State Official Notification Rule, 39112-39117 [2012-14062]

Download as PDF 39112 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Rules and Regulations be made available for examination by the person who produced such material, or his or her duly authorized representative, during regular office hours established for the Bureau. § 1080.14 Confidential treatment of demand material and non-public nature of investigations. (a) Documentary materials, written reports, answers to questions, tangible things or transcripts of oral testimony the Bureau receives in any form or format pursuant to a civil investigative demand are subject to the requirements and procedures relating to the disclosure of records and information set forth in part 1070 of this title. (b) Bureau investigations generally are non-public. Bureau investigators may disclose the existence of an investigation to potential witnesses or third parties to the extent necessary to advance the investigation. Dated: June 4, 2012. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2012–14047 Filed 6–28–12; 8:45 am] BILLING CODE 4810–AM–P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1082 [Docket No. CFPB–2011–0005] RIN 3170–AA02 State Official Notification Rule Bureau of Consumer Financial Protection. ACTION: Final rule. AGENCY: The Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (Dodd-Frank Act) requires the Bureau of Consumer Financial Protection (Bureau) to prescribe rules establishing procedures that govern the process by which State Officials notify the Bureau of actions undertaken pursuant to the authority granted to the States to enforce the Dodd-Frank Act or regulations prescribed thereunder. This final State Official Notification Rule (Final Rule) sets forth the procedures to govern this process. DATES: The Final Rule is effective June 29, 2012. FOR FURTHER INFORMATION CONTACT: Veronica Spicer, Office of Enforcement, Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 20552, at (202) 435–7545. SUPPLEMENTARY INFORMATION: sroberts on DSK5SPTVN1PROD with RULES SUMMARY: VerDate Mar<15>2010 18:21 Jun 28, 2012 Jkt 226001 I. Background The Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (Dodd-Frank Act) was signed into law on July 21, 2010. Title X of the Dodd-Frank Act established the Bureau to regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws. Section 1042 of the Dodd-Frank Act, 12 U.S.C. 5552, governs the enforcement powers of the States under the Dodd-Frank Act. Under section 1042(a), a State attorney general or regulator (State Official) may bring an action to enforce Title X of the DoddFrank Act and regulations issued thereunder. Prior to initiating any such action, the State Official is required to provide notice of the action to the Bureau and the prudential regulator, if any, pursuant to section 1042(b) of the Dodd-Frank Act. Section 1042(b) further authorizes the Bureau to intervene in the State Official’s action as a party, remove the action to a Federal district court, and appeal any order or judgment. Pursuant to section 1042(c) of the Dodd-Frank Act, the Bureau is required to issue regulations implementing the requirements of section 1042. On July 28, 2011, the Bureau promulgated the State Official Notification Rule (Interim Final Rule) with a request for comment. The comment period for the Interim Final Rule ended on September 26, 2011. After reviewing and considering the issues raised by the comments, the Bureau now promulgates the Final Rule establishing a procedure for the timing and content of the notice required to be provided by State Officials pursuant to section 1042(b) of the Dodd-Frank Act, 12 U.S.C. 5552(b). II. Summary of the Final Rule Like the Interim Final Rule, the Final Rule implements a procedure for the timing and content of the notice required by section 1042(b), sets forth the responsibilities of the recipients of the notice, and specifies the rights of the Bureau to participate in actions brought by State Officials under section 1042(a) of the Dodd-Frank Act. In drafting the Final Rule, the Bureau endeavored to create a process that would provide both the Bureau and, where applicable, the prudential regulators with timely notice of pending actions and account for the investigation and litigation needs of State regulators and law enforcement agencies. In keeping with this approach, the Final Rule provides for a default notice period of at least ten calendar days, with exceptions for emergencies and other extenuating circumstances, PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 and requires substantive notice that is both straightforward and comprehensive. The Final Rule further makes clear that the Bureau can intervene as a party in an action brought by a State Official under Title X of the Dodd-Frank Act or a regulation prescribed thereunder, provides for the confidential treatment of non-public information contained in the notice if a State so requests, and provides that provision of notice shall not be deemed a waiver of any applicable privilege. In addition, the Final Rule specifies that the notice provisions do not create any procedural or substantive rights for parties in litigation against the United States or against a State that brings an action under Title X of the Dodd-Frank Act or a regulation prescribed thereunder. III. Legal Authority Section 1042(c) of the Dodd-Frank Act authorizes the Bureau to prescribe regulations implementing the requirements of section 1042(b). In addition, the Bureau has general rulemaking authority pursuant to section 1022(b)(1) of the Dodd-Frank Act to prescribe rules to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws and to prevent evasions thereof. IV. Overview of Comments Received In response to the Interim Final Rule, the Bureau received several comments. Four letters were received from associations representing the financial industry, two letters were received from financial industry regulators and supervisors, and one letter was received from an individual consumer. The Bureau also received a comment letter from a financial industry regulator in response to its Federal Register notification of November 21, 2011, regarding the information collection requirements associated with the Interim Final Rule pursuant to the Paperwork Reduction Act of 1995 (PRA), Public Law 104–13. All of the comments are available for review on www.regulations.gov. The financial industry associations’ comments fell into several general categories. Several comments expressed concerns about the Bureau’s ability to maintain confidentiality for notification materials received by the Bureau. Other commenters requested clarity as to the type of actions for which the Bureau requires notification. One commenter requested that the Bureau require uniform interpretation by States of all Federal law within the Bureau’s jurisdiction. E:\FR\FM\29JNR2.SGM 29JNR2 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Rules and Regulations The comment letters received from industry regulators and supervisors focused on several concerns. Several commenters requested clarification of the types of actions for which the Bureau requires notification. The commenters also expressed concerns about the timing of the notice requirement prior to bringing an action, and one of the commenters requested clarification as to the application of the notification requirement to actions involving credit unions. The comment letter from an individual consumer did not contain any specific comments or suggestions pertaining to the Interim Final Rule. The comments received by the Bureau are discussed in more detail below in part V of the SUPPLEMENTARY INFORMATION. V. Section-by-Section Summary sroberts on DSK5SPTVN1PROD with RULES Section 1082.1(a) Notice Requirement Section 1082.1(a) of the Interim Final Rule sets out the timing and process for notice by State Officials under nonemergency circumstances. The section requires State Officials to provide notice no later than ten days prior to initiating an action to enforce Title X of the DoddFrank Act or any regulation prescribed thereunder. The section also identifies to whom and how the notice should be sent and sets out an exception to the timing of the notice. Several commenters asked the Bureau to clarify the types of proceedings subject to notification under this section. Commenters were concerned about lack of clarity in the use of the term ‘‘action.’’ The commenters noted that State regulators often pursue various courses of ‘‘action,’’ many of which do not rise to the level of a court or administrative proceeding, such as examination findings, confidential memorandums of understanding, licensing actions, and other similar ‘‘actions.’’ Commenters also asked the Bureau to clarify when it would consider an action to be one for the enforcement of any provisions of ‘‘the Act or any regulation prescribed thereunder’’ pursuant to § 1082.1(a)(1) of the Interim Final Rule. Specifically, the commenters asked whether notice is required when a State Official brings an action: (1) Pursuant to an enumerated Federal consumer financial law, other than Title X, or its implementing regulations, which the Bureau now has jurisdiction to enforce; or (2) pursuant to a State law that is predicated on Federal law, specifically Title X, but does not bring the action directly under Title X. VerDate Mar<15>2010 18:21 Jun 28, 2012 Jkt 226001 The Final Rule amends the Interim Final Rule to clarify the types of proceedings subject to the notice requirement. The Final Rule provides that an action requiring notification under this section is any adjudicative proceeding before a court or an administrative or regulatory body to determine whether a violation of any provision of Title X of the Dodd-Frank Act or any regulation prescribed thereunder has occurred. Initiating an action under this section would include, but not be limited to, the filing of a complaint, motion for relief, or other document which initiates an action in a court or administrative or regulatory body. The Final Rule does not apply, for example, to examination findings or licensing proceedings. With regards to the substance of actions covered, the Final Rule does not apply to actions brought under the enumerated consumer laws, as defined in section 1002(12) of the Dodd-Frank Act, or the laws for which authorities are transferred to the Bureau under subtitles F and H of the Dodd-Frank Act, though some of those enumerated statutes have their own respective notification requirements that must be complied with. Nor would the Final Rule require notification of actions under State laws that are predicated on violations of Title X or regulations issued thereunder. The Bureau, however, encourages State Officials to consult with the Bureau whenever interpretation of