Treatment of Pandemic Relief Payments Under Regulation E and Application of the Compulsory Use Prohibition, 23217-23219 [2020-08084]

Download as PDF Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations commitments less any portion secured by shares in the credit union to a borrower or an associated borrower, are equal to less than $50,000. The definition of commercial loan also excludes covered loans issued under the Small Business Administration’s Paycheck Protection Program, 15 U.S.C. 636(a)(36). * * * * * [FR Doc. 2020–08920 Filed 4–24–20; 8:45 am] BILLING CODE 7535–01–P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1005 Treatment of Pandemic Relief Payments Under Regulation E and Application of the Compulsory Use Prohibition Bureau of Consumer Financial Protection. AGENCY: ACTION: Interpretive rule. The Bureau of Consumer Financial Protection (Bureau) is issuing this interpretive rule to provide guidance to government agencies distributing aid to consumers in response to the COVID–19 pandemic. The Bureau concludes in this interpretive rule that certain pandemicrelief payments are not ‘‘government benefits’’ for purposes of Regulation E and the Electronic Fund Transfer Act (EFTA) and are therefore not subject to the compulsory use prohibition in EFTA, if certain conditions are met. Specifically, government benefits do not include payments from Federal, State, or local governments if those payments: Are made to provide assistance to consumers in response to the COVID–19 pandemic or its economic impacts; are not part of an already-established government benefit program; are made on a one-time or otherwise limited basis; and are distributed without a general requirement that consumers apply to the agency to receive funds. SUMMARY: This interpretive rule is effective on April 27, 2020. DATES: lotter on DSKBCFDHB2PROD with RULES FOR FURTHER INFORMATION CONTACT: Kristine M. Andreassen, Senior Counsel, Office of Regulations, at 202–435–7700 or https:// reginquiries.consumerfinance.gov/. If you require this document in an alternative electronic format, please contact CFPB_Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: VerDate Sep<11>2014 17:00 Apr 24, 2020 Jkt 250001 I. Discussion A. Background Section 913 of the Electronic Fund Transfer Act (EFTA) provides, among other things, that no person may require a consumer to establish an account for receipt of electronic fund transfers with a particular financial institution as a condition of employment or receipt of a government benefit.1 This provision, often referred to as the compulsory use prohibition, is implemented in § 1005.10(e)(2) of Regulation E. In the mid-1990s, the Board of Governors of the Federal Reserve System (Board) extended consumer protections under Regulation E to accounts established by government agencies for distributing benefits to consumers electronically (government benefit accounts).2 Government benefits covered under the rule include Federally-administered government benefit programs and non-needs tested State and local government benefit programs (they do not include accounts for distributing needs-tested benefits in programs established under State or local law or administered by a State or local agency).3 Provisions specific to government benefit accounts were codified in § 1005.15 of Regulation E. On October 5, 2016, the Bureau issued a final rule titled ‘‘Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z)’’ (2016 Final Rule).4 The Bureau subsequently amended the 2016 Final Rule twice, in 2017 and 2018.5 The 2016 Final Rule, as subsequently amended, is referred to herein as the Prepaid Accounts Rule. The Prepaid Accounts Rule, among other things, extended Regulation E coverage to prepaid accounts and adopted provisions specific to such accounts. The definition of ‘‘prepaid account’’ in the Prepaid Accounts Rule includes government benefit accounts (as defined in § 1005.15(a)(2)), which were already covered by Regulation E as described above. The Prepaid Accounts Rule generally maintained the existing provisions specific to government benefit accounts, while adding certain new requirements such as preacquisition disclosures. The Prepaid Accounts Rule did not change the compulsory use prohibition in 1 15 U.S.C. 1693k(2). FR 10678 (Mar. 7, 1994) and 62 FR 43467 (Aug. 14, 1997). 3 See § 1005.15(a)(2). 4 81 FR 83934 (Nov. 22, 2016). 5 See 82 FR 18975 (Apr. 25, 2017) and 83 FR 6364 (Feb. 13, 2018). These amendments, among other things, extended the effective date of the Prepaid Accounts Rule to April 1, 2019. 