explained below, the undersigned associations ask the CFPB to withdraw the Emerging Payments Rule.

Substantive Changes to Regulations Must Be Made Through Legislative Rulemaking

The CFPB asserts that the proposed interpretive rule is mere "guidance" that is exempt from the notice and comment requirements of the APA.^[6] While the APA does exempt interpretive rules and policy statements (collectively known as agency "guidance") from its notice and comment requirements,^[7] the proposed Emerging Payments Rule should not be styled as an interpretive rule. An interpretive rule "only reminds affected parties of existing duties"^[8] and does not "effect[] a substantive change in the regulations."^[9]

The Emerging Payments Rule purports to apply Regulation E to new products, including virtual currencies, that neither the CFPB nor market participants previously understood to be covered by the regulation. The CFPB's 2016 prepaid card rule explicitly declined to determine whether Regulation E applied to virtual currencies because its analysis of the market was "ongoing." ^[10] The Emerging Payments Rule's affirmative decision to include virtual currencies within the scope of Regulation E imposes new obligations on previously unaffected parties. Accordingly, the rule effects a "substantive change" to Regulation E that requires full notice and comment procedures.

The Emerging Payments Rule would impose new obligations on providers of virtual currencies, video game currency, and certain credit card rewards points, which is the hallmark of legislative rules that require notice and comment under the APA.^[11] Indeed, when the CFPB and the Federal Reserve Board expanded Regulation E to cover new products in the past, they have done so only using notice and comment rulemaking.^[12] In that way, providers of government- sponsored EBT cards, payroll cards, international remittance transfers, and prepaid cards had sufficient notice and opportunity to provide feedback on whether and how their products should be covered by EFTA. Here, the relevant markets and providers have received no such notice. Instead, the CFPB would assert that these digital assets are "funds" covered by EFTA and that Regulation E already applies to them, and that accounts holding these funds are likewise "accounts" covered by EFTA and Regulation E.^[13]

Not only would the Emerging Payments Rule contravene the APA, it would likely violate the spirit of Executive Order 13892 which prohibits the use of guidance documents "to impose new standards of conduct on persons outside the executive branch except as expressly authorized by law or as expressly incorporated into a contract."^[14] Pursuant to the Order, "an agency may not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of applicable statutes or regulations."^[15] Thus, were the Bureau to file an enforcement action citing violations of Regulation E for any of the novel accounts purportedly covered by the rule, doing so would likely violate the Executive Order.

To read the full comment letter, please click here, or click on the download button below.

[1] The Clearing House Association L.L.C., the country's oldest banking trade association, is a nonpartisan organization that provides informed advocacy and thought leadership on critical payments-related issues. Its sister company, The Clearing House Payments Company L.L.C., owns and operates core payments system infrastructure in the U.S., clearing and settling more than $2 trillion each day.

[2] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

[3] The Consumer Bankers Association is the only national trade association focused exclusively on retail banking. Established in 1919, the association is a leading voice in the banking industry and Washington, representing members who employ nearly two million Americans, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans.

[4] Electronic Fund Transfers Through Accounts Established Primarily for Personal, Family, or Household Purposes Using Emerging Payment Mechanisms, 90. Fed. Reg. 3723 (Jan. 15, 2025).

[5] 15 U.S.C. 1693 et seq.; 12 C.F.R. 1005.

[6] Id. at 3727.

[7] 5 U.S.C. § 553(b)(3)(A). Nevertheless, agencies can still solicit comments on interpretive rules, as the CFPB notes in the Emerging Payments Rule.

[8] Gen. Motors Corp. v. Ruckelshaus, 742 F.2d 1561, 1565 (D.C. Cir. 1984) (en banc).

[9] Warder v. Shalala, 149 F.3d 73, 80 (1st Cir. 1998) (quoting Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 100 (1995)).

[10] 81 FR 83934, 83978 (Nov. 22, 2016).

[11] Cmty. Nutrition Inst. v. Young, 818 F.2d 943, 948 (D.C. Cir. 1987) (per curiam); Center for Auto Safety v. National Highway Traffic Safety Admin., 452 F.3d 798, 806 (D.C. Cir. 2006).

[12] See, e.g., 61 FR 19662, 19662 (May 2, 1996) (amending Regulation E as part of periodic review to ''reflect technological and other developments''); 62 FR 43467 (Aug. 14, 1997) (amending Regulation E with respect to government-administered EBT programs); 71 FR 51437 (Aug. 30, 2006) (amending Regulation E with respect to payroll cards). The CFPB also issued new requirements in subpart B of Regulation E relating to remittance transfers in final Regulation E relating to remittance transfers in final rules issued in 2012 and 2013. See 78 FR 30662 (May 22, 2013) (summarizing 2012 and 2013 rules).

[13] The Emerging Payments Rule does not contain an effective date and thus would be immediately effective.

[14] Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication. 84 Fed. Reg. 55239 (Oct. 9, 2019). This Executive Order was rescinded by President Biden and reinstated by President Trump through Executive Order 14148. Initial Rescissions of Harmful Executive Orders and Actions, 90 Fed. Reg 8437 (Jan. 28, 2025).

[15] Id.