Federal consumer financial law, as defined in section 1002(14) of the DoddFrank Act, the regulations promulgated under Federal consumer financial law, or State law predicated on violations of Federal consumer financial law is relevant to a State regulatory or law enforcement matter, even if it is not the type of action for which notification is required. State Officials are also encouraged to consult with the Bureau when in doubt as to whether a particular anticipated activity is covered by this Final Rule. State Officials that wish to consult with the Bureau in this context may contact the Bureau via electronic mail at Enforcement@cfpb.gov. The Bureau was also asked to clarify the application of § 1082.1(a) to covered entities approaching the $10 billion asset threshold relevant to the Bureau’s supervisory authority under sections 1025 and 1026 of the Dodd-Frank Act or to those that fall below the threshold at a point in time. Section 1042 of the Dodd-Frank Act and paragraph 1082.1(a) apply to all actions brought by State Officials under Title X of the Dodd-Frank Act or any regulation PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 39113 promulgated thereunder, against any covered person, regardless of whether or not the entity’s assets are above or below the threshold amount. The Bureau also received several comments raising policy concerns. One commenter noted that it would not be prudent to impede a regulator’s ability to apply the law in a timely manner simply because of a ten-day advance notice requirement. The Bureau agrees that delaying initiation of an action for the ten calendar day advance notice requirement may not always be in the public interest. The Bureau refers State Officials to § 1082.1(b), which governs Emergency Actions and is intended to account for these situations. In addition, under § 1082.1(a)(5), the Bureau may set an alternative deadline for the notice where the State Official demonstrates good cause. Another commenter recommended that the Bureau require uniform interpretations of Federal law among various regulators at the Federal and State levels to discourage State attorneys general and other State regulators from initiating enforcement actions based on interpretations of Federal law that are not supported by the Bureau. The Bureau believes that it can achieve appropriate uniformity through notification and intervention, which are the mechanisms provided in section 1042(b) the Dodd-Frank Act. The Bureau also has authority to intervene in actions as otherwise provided for by law (including the Federal Rules of Civil Procedure), and may file amicus briefs in appropriate circumstances, which may assist in the uniform interpretation of Federal law. The Bureau, however, encourages State Officials and other Federal law enforcement agencies to consult with the Bureau regarding issues related to enforcement of Federal consumer financial law, especially the Dodd-Frank Act’s prohibition on unfair, deceptive and abusive acts and practices. The Bureau will make resources available through its Office of Enforcement to provide consultation on such issues as needed, even if the action is not one for which the Bureau requires notification. Government officials that wish to consult with the Bureau in this context may contact the Bureau via electronic mail at Enforcement@cfpb.gov. Other commenters recommended specific changes to § 1082.1(a) of the Interim Final Rule. One commenter recommended that the Bureau include in its Final Rule a requirement that State Officials bringing an action also notify ‘‘other state regulatory officials,’’ such as ‘‘state consumer credit commissioners and prudential bank E:\FR\FM\29JNR2.SGM 29JNR2 39114 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Rules and Regulations regulators.’’ Another commenter recommended that the Bureau amend § 1082.1(a)(3) to require notification of prudential regulators by electronic mail instead of the current text, which permits notice ‘‘by mail or electronic mail.’’ The Bureau declines to adopt these recommendations. First, section 1042(b)(1) of the Dodd-Frank Act limits the recipients of the notice to the Bureau and the prudential regulator, if any. Section 1002(24) of the Dodd-Frank Act defines the term ‘‘prudential regulator’’ as certain Federal regulatory agencies. While notification to State regulators may also be appropriate and should be considered by State Officials, such notification is within the discretion of the State Official. Second, the Bureau believes that allowing State Officials to notice the prudential regulator by regular mail, in addition to electronic mail, provides flexibility to State Officials subject to the notice requirement and will promote compliance with this section. On its own initiative, the Bureau also amended the Final Rule to clarify that the State Official has ten calendar days prior to initiating the action to provide notice. The Bureau adopts § 1082.1(a) of the Interim Final Rule with the changes discussed above. sroberts on DSK5SPTVN1PROD with RULES Section 1082.1(b) Emergency Actions Section 1082.1(b) of the Interim Final Rule sets out the process for the provision of notice in emergency circumstances. The section lays out the acceptable reasons for not providing notice in accordance with § 1082.1(a), and establishes a deadline to provide notice of no more than 48 hours after the initiation of an action. The section also identifies to whom and how the notice should be sent and provides an exception to the timing of notice. The Bureau received two comments concerning § 1082.1(b) of the Interim Final Rule. One commenter argued that the emergency exception was too broad and suggested that the Bureau include in the Final Rule specific criteria for the Bureau’s determination of when an emergency exception to the ten-day notification requirement is warranted as being ‘‘in the public interest.’’ Along similar lines, another commenter recommended that the Bureau remove the ‘‘in the public interest’’ language from the Final Rule and suggested that the exception to the ten-day notification requirement should only be permitted when delaying for ten days would cause ‘‘irreparable and imminent harm or similar emergency circumstances.’’ VerDate Mar<15>2010 18:21 Jun 28, 2012 Jkt 226001 The Bureau has made minor technical revisions to the Interim Final Rule. The Bureau adopts § 1082.1(b) of the Interim Final Rule with the changes discussed above. The Final Rule reflects the Bureau’s view that determinations under § 1082.1(b) should be made on a case-by-case basis, taking into account the particular facts and circumstances of each case and that it is not necessary to include in the Final Rule specific criteria for determining when an emergency exception to the ten-day notice requirement is warranted as being ‘‘in the public interest.’’ The Bureau encourages State Officials to consult with the Office of Enforcement to determine instances when the emergency exception may apply. Section 1082.1(c) Contents of Notice In § 1082.1(c) of the Interim Final rule, the Bureau specifies the information that must be included in the notice provided by State Officials. This section also details certain additional information that must be provided when notice is not given until after an action has been initiated. One commenter asked the Bureau to clarify the term ‘‘materially different’’ as used in § 1082.1(c)(5) of the Interim Final Rule. Under that section, the State Official must update the information provided in the notice if the State Official ‘‘intends to file a complaint, motion for relief, or similar document that is materially different’’ than the information initially provided. By way of clarification, material changes are those changes that substantively affect the legal or factual allegations of an action. Material changes would include, among other things, substantive changes in the factual allegations of an action, substantive changes in the citation to a State Official’s legal authority to bring such an action, changes in the number of counts charged, changes in legal theories relied upon, and adding additional parties to an action. This list of material changes is not intended to be exhaustive, but is representative of the types of changes that would trigger a supplemental notification requirement under § 1082.1(c)(5). The Bureau encourages State Officials to consult with the Office of Enforcement on a case-by-case basis to determine if changes to documents filed in an action amount to ‘‘material’’ changes, requiring further notification. Another commenter stated that § 1082.1(c) of the Interim Final Rule is inconsistent with section 1042(b) of the Dodd-Frank Act because § 1082.1(c) permits a State Official to provide a complete and unredacted copy of any complaint or action initiating document PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 ‘‘in its form as of the date the notice is provided.’’ The commenter stated that section 1042 of the Dodd-Frank Act requires the State Official to provide the complete and ‘‘final’’ complaint at the time of initial notification. Because § 1082.1(b) of the Interim Final Rule requires notification ten days in advance of a State Official filing a complaint or other action initiating document, it is impractical to require the State to provide the Bureau with the ‘‘final’’ version of these documents. To the extent the commenter is concerned that the notice will be inaccurate, § 1082.1(c)(5) requires supplemental notice if there are any material changes to the information provided to the Bureau in the initial notification documents. As discussed below, § 1082.1(c) of the Interim Final Rule was also amended to require State Officials to identify, as part of the notification, any limitations the State Official requires on the disclosure of the substance or fact of the notice to any person or entity outside of the recipient agency. The Bureau also made some minor technical revisions to § 1082.1(c). The Bureau adopts § 1082.1(c) of the Interim Final Rule with the changes discussed above. Section 1082.1(d) Bureau Response Section 1082.1(d) of the Interim Final Rule describes how the Bureau may intervene or otherwise participate in an action initiated by a State Official. Several commenters suggested changes to this section of the Interim Final Rule. Some commenters recommended that the Bureau revise the Interim Final Rule to provide clear standards for when it would be appropriate for the Bureau to exercise its power to intervene under § 1082.1(d). Further, one commenter suggested that the Interim Final Rule should be amended to specify under which provisions of law the Bureau may legally intervene. Section 1042(b)(2) of the Dodd-Frank Act authorizes the Bureau to intervene in any action brought by a State Official