2 59 PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 23217 § 1005.10(e) of Regulation E, but did add commentary to clarify the compulsory use prohibition’s application to government benefits (comment 10(e)(2)– 2), which is in line with pre-existing commentary regarding payroll (comment 10(e)(2)–1). Federal, State, and local governments are considering a variety of approaches to providing consumers relief from the economic impacts of the COVID–19 pandemic. These approaches may include government distribution of funds directly to consumers, in some cases outside of existing government benefit programs. In some cases, the relevant governmental agencies may not have access to consumers’ account information, such as account and routing numbers, and therefore may have difficulty disbursing funds via direct deposit in a timely manner; in other cases, consumers may not have a pre-existing account that is capable of receiving funds via direct deposit. B. Use of Electronic Fund Transfers in Government Benefit Disbursement The Bureau notes that Regulation E provides significant flexibility to government agencies that wish to disburse government benefits via electronic fund transfers. As stated above, EFTA and Regulation E prohibit requiring consumers to establish accounts for receipt of electronic fund transfers with a particular financial institution as a condition of receipt of a government benefit.6 The compulsory use prohibition does not require the agency to also offer payment through any other method the consumer may prefer; it simply requires that government agencies provide the consumer a choice. Specifically, comment 10(e)(2)–2 to Regulation E states that a government agency may require direct deposit of benefits by electronic means if recipients are allowed to choose the institution that will receive the direct deposit.7 In the preamble to the 2016 Final Rule, the Bureau recognized that in some cases, circumstances may require that financial institutions or other persons disburse funds to consumers within a certain period. Consumers may be presented with options of how to receive payment but fail to exercise a choice. In such cases, the Bureau noted 6 See EFTA section 913(a)(2) (15 U.S.C. 1693k(2)) and § 1005.10(e)(2). 7 Government agencies are permitted to provide paper checks as an option for payment, but are not required to do so by EFTA or Regulation E. Similarly, government agencies may, but are not required to, offer direct deposit into an account of the consumer’s choosing as an alternative method of payment. E:\FR\FM\27APR1.SGM 27APR1 23218 Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations that, depending on the facts and circumstances, it may be reasonable for a financial institution or other person in this scenario to employ a reasonable default enrollment method.8 lotter on DSKBCFDHB2PROD with RULES C. Application of the Compulsory Use Prohibition to COVID–19 Pandemic Relief Payments The Bureau is aware of the extraordinary circumstances created by the COVID–19 pandemic and the impact the pandemic has had, and will continue to have, on consumers. Government agencies are responding to these impacts by disbursing funds directly to consumers, among other measures. In response to the pandemic and its effects, it is important for consumers to be able to receive economic stimulus payments in a fast, secure, and efficient manner. The Bureau believes that consumers, for many reasons, will typically prefer to receive these payments via direct deposit into an existing account of their choosing, if they have such an account. However, the Bureau appreciates that government agencies making these disbursements will not be able to make all of these payments via direct deposit to an account of the consumer’s choice. Government agencies may be unable to do so either because they do not have access to the account information, such as account and routing numbers, for some consumers, or because some consumers receiving payments do not have a pre-existing account that can accept direct deposits. In such cases, the disbursement of funds via alternative means, such as a newly-issued prepaid account, may be faster, more secure, more convenient, and less expensive— for both the government agency and the consumer—than making disbursements through other methods such as paper check.9 Given the unique nature of this type of pandemic relief payment, the Bureau believes it is reasonable to interpret the term ‘‘government benefit,’’ as used in EFTA section 913 and Regulation E § 1005.10(e)(2), to exclude certain of these payments. Specifically, the Bureau interprets the term ‘‘government benefit’’ to exclude payments from Federal, State, or local governments if those payments are made: 1. To provide assistance to consumers in response to the COVID–19 pandemic or its economic impacts; FR 83934, 83985 (Nov. 22, 2016). addition, consumers without a pre-existing account will typically need to visit an in-person location, such as a check cashing outlet, to obtain cash from a paper check. 