pursuant to the authority granted to the State under section 1042(a) of the DoddFrank Act. The Bureau reserves the right to intervene or otherwise participate in any action where it lawfully may do so, whether under section 1042(b)(2) of the Dodd-Frank Act or under another provision of law (including the Federal Rules of Civil Procedure). As a result, the Bureau declines to amend the Interim Final Rule as recommended and will determine which actions are appropriate for intervention on a caseby-case basis. E:\FR\FM\29JNR2.SGM 29JNR2 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Rules and Regulations sroberts on DSK5SPTVN1PROD with RULES The Bureau made some minor technical revisions to § 1082.1(d). The Bureau adopts § 1082.1(d) of the Interim Final Rule with the changes discussed above. Section 1082.1(e) Confidentiality and Privilege Section 1082.1(e) of the Interim Final Rule governs the recipient agencies’ treatment of the information provided in the notice. The Interim Final Rule provides that the substance and fact of the notice shall not be disclosed by the Bureau or the prudential regulator prior to the information becoming public and also establishes certain exceptions to this requirement. These exceptions include (1) disclosures required by law, (2) disclosures consented to by the State Official, and (3) disclosures made to another government entity to protect the public interest after consultation with the State Official. In addition, the Interim Final Rule states that the provision of notice shall not be deemed a waiver of any applicable privilege. One commenter raised two concerns with respect to this section. First, the commenter stated that the Bureau does not have the authority to limit a prudential regulator’s ability to disclose such information and asserted that prudential regulators actually have an obligation to alert entities they supervise of such a notification. Second, the commenter asserted that the Bureau has no legal basis for its assertion that information provided by State Officials pursuant to the notification requirement shall not be deemed a waiver of any applicable privilege. Section 1082.1(e) is promulgated pursuant to the Bureau’s exclusive authority, under section 1042(c) of the Dodd-Frank Act, to prescribe regulations implementing the notice requirement. That authority necessarily includes the power to determine how the notice will be provided and how any non-public information contained therein will be treated by those who receive it. The Bureau, however, has revised the Interim Final Rule to emphasize that the restrictions on disclosure emanate from the nature of the information as belonging to the State. That information, including the fact of notice itself, is typically both sensitive and confidential. There is nothing in the Dodd-Frank Act to suggest that Congress intended section 1042(b) to prevent State Officials from keeping the substance and fact of their law enforcement actions confidential ` vis-a-vis third parties. Accordingly, the Final Rule amends the Interim Final Rule to provide that the substance and fact of the notice shall be subject to any VerDate Mar<15>2010 18:21 Jun 28, 2012 Jkt 226001 limitations on disclosure required by the State Official pursuant to section 1082.1(c)(viii), subject to certain exceptions. As set forth in section 1082.1(e) of the Interim Final Rule, these exceptions include (1) disclosures required by law, (2) disclosures consented to by the State Official, and (3) disclosures made to another government entity to protect the public interest after consultation with the State Official. With respect to the commenter’s assertion that prudential regulators actually have an obligation to alert entities they supervise if they receive notification of an action by a State Official, the commenter provided no support for this assertion nor is the Bureau aware of any. With respect to the commenter’s privilege concerns, the provision of notification by a State Official to the Bureau pursuant to the Final Rule will not constitute a waiver of any applicable privilege. The disclosure by State Officials of the notification materials required by the Final Rule constitutes a compelled disclosure to the Bureau of information required by law, as opposed to a voluntary disclosure or a disclosure to an adversary that would constitute a waiver of applicable privileges. Moreover, the Bureau’s rulemaking authority under sections 1022 and 1042 of the Dodd-Frank Act includes the authority to prescribe rules governing the implications of compliance with the statutory notice mandate. This provision furthers that mandate by encouraging compliance. Finally, other commenters were concerned about the disclosure of confidential and/or privileged material contained in documentation maintained by the Bureau, including State notification documents provided to the Bureau. One commenter expressed specific concern regarding maintaining confidentiality when sending electronic mail to an anonymous address such as Enforcement@cfpb.gov. Section 1082.1(e) of the Final Rule expressly provides that the State Official may impose limitations on the disclosure of the substance or fact of the notice to any entity outside of the recipient agency, subject to certain exceptions. Further, the Bureau will comply with the confidentiality procedures promulgated in its Interim Final Rule governing the Disclosure of Records and Information, 12 CFR 1070, to the extent applicable, and any future amendments to that Rule. Finally, the Bureau notes that its electronic mail system, which includes the incoming mailbox for Enforcement@cfpb.gov and ExecSec@cfpb.gov, is a secured web- PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 39115 based electronic mail system and access to these secured accounts is limited to select personnel within the Office of Enforcement and the Office of the Executive Secretary. The Bureau adopts § 1082.1(e) of the Interim Final Rule with the changes discussed above. Section 1082.1(f) No Private Right of Action or Defense Section 1082.1(f) of the Interim Final Rule clarifies that § 1082.1 does not create any right, benefit, or defense which is enforceable against the United States or State Officials enforcing Title X of the Dodd-Frank Act or any regulation prescribed thereunder. The Bureau received one comment on this section, which stated that to the extent the Interim Final Rule sets out rights enforceable under the Dodd-Frank Act or other statutes, the Interim Final Rule cannot remove those rights. Thus, the commenter recommended that the Bureau delete § 1082.1(f). The Bureau adopts § 1082.1(f) of the Interim Final Rule without change in the Final Rule. By way of clarification, § 1082.1(f) of the Final Rule does not bar the exercise of any pre-existing rights; it merely makes clear that the Final Rule creates no additional rights. VI. Section 1022 Analysis In developing the Final Rule, the Bureau has considered the potential benefits, costs, and impacts as required by section 1022(b)(2)(A) of the DoddFrank Act.1 In addition, the Bureau has consulted or offered to consult with the prudential regulators, the Department of Housing and Urban Development, the Securities and Exchange Commission, the Department of Justice, and the Federal Trade Commission before and after issuing the Interim Final Rule, including with regard to consistency with any prudential, market, or systemic 1 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 a rulemaking of this kind that does not establish standards of conduct is unclear and to benefits, costs 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. E:\FR\FM\29JNR2.SGM 29JNR2 39116 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Rules and Regulations objectives administered by such agencies. The Final Rule implements the DoddFrank Act’s requirement to provide notice to the Bureau and prudential regulators when a State initiates an action under Title X of the Dodd-Frank Act or a regulation prescribed thereunder. The Final Rule will help ensure more efficient and consistent implementation of the State notification requirement, which will benefit both consumers and covered persons. In particular, the Final Rule provides that the notice shall be subject to any limitations on disclosure imposed by the State Official subject to certain limitations, establishes notification deadlines, including an exception for emergency proceedings, and specifies the content of the notice. The Final Rule neither imposes any obligations on consumers nor has any direct impact on their access to consumer financial products or services. Further, the Final Rule has no unique impact on insured depository institutions or insured credit unions with less than $10 billion in assets as described in section 1026(a) of the Dodd-Frank Act. Finally, the Final Rule does not have a unique impact on rural consumers. A commenter stated that the four interim final rules that the Bureau promulgated together on July 28, 2011 failed to satisfy the rulemaking requirements under section 1022 of the Dodd-Frank Act. Specifically, the commenter stated that ‘‘the CFPB’s analysis of the costs and benefits of its rules does not recognize the significant costs the CFPB imposes on covered persons.’’ The Bureau believes that it fully considered the benefits, costs, and impacts of the Interim Final Rule pursuant to section 1022. Notably, the commenter did not identify any specific costs to covered persons imposed by the State Notification Rule that are not discussed in part C of the SUPPLEMENTARY INFORMATION to the Interim Final Rule. sroberts on DSK5SPTVN1PROD with RULES VII. Procedural Requirements 1. Administrative Procedure Act One commenter questioned whether the Interim Final Rule is exempt from the notice-and-comment requirements of section 553(b) of the Administrative Procedure Act (APA), 5 U.S.C. 553. The commenter argued that the Interim Final Rule is not properly characterized as relating solely to agency organization, procedure or practice because it requires the submission of information regarding covered persons to Federal officials and also establishes rules for the treatment VerDate Mar<15>2010 18:21 Jun 28, 2012 Jkt 226001 of such information, which could result in potential harm to covered persons. The commenter further urged the Bureau to seek comment on similar rulemakings in the future. The notice-and-comment procedures described in section 553(b) of the APA do not apply to rules of agency organization, procedure, or practice, or when the agency for good cause finds that notice and public comment on the rules being promulgated are impracticable or unnecessary. Both the Interim Final Rule and Final Rule relate to agency organization, procedure, or practice because they establish procedures for State Officials to provide notice to the Bureau; the requirement to provide the notice itself derives from section 1042(b)(1)(A) of the Dodd-Frank Act—not the Bureau’s regulations. In any event, for the reasons discussed in the preamble to the Interim Final Rule, the Bureau had good cause for issuing the Interim Final Rule without prior notice and an opportunity for comment. The Bureau nevertheless solicited comment on the Interim Final Rule. Moreover, because the Final Rule merely finalizes the Interim Final Rule, to which it is substantially similar, the Bureau for good cause finds that additional notice and public comment on the Final Rule is unnecessary. In addition, because the Final Rule relates solely to agency procedure and practice, it is not subject to the 30-day delayed effective date for substantive rules under section 553(d) of the Administrative Procedure Act, 5 U.S.C. 551 et seq. Even if this requirement applied, the Bureau finds there is good cause for the Final Rules to take effect immediately upon publication in the Federal Register. The Final Rule is substantially similar to the Interim Final Rule, which became effective on July 29, 2011. Thus, no purpose would be served by delaying the Final Rule’s effective date. 2. Regulatory Flexibility Act Because no notice of proposed rulemaking was required, the requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2), do not apply. 3. Paperwork Reduction Act The collection of information requirements contained in this Final Rule have been approved by the Office of Management and Budget (OMB) in accordance with the PRA under OMB control number 3170–0019. The estimated time per response was 30 minutes. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 unless it displays a valid OMB control number. List of Subjects in 12 CFR Part 1082 Banks, Banking, Consumer protection, Credit, Credit unions, Federal Reserve System, Investigations, Law enforcement, National banks, Savings associations, State and local governments, Trade practices. For the reasons set forth in the preamble, the Bureau of Consumer Financial Protection revises part 1082 to Chapter X in Title 12 of the Code of Federal Regulations to read as follows: PART 1082—STATE OFFICIAL NOTIFICATION RULES Authority: 12 U.S.C. 5481 et seq. § 1082.1 Procedures for notifying the Bureau of Consumer Financial Protection when a State Official takes an action to enforce Title X of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010. (a) Notice requirement. (1) Pursuant to 12 U.S.C. 5552(b) and except as provided in paragraph (b) of this section, every State attorney general and State regulator (State Official) shall provide the notice described in paragraph (c) of this section to the Office of Enforcement of the Bureau of Consumer Financial Protection (the Bureau), the office of the Bureau responsible for enforcement of Federal consumer financial law pursuant to Title X of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010, as amended, Public Law 111–203 (July 21, 2010), codified at 12 U.S.C. 5481 et seq. (the Dodd-Frank Act), and the Office of the Executive Secretary of the Bureau at least ten calendar days prior to initiating any action against any covered person. For purposes of this section, an action requiring notification is any adjudicative proceeding before a court or an administrative or regulatory body to determine whether a violation of any provision of Title X of the Dodd-Frank Act or any regulation prescribed thereunder has occurred. Initiating an action under this section would include but not be limited to the filing of a complaint, motion for relief, or other document which initiates an action or a proceeding. (2) Notice shall be provided to the Office of Enforcement and the Office of the Executive Secretary, or their successor offices, via electronic mail to Enforcement@cfpb.gov and ExecSec@cfpb.gov. In the event of technical problems preventing the delivery of notice, the Office of E:\FR\FM\29JNR2.SGM 29JNR2 sroberts on DSK5SPTVN1PROD with RULES Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Rules and Regulations Enforcement or its successor entity should be contacted. (3) On the same date that notice is provided to the Office of Enforcement and the Office of the Executive Secretary pursuant to paragraph (a)(1) of this section, a copy of the notice shall be sent to the relevant prudential regulator, if any, or the designee thereof, by mail or electronic mail. (4) Notice shall be deemed to have been provided as of the date of transmitting or mailing the materials described in paragraph (c) of this section. (5) The Office of Enforcement, or its successor entity, in consultation with a State Official, may provide, for good cause shown, an alternative deadline for the notice described in paragraph (a)(1) of this section. (b) Emergency actions. (1) Pursuant to 12 U.S.C. 5552(b), in the event that a State Official initiates or intends to initiate an action and, in order to protect the public interest or prevent irreparable and imminent harm, is unable to provide timely notice as described in paragraph (a) of this section, the State Official shall provide the notice described in paragraph (c) of this section as soon as is practicable and not later than 48 hours after initiation of the action. (2) Notice shall be provided in accordance with the procedures set forth in paragraphs (a)(2) through (4) of this section. (3) The Office of Enforcement, or its successor entity, in consultation with a State Official, may provide, for good cause shown, an alternative deadline for the notice described in paragraph (b)(1) of this section. (c) Contents of notice. (1) Pursuant to 12 U.S.C. 5552(b), the notice required under paragraphs (a) and (b) of this section shall include a written description of the anticipated action, including: (i) The court or body in which the action is to be initiated; (ii) The identity of the parties to the action; (iii) The nature of the action to be initiated; (iv) The anticipated date of initiating the action; (v) The alleged facts underlying the action; (vi) A contact name, electronic mail address, and phone number of an individual involved with the matter in the office of the State Official with whom the Bureau may consult; (vii) A determination as to whether there may be a need to coordinate the prosecution of the action so as not to interfere with any action, including any VerDate Mar<15>2010 18:21 Jun 28, 2012 Jkt 226001 rulemaking, undertaken by the Bureau, a prudential regulator, or another Federal agency; and (viii) A statement by the State Official setting forth any limitations on the disclosure of the substance or fact of the notice to any person or entity outside of the recipient agency. (2) The notice required under paragraphs (a) and (b) of this section shall further include a complete and unredacted copy of any complaint, motion for relief, or similar document that is the subject of the notice, in its form as of the date the notice is provided. To the extent the complaint, motion for relief, or similar document contains the information described in paragraph (c)(1) of this section, provision of the complaint, motion for relief, or similar document shall be deemed sufficient notice of that information. (3) In the event that notice is provided after the initiation of an action, the written description shall also include the following, in addition to the information described in paragraph (c)(1) of this section: (i) A brief description of any proceeding that occurred as a result of the initiation of the action, including any orders issued by a court or other body; (ii) Any case number, matter number, or designation assigned to the action; and (iii) Information on scheduled court or other administrative or regulatory proceedings. (4) In the event that notice is provided after the initiation of an action, in addition to the requirements set forth in paragraph (c)(3) of this section, the notice shall further include a complete, unredacted copy of any document filed by any party in relation to the action and any orders issued by the court or other body. (5) If the State Official, after providing the notice described in paragraphs (c)(1) and (c)(2) of this section, intends to file a complaint, motion for relief, or similar document that is materially different from the document included with the notice, the State Official shall provide a copy of that document prior to filing, in accordance with the method described in paragraph (a)(2) of this section. (d) Bureau response. In any action described in paragraphs (a) and (b) of this section, the Bureau may: (1) Intervene in the action as a party; (2) Upon intervening, (i) Remove the action to the appropriate United States district court, if the action was not originally brought there; and PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 39117 (ii) Be heard on all matters arising in the action; (3) Appeal any order or judgment, to the same extent as any other party in the proceeding may; and (4) Otherwise participate in the action as appropriate. (e) Confidentiality and privilege. (1) The information described in paragraph (c) of this section, including the complaint, motion for relief, or other document, as well as the fact that notice has been provided, shall be subject to any limitations on disclosure imposed by the State Official pursuant to paragraph (c)(1)(viii) of this section; provided, however, that the recipient may disclose such information: (i) As required by law; (ii) When the information is or becomes publicly available; (iii) With the consent of the State Official; or (iv) To another State or Federal government entity when necessary to protect the public interest, after consultation with the State Official who provided the notice. (2) Provision of notice by a State Official and disclosure of information pursuant to paragraph (e)(1) of this section shall not be deemed a waiver of any applicable privilege. (f) No private right of action or defense. The requirements set forth in this section are not intended to, do not, and may not be relied upon to create any right, benefit, or defense, substantive or procedural, enforceable at law by a party against the United States or any State enforcing the provisions of the Dodd-Frank Act or any regulation prescribed thereunder. Dated: June 4, 2012. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2012–14062 Filed 6–28–12; 8:45 am] BILLING CODE 4810–AM–P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1071 [Docket No.: CFPB–2012–0020] RIN 3170–AA27 Equal Access to Justice Act Implementation Rule Bureau of Consumer Financial Protection. ACTION: Interim final rule with request for public comment. AGENCY: The Equal Access to Justice Act (EAJA or the Act) requires agencies SUMMARY: E:\FR\FM\29JNR2.SGM 29JNR2