2. Outside of an already-established government benefit program: For example, payments made pursuant to an existing government benefit program would not qualify for this exclusion, even if the volume or dollar value of the program’s payments is increased due to the COVID–19 pandemic; 3. On a one-time or otherwise limited basis: Thus, a limited series of related payments made to the same consumer could qualify for this exclusion; and 4. Without a general requirement that consumers apply to the agency to receive funds: Filing a tax return, or consumer provision of information necessary to complete a consumer identification and verification process prior to activating an access device, does not by itself constitute an application to receive funds. The term ‘‘government benefit’’ is not defined in EFTA or Regulation E. However, the Bureau’s interpretation herein is aligned with a common understanding of the scope of the term ‘‘government benefit.’’ In the preamble to its 2016 Final Rule, the Bureau identified examples of government benefit programs that were covered by the Board’s 1994 and 1997 rulemakings.10 In contrast, the payments that would not be considered a government benefit under this interpretive rule are one-time or otherwise limited payments specifically in response to the COVID–19 pandemic, not part of any existing government benefit program. Further, for payments under this interpretation, consumers likely would not generally be required to apply to the government for these types of pandemic relief payments, which may make it difficult for government agencies to determine consumers’ payment preferences while making payments in a timely manner. Direct deposit is generally the fastest, most efficient, and most secure way to disburse funds to consumers, but to make payments in that manner a government agency needs to have access to consumers’ account information. However, given the unique circumstances due to the COVID–19 pandemic, the Bureau recognizes that payments covered by this interpretive rule are different than government benefits referred to in § 1005.10(e)(2). Thus, a government agency (as well as persons acting on behalf of a government agency) may require consumers to establish an account with a particular financial institution as a 8 81 9 In VerDate Sep<11>2014 16:16 Apr 24, 2020 Jkt 250001 10 See 81 FR 83934, 83995 (Nov. 22, 2016). This interpretive rule does not change the status of any existing government benefit program under Regulation E. PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 condition of receiving pandemic relief payments that meet the above conditions under this interpretive rule. This interpretive rule is limited to the definition of ‘‘government benefit’’ under Regulation E and EFTA. Therefore, while accounts established to receive pandemic relief payments, as described above, do not constitute government benefit accounts as defined in § 1005.15(a)(2), the Bureau emphasizes that they may still be ‘‘prepaid accounts’’ under one of the other prongs of that definition in § 1005.2(b)(3).11 However, the Bureau notes Regulation E excludes from the definition of ‘‘prepaid account’’ (and therefore coverage under Regulation E) an account that is directly or indirectly established through a third party and loaded only with qualified disaster relief payments (i.e., funds made available through a qualified disaster relief program as defined in 26 U.S.C. 139(b)).12 The Bureau is issuing this interpretive rule based on its authority to interpret EFTA and Regulation E, including under section 1022(b)(1) of the DoddFrank Act, which authorizes guidance as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws.13 By operation of EFTA section 916(d), no provision of EFTA sections 916 or 917 imposing any liability applies to any act done or omitted in good faith in conformity with this interpretive rule, notwithstanding that after such act or omission has occurred, the interpretive rule is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.14 II. Effective Date Because this rule is solely interpretive, it is not subject to the 30day delayed effective date for substantive rules under section 553(d) of the Administrative Procedure Act.15 Therefore, this rule is effective on April 27, 2020, the same date that it is published in the Federal Register. III. Regulatory Requirements This rule articulates the Bureau’s interpretation of Regulation E and EFTA. As an interpretive rule, it is 11 To the extent that they are prepaid accounts, the requirements of the Prepaid Accounts Rule (including the rule’s pre-acquisition disclosure requirements) apply. 12 See § 1005.2(b)(3)(ii)(B) and comment 2(b)(3)(ii)–2. 13 12 U.S.C. 5512(b)(1). The relevant provisions of EFTA and Regulation E form part of Federal consumer financial law. 12 U.S.C. 5481(12)(C), (14). 14 15 U.S.C. 1693m(d). 