Agencies

[Federal Register Volume 77, Number 126 (Friday, June 29, 2012)]
[Rules and Regulations]
[Pages 39112-39117]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14062]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1082

[Docket No. CFPB-2011-0005]
RIN 3170-AA02


State Official Notification Rule

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: The Dodd-Frank Wall Street Reform and Consumer Financial 
Protection Act of 2010 (Dodd-Frank Act) requires the Bureau of Consumer 
Financial Protection (Bureau) to prescribe rules establishing 
procedures that govern the process by which State Officials notify the 
Bureau of actions undertaken pursuant to the authority granted to the 
States to enforce the Dodd-Frank Act or regulations prescribed 
thereunder. This final State Official Notification Rule (Final Rule) 
sets forth the procedures to govern this process.

DATES: The Final Rule is effective June 29, 2012.

FOR FURTHER INFORMATION CONTACT: Veronica Spicer, Office of 
Enforcement, Consumer Financial Protection Bureau, 1700 G Street NW., 
Washington, DC 20552, at (202) 435-7545.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Financial Protection 
Act of 2010 (Dodd-Frank Act) was signed into law on July 21, 2010. 
Title X of the Dodd-Frank Act established the Bureau to regulate the 
offering and provision of consumer financial products or services under 
the Federal consumer financial laws. Section 1042 of the Dodd-Frank 
Act, 12 U.S.C. 5552, governs the enforcement powers of the States under 
the Dodd-Frank Act. Under section 1042(a), a State attorney general or 
regulator (State Official) may bring an action to enforce Title X of 
the Dodd-Frank Act and regulations issued thereunder. Prior to 
initiating any such action, the State Official is required to provide 
notice of the action to the Bureau and the prudential regulator, if 
any, pursuant to section 1042(b) of the Dodd-Frank Act. Section 1042(b) 
further authorizes the Bureau to intervene in the State Official's 
action as a party, remove the action to a Federal district court, and 
appeal any order or judgment.
    Pursuant to section 1042(c) of the Dodd-Frank Act, the Bureau is 
required to issue regulations implementing the requirements of section 
1042. On July 28, 2011, the Bureau promulgated the State Official 
Notification Rule (Interim Final Rule) with a request for comment. The 
comment period for the Interim Final Rule ended on September 26, 2011. 
After reviewing and considering the issues raised by the comments, the 
Bureau now promulgates the Final Rule establishing a procedure for the 
timing and content of the notice required to be provided by State 
Officials pursuant to section 1042(b) of the Dodd-Frank Act, 12 U.S.C. 
5552(b).

II. Summary of the Final Rule

    Like the Interim Final Rule, the Final Rule implements a procedure 
for the timing and content of the notice required by section 1042(b), 
sets forth the responsibilities of the recipients of the notice, and 
specifies the rights of the Bureau to participate in actions brought by 
State Officials under section 1042(a) of the Dodd-Frank Act. In 
drafting the Final Rule, the Bureau endeavored to create a process that 
would provide both the Bureau and, where applicable, the prudential 
regulators with timely notice of pending actions and account for the 
investigation and litigation needs of State regulators and law 
enforcement agencies. In keeping with this approach, the Final Rule 
provides for a default notice period of at least ten calendar days, 
with exceptions for emergencies and other extenuating circumstances, 
and requires substantive notice that is both straightforward and 
comprehensive. The Final Rule further makes clear that the Bureau can 
intervene as a party in an action brought by a State Official under 
Title X of the Dodd-Frank Act or a regulation prescribed thereunder, 
provides for the confidential treatment of non-public information 
contained in the notice if a State so requests, and provides that 
provision of notice shall not be deemed a waiver of any applicable 
privilege. In addition, the Final Rule specifies that the notice 
provisions do not create any procedural or substantive rights for 
parties in litigation against the United States or against a State that 
brings an action under Title X of the Dodd-Frank Act or a regulation 
prescribed thereunder.

III. Legal Authority

    Section 1042(c) of the Dodd-Frank Act authorizes the Bureau to 
prescribe regulations implementing the requirements of section 1042(b). 
In addition, the Bureau has general rulemaking authority pursuant to 
section 1022(b)(1) of the Dodd-Frank Act to prescribe rules to enable 
the Bureau to administer and carry out the purposes and objectives of 
the Federal consumer financial laws and to prevent evasions thereof.

IV. Overview of Comments Received

    In response to the Interim Final Rule, the Bureau received several 
comments. Four letters were received from associations representing the 
financial industry, two letters were received from financial industry 
regulators and supervisors, and one letter was received from an 
individual consumer. The Bureau also received a comment letter from a 
financial industry regulator in response to its Federal Register 
notification of November 21, 2011, regarding the information collection 
requirements associated with the Interim Final Rule pursuant to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. All of the 
comments are available for review on www.regulations.gov.
    The financial industry associations' comments fell into several 
general categories. Several comments expressed concerns about the 
Bureau's ability to maintain confidentiality for notification materials 
received by the Bureau. Other commenters requested clarity as to the 
type of actions for which the Bureau requires notification. One 
commenter requested that the Bureau require uniform interpretation by 
States of all Federal law within the Bureau's jurisdiction.

[[Page 39113]]

    The comment letters received from industry regulators and 
supervisors focused on several concerns. Several commenters requested 
clarification of the types of actions for which the Bureau requires 
notification. The commenters also expressed concerns about the timing 
of the notice requirement prior to bringing an action, and one of the 
commenters requested clarification as to the application of the 
notification requirement to actions involving credit unions.
    The comment letter from an individual consumer did not contain any 
specific comments or suggestions pertaining to the Interim Final Rule.
    The comments received by the Bureau are discussed in more detail 
below in part V of the SUPPLEMENTARY INFORMATION.

V. Section-by-Section Summary

Section 1082.1(a) Notice Requirement

    Section 1082.1(a) of the Interim Final Rule sets out the timing and 
process for notice by State Officials under non-emergency 
circumstances. The section requires State Officials to provide notice 
no later than ten days prior to initiating an action to enforce Title X 
of the Dodd-Frank Act or any regulation prescribed thereunder. The 
section also identifies to whom and how the notice should be sent and 
sets out an exception to the timing of the notice.
    Several commenters asked the Bureau to clarify the types of 
proceedings subject to notification under this section. Commenters were 
concerned about lack of clarity in the use of the term ``action.'' The 
commenters noted that State regulators often pursue various courses of 
``action,'' many of which do not rise to the level of a court or 
administrative proceeding, such as examination findings, confidential 
memorandums of understanding, licensing actions, and other similar 
``actions.'' Commenters also asked the Bureau to clarify when it would 
consider an action to be one for the enforcement of any provisions of 
``the Act or any regulation prescribed thereunder'' pursuant to Sec.  
1082.1(a)(1) of the Interim Final Rule. Specifically, the commenters 
asked whether notice is required when a State Official brings an 
action: (1) Pursuant to an enumerated Federal consumer financial law, 
other than Title X, or its implementing regulations, which the Bureau 
now has jurisdiction to enforce; or (2) pursuant to a State law that is 
predicated on Federal law, specifically Title X, but does not bring the 
action directly under Title X.
    The Final Rule amends the Interim Final Rule to clarify the types 
of proceedings subject to the notice requirement. The Final Rule 
provides that an action requiring notification under this section is 
any adjudicative proceeding before a court or an administrative or 
regulatory body to determine whether a violation of any provision of 
Title X of the Dodd-Frank Act or any regulation prescribed thereunder 
has occurred.
    Initiating an action under this section would include, but not be 
limited to, the filing of a complaint, motion for relief, or other 
document which initiates an action in a court or administrative or 
regulatory body. The Final Rule does not apply, for example, to 
examination findings or licensing proceedings. With regards to the 
substance of actions covered, the Final Rule does not apply to actions 
brought under the enumerated consumer laws, as defined in section 
1002(12) of the Dodd-Frank Act, or the laws for which authorities are 
transferred to the Bureau under subtitles F and H of the Dodd-Frank 
Act, though some of those enumerated statutes have their own respective 
notification requirements that must be complied with. Nor would the 
Final Rule require notification of actions under State laws that are 
predicated on violations of Title X or regulations issued thereunder.
    The Bureau, however, encourages State Officials to consult with the 
Bureau whenever interpretation of Federal consumer financial law, as 
defined in section 1002(14) of the Dodd-Frank Act, the regulations 
promulgated under Federal consumer financial law, or State law 
predicated on violations of Federal consumer financial law is relevant 
to a State regulatory or law enforcement matter, even if it is not the 
type of action for which notification is required. State Officials are 
also encouraged to consult with the Bureau when in doubt as to whether 
a particular anticipated activity is covered by this Final Rule. State 
Officials that wish to consult with the Bureau in this context may 
contact the Bureau via electronic mail at Enforcement@cfpb.gov.
    The Bureau was also asked to clarify the application of Sec.  
1082.1(a) to covered entities approaching the $10 billion asset 
threshold relevant to the Bureau's supervisory authority under sections 
1025 and 1026 of the Dodd-Frank Act or to those that fall below the 
threshold at a point in time. Section 1042 of the Dodd-Frank Act and 
paragraph 1082.1(a) apply to all actions brought by State Officials 
under Title X of the Dodd-Frank Act or any regulation promulgated 
thereunder, against any covered person, regardless of whether or not 
the entity's assets are above or below the threshold amount.
    The Bureau also received several comments raising policy concerns. 
One commenter noted that it would not be prudent to impede a 
regulator's ability to apply the law in a timely manner simply because 
of a ten-day advance notice requirement. The Bureau agrees that 
delaying initiation of an action for the ten calendar day advance 
notice requirement may not always be in the public interest. The Bureau 
refers State Officials to Sec.  1082.1(b), which governs Emergency 
Actions and is intended to account for these situations. In addition, 
under Sec.  1082.1(a)(5), the Bureau may set an alternative deadline 
for the notice where the State Official demonstrates good cause.
    Another commenter recommended that the Bureau require uniform 
interpretations of Federal law among various regulators at the Federal 
and State levels to discourage State attorneys general and other State 
regulators from initiating enforcement actions based on interpretations 
of Federal law that are not supported by the Bureau. The Bureau 
believes that it can achieve appropriate uniformity through 
notification and intervention, which are the mechanisms provided in 
section 1042(b) the Dodd-Frank Act. The Bureau also has authority to 
intervene in actions as otherwise provided for by law (including the 
Federal Rules of Civil Procedure), and may file amicus briefs in 
appropriate circumstances, which may assist in the uniform 
interpretation of Federal law. The Bureau, however, encourages State 
Officials and other Federal law enforcement agencies to consult with 
the Bureau regarding issues related to enforcement of Federal consumer 
financial law, especially the Dodd-Frank Act's prohibition on unfair, 
deceptive and abusive acts and practices. The Bureau will make 
resources available through its Office of Enforcement to provide 
consultation on such issues as needed, even if the action is not one 
for which the Bureau requires notification. Government officials that 
wish to consult with the Bureau in this context may contact the Bureau 
via electronic mail at Enforcement@cfpb.gov.
    Other commenters recommended specific changes to Sec.  1082.1(a) of 
the Interim Final Rule. One commenter recommended that the Bureau 
include in its Final Rule a requirement that State Officials bringing 
an action also notify ``other state regulatory officials,'' such as 
``state consumer credit commissioners and prudential bank

[[Page 39114]]

regulators.'' Another commenter recommended that the Bureau amend Sec.  
1082.1(a)(3) to require notification of prudential regulators by 
electronic mail instead of the current text, which permits notice ``by 
mail or electronic mail.''
    The Bureau declines to adopt these recommendations. First, section 
1042(b)(1) of the Dodd-Frank Act limits the recipients of the notice to 
the Bureau and the prudential regulator, if any. Section 1002(24) of 
the Dodd-Frank Act defines the term ``prudential regulator'' as certain 
Federal regulatory agencies. While notification to State regulators may 
also be appropriate and should be considered by State Officials, such 
notification is within the discretion of the State Official. Second, 
the Bureau believes that allowing State Officials to notice the 
prudential regulator by regular mail, in addition to electronic mail, 
provides flexibility to State Officials subject to the notice 
requirement and will promote compliance with this section.
    On its own initiative, the Bureau also amended the Final Rule to 
clarify that the State Official has ten calendar days prior to 
initiating the action to provide notice.
    The Bureau adopts Sec.  1082.1(a) of the Interim Final Rule with 
the changes discussed above.

Section 1082.1(b) Emergency Actions

    Section 1082.1(b) of the Interim Final Rule sets out the process 
for the provision of notice in emergency circumstances. The section 
lays out the acceptable reasons for not providing notice in accordance 
with Sec.  1082.1(a), and establishes a deadline to provide notice of 
no more than 48 hours after the initiation of an action. The section 
also identifies to whom and how the notice should be sent and provides 
an exception to the timing of notice.
    The Bureau received two comments concerning Sec.  1082.1(b) of the 
Interim Final Rule. One commenter argued that the emergency exception 
was too broad and suggested that the Bureau include in the Final Rule 
specific criteria for the Bureau's determination of when an emergency 
exception to the ten-day notification requirement is warranted as being 
``in the public interest.'' Along similar lines, another commenter 
recommended that the Bureau remove the ``in the public interest'' 
language from the Final Rule and suggested that the exception to the 
ten-day notification requirement should only be permitted when delaying 
for ten days would cause ``irreparable and imminent harm or similar 
emergency circumstances.''
    The Bureau has made minor technical revisions to the Interim Final 
Rule.
    The Bureau adopts Sec.  1082.1(b) of the Interim Final Rule with 
the changes discussed above. The Final Rule reflects the Bureau's view 
that determinations under Sec.  1082.1(b) should be made on a case-by-
case basis, taking into account the particular facts and circumstances 
of each case and that it is not necessary to include in the Final Rule 
specific criteria for determining when an emergency exception to the 
ten-day notice requirement is warranted as being ``in the public 
interest.'' The Bureau encourages State Officials to consult with the 
Office of Enforcement to determine instances when the emergency 
exception may apply.

Section 1082.1(c) Contents of Notice

    In Sec.  1082.1(c) of the Interim Final rule, the Bureau specifies 
the information that must be included in the notice provided by State 
Officials. This section also details certain additional information 
that must be provided when notice is not given until after an action 
has been initiated.
    One commenter asked the Bureau to clarify the term ``materially 
different'' as used in Sec.  1082.1(c)(5) of the Interim Final Rule. 
Under that section, the State Official must update the information 
provided in the notice if the State Official ``intends to file a 
complaint, motion for relief, or similar document that is materially 
different'' than the information initially provided. By way of 
clarification, material changes are those changes that substantively 
affect the legal or factual allegations of an action. Material changes 
would include, among other things, substantive changes in the factual 
allegations of an action, substantive changes in the citation to a 
State Official's legal authority to bring such an action, changes in 
the number of counts charged, changes in legal theories relied upon, 
and adding additional parties to an action. This list of material 
changes is not intended to be exhaustive, but is representative of the 
types of changes that would trigger a supplemental notification 
requirement under Sec.  1082.1(c)(5). The Bureau encourages State 
Officials to consult with the Office of Enforcement on a case-by-case 
basis to determine if changes to documents filed in an action amount to 
``material'' changes, requiring further notification.
    Another commenter stated that Sec.  1082.1(c) of the Interim Final 
Rule is inconsistent with section 1042(b) of the Dodd-Frank Act because 
Sec.  1082.1(c) permits a State Official to provide a complete and 
unredacted copy of any complaint or action initiating document ``in its 
form as of the date the notice is provided.'' The commenter stated that 
section 1042 of the Dodd-Frank Act requires the State Official to 
provide the complete and ``final'' complaint at the time of initial 
notification.
    Because Sec.  1082.1(b) of the Interim Final Rule requires 
notification ten days in advance of a State Official filing a complaint 
or other action initiating document, it is impractical to require the 
State to provide the Bureau with the ``final'' version of these 
documents. To the extent the commenter is concerned that the notice 
will be inaccurate, Sec.  1082.1(c)(5) requires supplemental notice if 
there are any material changes to the information provided to the 
Bureau in the initial notification documents.
    As discussed below, Sec.  1082.1(c) of the Interim Final Rule was 
also amended to require State Officials to identify, as part of the 
notification, any limitations the State Official requires on the 
disclosure of the substance or fact of the notice to any person or 
entity outside of the recipient agency. The Bureau also made some minor 
technical revisions to Sec.  1082.1(c).
    The Bureau adopts Sec.  1082.1(c) of the Interim Final Rule with 
the changes discussed above.

Section 1082.1(d) Bureau Response

    Section 1082.1(d) of the Interim Final Rule describes how the 
Bureau may intervene or otherwise participate in an action initiated by 
a State Official.
    Several commenters suggested changes to this section of the Interim 
Final Rule. Some commenters recommended that the Bureau revise the 
Interim Final Rule to provide clear standards for when it would be 
appropriate for the Bureau to exercise its power to intervene under 
Sec.  1082.1(d). Further, one commenter suggested that the Interim 
Final Rule should be amended to specify under which provisions of law 
the Bureau may legally intervene.
    Section 1042(b)(2) of the Dodd-Frank Act authorizes the Bureau to 
intervene in any action brought by a State Official pursuant to the 
authority granted to the State under section 1042(a) of the Dodd-Frank 
Act. The Bureau reserves the right to intervene or otherwise 
participate in any action where it lawfully may do so, whether under 
section 1042(b)(2) of the Dodd-Frank Act or under another provision of 
law (including the Federal Rules of Civil Procedure). As a result, the 
Bureau declines to amend the Interim Final Rule as recommended and will 
determine which actions are appropriate for intervention on a case-by-
case basis.

[[Page 39115]]

    The Bureau made some minor technical revisions to Sec.  1082.1(d).
    The Bureau adopts Sec.  1082.1(d) of the Interim Final Rule with 
the changes discussed above.

Section 1082.1(e) Confidentiality and Privilege

    Section 1082.1(e) of the Interim Final Rule governs the recipient 
agencies' treatment of the information provided in the notice. The 
Interim Final Rule provides that the substance and fact of the notice 
shall not be disclosed by the Bureau or the prudential regulator prior 
to the information becoming public and also establishes certain 
exceptions to this requirement. These exceptions include (1) 
disclosures required by law, (2) disclosures consented to by the State 
Official, and (3) disclosures made to another government entity to 
protect the public interest after consultation with the State Official. 
In addition, the Interim Final Rule states that the provision of notice 
shall not be deemed a waiver of any applicable privilege.
    One commenter raised two concerns with respect to this section. 
First, the commenter stated that the Bureau does not have the authority 
to limit a prudential regulator's ability to disclose such information 
and asserted that prudential regulators actually have an obligation to 
alert entities they supervise of such a notification. Second, the 
commenter asserted that the Bureau has no legal basis for its assertion 
that information provided by State Officials pursuant to the 
notification requirement shall not be deemed a waiver of any applicable 
privilege.
    Section 1082.1(e) is promulgated pursuant to the Bureau's exclusive 
authority, under section 1042(c) of the Dodd-Frank Act, to prescribe 
regulations implementing the notice requirement. That authority 
necessarily includes the power to determine how the notice will be 
provided and how any non-public information contained therein will be 
treated by those who receive it. The Bureau, however, has revised the 
Interim Final Rule to emphasize that the restrictions on disclosure 
emanate from the nature of the information as belonging to the State. 
That information, including the fact of notice itself, is typically 
both sensitive and confidential. There is nothing in the Dodd-Frank Act 
to suggest that Congress intended section 1042(b) to prevent State 
Officials from keeping the substance and fact of their law enforcement 
actions confidential vis-[agrave]-vis third parties. Accordingly, the 
Final Rule amends the Interim Final Rule to provide that the substance 
and fact of the notice shall be subject to any limitations on 
disclosure required by the State Official pursuant to section 
1082.1(c)(viii), subject to certain exceptions. As set forth in section 
1082.1(e) of the Interim Final Rule, these exceptions include (1) 
disclosures required by law, (2) disclosures consented to by the State 
Official, and (3) disclosures made to another government entity to 
protect the public interest after consultation with the State Official.
    With respect to the commenter's assertion that prudential 
regulators actually have an obligation to alert entities they supervise 
if they receive notification of an action by a State Official, the 
commenter provided no support for this assertion nor is the Bureau 
aware of any.
    With respect to the commenter's privilege concerns, the provision 
of notification by a State Official to the Bureau pursuant to the Final 
Rule will not constitute a waiver of any applicable privilege. The 
disclosure by State Officials of the notification materials required by 
the Final Rule constitutes a compelled disclosure to the Bureau of 
information required by law, as opposed to a voluntary disclosure or a 
disclosure to an adversary that would constitute a waiver of applicable 
privileges. Moreover, the Bureau's rulemaking authority under sections 
1022 and 1042 of the Dodd-Frank Act includes the authority to prescribe 
rules governing the implications of compliance with the statutory 
notice mandate. This provision furthers that mandate by encouraging 
compliance.
    Finally, other commenters were concerned about the disclosure of 
confidential and/or privileged material contained in documentation 
maintained by the Bureau, including State notification documents 
provided to the Bureau. One commenter expressed specific concern 
regarding maintaining confidentiality when sending electronic mail to 
an anonymous address such as Enforcement@cfpb.gov.
    Section 1082.1(e) of the Final Rule expressly provides that the 
State Official may impose limitations on the disclosure of the 
substance or fact of the notice to any entity outside of the recipient 
agency, subject to certain exceptions. Further, the Bureau will comply 
with the confidentiality procedures promulgated in its Interim Final 
Rule governing the Disclosure of Records and Information, 12 CFR 1070, 
to the extent applicable, and any future amendments to that Rule. 
Finally, the Bureau notes that its electronic mail system, which 
includes the incoming mailbox for Enforcement@cfpb.gov and 
ExecSec@cfpb.gov, is a secured web-based electronic mail system and 
access to these secured accounts is limited to select personnel within 
the Office of Enforcement and the Office of the Executive Secretary.
    The Bureau adopts Sec.  1082.1(e) of the Interim Final Rule with 
the changes discussed above.

Section 1082.1(f) No Private Right of Action or Defense

    Section 1082.1(f) of the Interim Final Rule clarifies that Sec.  
1082.1 does not create any right, benefit, or defense which is 
enforceable against the United States or State Officials enforcing 
Title X of the Dodd-Frank Act or any regulation prescribed thereunder.
    The Bureau received one comment on this section, which stated that 
to the extent the Interim Final Rule sets out rights enforceable under 
the Dodd-Frank Act or other statutes, the Interim Final Rule cannot 
remove those rights. Thus, the commenter recommended that the Bureau 
delete Sec.  1082.1(f).
    The Bureau adopts Sec.  1082.1(f) of the Interim Final Rule without 
change in the Final Rule. By way of clarification, Sec.  1082.1(f) of 
the Final Rule does not bar the exercise of any pre-existing rights; it 
merely makes clear that the Final Rule creates no additional rights.

VI. Section 1022 Analysis

    In developing the Final Rule, the Bureau has considered the 
potential benefits, costs, and impacts as required by section 
1022(b)(2)(A) of the Dodd-Frank Act.\1\ In addition, the Bureau has 
consulted or offered to consult with the prudential regulators, the 
Department of Housing and Urban Development, the Securities and 
Exchange Commission, the Department of Justice, and the Federal Trade 
Commission before and after issuing the Interim Final Rule, including 
with regard to consistency with any prudential, market, or systemic

[[Page 39116]]

objectives administered by such agencies.
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    \1\ 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 a rulemaking of this kind that does not 
establish standards of conduct is unclear and to benefits, costs 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.
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    The Final Rule implements the Dodd-Frank Act's requirement to 
provide notice to the Bureau and prudential regulators when a State 
initiates an action under Title X of the Dodd-Frank Act or a regulation 
prescribed thereunder. The Final Rule will help ensure more efficient 
and consistent implementation of the State notification requirement, 
which will benefit both consumers and covered persons. In particular, 
the Final Rule provides that the notice shall be subject to any 
limitations on disclosure imposed by the State Official subject to 
certain limitations, establishes notification deadlines, including an 
exception for emergency proceedings, and specifies the content of the 
notice.
    The Final Rule neither imposes any obligations on consumers nor has 
any direct impact on their access to consumer financial products or 
services. Further, the Final Rule has no unique impact on insured 
depository institutions or insured credit unions with less than $10 
billion in assets as described in section 1026(a) of the Dodd-Frank 
Act. Finally, the Final Rule does not have a unique impact on rural 
consumers.
    A commenter stated that the four interim final rules that the 
Bureau promulgated together on July 28, 2011 failed to satisfy the 
rulemaking requirements under section 1022 of the Dodd-Frank Act. 
Specifically, the commenter stated that ``the CFPB's analysis of the 
costs and benefits of its rules does not recognize the significant 
costs the CFPB imposes on covered persons.'' The Bureau believes that 
it fully considered the benefits, costs, and impacts of the Interim 
Final Rule pursuant to section 1022. Notably, the commenter did not 
identify any specific costs to covered persons imposed by the State 
Notification Rule that are not discussed in part C of the SUPPLEMENTARY 
INFORMATION to the Interim Final Rule.

VII. Procedural Requirements

1. Administrative Procedure Act

    One commenter questioned whether the Interim Final Rule is exempt 
from the notice-and-comment requirements of section 553(b) of the 
Administrative Procedure Act (APA), 5 U.S.C. 553. The commenter argued 
that the Interim Final Rule is not properly characterized as relating 
solely to agency organization, procedure or practice because it 
requires the submission of information regarding covered persons to 
Federal officials and also establishes rules for the treatment of such 
information, which could result in potential harm to covered persons. 
The commenter further urged the Bureau to seek comment on similar 
rulemakings in the future.
    The notice-and-comment procedures described in section 553(b) of 
the APA do not apply to rules of agency organization, procedure, or 
practice, or when the agency for good cause finds that notice and 
public comment on the rules being promulgated are impracticable or 
unnecessary. Both the Interim Final Rule and Final Rule relate to 
agency organization, procedure, or practice because they establish 
procedures for State Officials to provide notice to the Bureau; the 
requirement to provide the notice itself derives from section 
1042(b)(1)(A) of the Dodd-Frank Act--not the Bureau's regulations. In 
any event, for the reasons discussed in the preamble to the Interim 
Final Rule, the Bureau had good cause for issuing the Interim Final 
Rule without prior notice and an opportunity for comment. The Bureau 
nevertheless solicited comment on the Interim Final Rule. Moreover, 
because the Final Rule merely finalizes the Interim Final Rule, to 
which it is substantially similar, the Bureau for good cause finds that 
additional notice and public comment on the Final Rule is unnecessary.
    In addition, because the Final Rule relates solely to agency 
procedure and practice, it is not subject to the 30-day delayed 
effective date for substantive rules under section 553(d) of the 
Administrative Procedure Act, 5 U.S.C. 551 et seq. Even if this 
requirement applied, the Bureau finds there is good cause for the Final 
Rules to take effect immediately upon publication in the Federal 
Register. The Final Rule is substantially similar to the Interim Final 
Rule, which became effective on July 29, 2011. Thus, no purpose would 
be served by delaying the Final Rule's effective date.

2. Regulatory Flexibility Act

    Because no notice of proposed rulemaking was required, the 
requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2), do not 
apply.

3. Paperwork Reduction Act

    The collection of information requirements contained in this Final 
Rule have been approved by the Office of Management and Budget (OMB) in 
accordance with the PRA under OMB control number 3170-0019. The 
estimated time per response was 30 minutes. An agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless it displays a valid OMB control number.

List of Subjects in 12 CFR Part 1082

    Banks, Banking, Consumer protection, Credit, Credit unions, Federal 
Reserve System, Investigations, Law enforcement, National banks, 
Savings associations, State and local governments, Trade practices.
    For the reasons set forth in the preamble, the Bureau of Consumer 
Financial Protection revises part 1082 to Chapter X in Title 12 of the 
Code of Federal Regulations to read as follows:

PART 1082--STATE OFFICIAL NOTIFICATION RULES

    Authority: 12 U.S.C. 5481 et seq.


Sec.  1082.1  Procedures for notifying the Bureau of Consumer Financial 
Protection when a State Official takes an action to enforce Title X of 
the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act 
of 2010.

    (a) Notice requirement. (1) Pursuant to 12 U.S.C. 5552(b) and 
except as provided in paragraph (b) of this section, every State 
attorney general and State regulator (State Official) shall provide the 
notice described in paragraph (c) of this section to the Office of 
Enforcement of the Bureau of Consumer Financial Protection (the 
Bureau), the office of the Bureau responsible for enforcement of 
Federal consumer financial law pursuant to Title X of the Dodd-Frank 
Wall Street Reform and Consumer Financial Protection Act of 2010, as 
amended, Public Law 111-203 (July 21, 2010), codified at 12 U.S.C. 5481 
et seq. (the Dodd-Frank Act), and the Office of the Executive Secretary 
of the Bureau at least ten calendar days prior to initiating any action 
against any covered person. For purposes of this section, an action 
requiring notification is any adjudicative proceeding before a court or 
an administrative or regulatory body to determine whether a violation 
of any provision of Title X of the Dodd-Frank Act or any regulation 
prescribed thereunder has occurred. Initiating an action under this 
section would include but not be limited to the filing of a complaint, 
motion for relief, or other document which initiates an action or a 
proceeding.
    (2) Notice shall be provided to the Office of Enforcement and the 
Office of the Executive Secretary, or their successor offices, via 
electronic mail to Enforcement@cfpb.gov and ExecSec@cfpb.gov. In the 
event of technical problems preventing the delivery of notice, the 
Office of

[[Page 39117]]

Enforcement or its successor entity should be contacted.
    (3) On the same date that notice is provided to the Office of 
Enforcement and the Office of the Executive Secretary pursuant to 
paragraph (a)(1) of this section, a copy of the notice shall be sent to 
the relevant prudential regulator, if any, or the designee thereof, by 
mail or electronic mail.
    (4) Notice shall be deemed to have been provided as of the date of 
transmitting or mailing the materials described in paragraph (c) of 
this section.
    (5) The Office of Enforcement, or its successor entity, in 
consultation with a State Official, may provide, for good cause shown, 
an alternative deadline for the notice described in paragraph (a)(1) of 
this section.
    (b) Emergency actions. (1) Pursuant to 12 U.S.C. 5552(b), in the 
event that a State Official initiates or intends to initiate an action 
and, in order to protect the public interest or prevent irreparable and 
imminent harm, is unable to provide timely notice as described in 
paragraph (a) of this section, the State Official shall provide the 
notice described in paragraph (c) of this section as soon as is 
practicable and not later than 48 hours after initiation of the action.
    (2) Notice shall be provided in accordance with the procedures set 
forth in paragraphs (a)(2) through (4) of this section.
    (3) The Office of Enforcement, or its successor entity, in 
consultation with a State Official, may provide, for good cause shown, 
an alternative deadline for the notice described in paragraph (b)(1) of 
this section.
    (c) Contents of notice. (1) Pursuant to 12 U.S.C. 5552(b), the 
notice required under paragraphs (a) and (b) of this section shall 
include a written description of the anticipated action, including:
    (i) The court or body in which the action is to be initiated;
    (ii) The identity of the parties to the action;
    (iii) The nature of the action to be initiated;
    (iv) The anticipated date of initiating the action;
    (v) The alleged facts underlying the action;
    (vi) A contact name, electronic mail address, and phone number of 
an individual involved with the matter in the office of the State 
Official with whom the Bureau may consult;
    (vii) A determination as to whether there may be a need to 
coordinate the prosecution of the action so as not to interfere with 
any action, including any rulemaking, undertaken by the Bureau, a 
prudential regulator, or another Federal agency; and
    (viii) A statement by the State Official setting forth any 
limitations on the disclosure of the substance or fact of the notice to 
any person or entity outside of the recipient agency.
    (2) The notice required under paragraphs (a) and (b) of this 
section shall further include a complete and unredacted copy of any 
complaint, motion for relief, or similar document that is the subject 
of the notice, in its form as of the date the notice is provided. To 
the extent the complaint, motion for relief, or similar document 
contains the information described in paragraph (c)(1) of this section, 
provision of the complaint, motion for relief, or similar document 
shall be deemed sufficient notice of that information.
    (3) In the event that notice is provided after the initiation of an 
action, the written description shall also include the following, in 
addition to the information described in paragraph (c)(1) of this 
section:
    (i) A brief description of any proceeding that occurred as a result 
of the initiation of the action, including any orders issued by a court 
or other body;
    (ii) Any case number, matter number, or designation assigned to the 
action; and
    (iii) Information on scheduled court or other administrative or 
regulatory proceedings.
    (4) In the event that notice is provided after the initiation of an 
action, in addition to the requirements set forth in paragraph (c)(3) 
of this section, the notice shall further include a complete, 
unredacted copy of any document filed by any party in relation to the 
action and any orders issued by the court or other body.
    (5) If the State Official, after providing the notice described in 
paragraphs (c)(1) and (c)(2) of this section, intends to file a 
complaint, motion for relief, or similar document that is materially 
different from the document included with the notice, the State 
Official shall provide a copy of that document prior to filing, in 
accordance with the method described in paragraph (a)(2) of this 
section.
    (d) Bureau response. In any action described in paragraphs (a) and 
(b) of this section, the Bureau may:
    (1) Intervene in the action as a party;
    (2) Upon intervening,
    (i) Remove the action to the appropriate United States district 
court, if the action was not originally brought there; and
    (ii) Be heard on all matters arising in the action;
    (3) Appeal any order or judgment, to the same extent as any other 
party in the proceeding may; and
    (4) Otherwise participate in the action as appropriate.
    (e) Confidentiality and privilege. (1) The information described in 
paragraph (c) of this section, including the complaint, motion for 
relief, or other document, as well as the fact that notice has been 
provided, shall be subject to any limitations on disclosure imposed by 
the State Official pursuant to paragraph (c)(1)(viii) of this section; 
provided, however, that the recipient may disclose such information:
    (i) As required by law;
    (ii) When the information is or becomes publicly available;
    (iii) With the consent of the State Official; or
    (iv) To another State or Federal government entity when necessary 
to protect the public interest, after consultation with the State 
Official who provided the notice.
    (2) Provision of notice by a State Official and disclosure of 
information pursuant to paragraph (e)(1) of this section shall not be 
deemed a waiver of any applicable privilege.
    (f) No private right of action or defense. The requirements set 
forth in this section are not intended to, do not, and may not be 
relied upon to create any right, benefit, or defense, substantive or 
procedural, enforceable at law by a party against the United States or 
any State enforcing the provisions of the Dodd-Frank Act or any 
regulation prescribed thereunder.

    Dated: June 4, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-14062 Filed 6-28-12; 8:45 am]
BILLING CODE 4810-AM-P