15 5 U.S.C. 553(d). E:\FR\FM\27APR1.SGM 27APR1 Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.16 Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis.17 The Bureau has determined that this interpretive rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the Office of Management and Budget under the Paperwork Reduction Act.18 IV. Congressional Review Act Pursuant to the Congressional Review Act,19 the Bureau will submit a report containing this interpretive rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to the rule’s published effective date. The Office of Information and Regulatory Affairs has designated this interpretive rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). V. Signing Authority The Director of the Bureau, having reviewed and approved this document is delegating the authority to electronically sign this document to Laura Galban, a Bureau Federal Register Liaison, for purposes of publication in the Federal Register. Dated: April 13, 2020. Laura Galban, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2020–08084 Filed 4–23–20; 11:15 am] BILLING CODE 4810–AM–P FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1238 [No. 2020–N–9] Orders: Reporting by Regulated Entities of Stress Testing Results as of December 31, 2019; Summary Instructions and Guidance Federal Housing Finance Agency. ACTION: Orders. lotter on DSKBCFDHB2PROD with RULES AGENCY: U.S.C. 553(b). 17 5 U.S.C. 603(a), 604(a). 18 44 U.S.C. 3501–3521. 19 5 U.S.C. 801 et seq. 17:00 Apr 24, 2020 I. Background FHFA is responsible for ensuring that the regulated entities operate in a safe and sound manner, including the maintenance of adequate capital and internal controls, that their operations and activities foster liquid, efficient, competitive, and resilient national housing finance markets, and that they carry out their public policy missions through authorized activities. See 12 U.S.C. 4513. These Orders are being issued under 12 U.S.C. 4516(a), which authorizes the Director of FHFA to require by Order that the regulated entities submit regular or special reports to FHFA and establishes remedies and procedures for failing to make reports required by Order. The Orders, through the accompanying Summary Instructions and Guidance, prescribe for the regulated entities the scenarios to be used for stress testing. The Summary Instructions and Guidance also provides to the regulated entities advice concerning the content and format of reports required by the Orders and the rule. II. Orders, Summary Instructions and Guidance For the convenience of the affected parties and the public, the text of the Orders follows below in its entirety. The Orders and Summary Instructions and Guidance are also available for public 16 5 VerDate Sep<11>2014 In this document, the Federal Housing Finance Agency (FHFA) provides notice that it issued Orders, dated March 10, 2020, with respect to stress test reporting as of December 31, 2019, under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). Summary Instructions and Guidance accompanied the Orders to provide testing scenarios. DATES: Each Order is applicable March 10, 2020. FOR FURTHER INFORMATION CONTACT: Naa Awaa Tagoe, Senior Associate Director, Office of Financial Analysis, Modeling & Simulations, Division of Housing Mission & Goals, (202) 649–3140, NaaAwaa.Tagoe@fhfa.gov; Karen Heidel, Assistant General Counsel, Office of General Counsel, (202) 649– 3073, Karen.Heidel@fhfa.gov; or Mark D. Laponsky, Deputy General Counsel, Office of General Counsel, (202) 649– 3054, Mark.Laponsky@fhfa.gov. The telephone number for the Telecommunications Device for the Deaf is (800) 877–8339. SUPPLEMENTARY INFORMATION: SUMMARY: Jkt 250001 PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 23219 inspection and copying at the Federal Housing Finance Agency’s Freedom of Information Act (FOIA) Reading Room at https://www.fhfa.gov/AboutUs/ FOIAPrivacy/Pages/Reading-Room.aspx by clicking on ‘‘Click here to view Orders’’ under the Final Opinions and Orders heading. You may also access these documents at http://www.fhfa.gov/ SupervisionRegulation/ DoddFrankActStressTests. The text of the Orders is as follows: Federal Housing Finance Agency Order Nos. 2020–OR–FNMA–1 and 2020–OR–FHLMC–1 Reporting by Regulated Entities of Stress Testing Results as of December 31, 2019 Whereas, section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank Act’’), as amended by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (‘‘EGRRCPA’’) requires certain financial companies with total consolidated assets of more than $250 billion, and which are regulated by a primary Federal financial regulatory agency, to conduct periodic stress tests to determine whether the companies have the capital necessary to absorb losses as a result of severely adverse economic conditions; Whereas, FHFA’s rule implementing section 165(i)(2) of the Dodd-Frank Act, as amended by section 401 of EGRRCPA is codified as 12 CFR 1238 and requires that ‘‘[e]ach Enterprise must file a report in the manner and form established by FHFA.’’ 12 CFR 1238.5(b); Whereas, The Board of Governors of the Federal Reserve System issued stress testing scenarios on February 7, 2020, and supplemented on February 10, 2020; and Whereas, section 1314 of the Safety and Soundness Act, 12 U.S.C. 4514(a) authorizes the Director of FHFA to require regulated entities, by general or specific order, to submit such reports on their management, activities, and operation as the Director considers appropriate. Now therefore, it is hereby Ordered as follows: Each Enterprise shall report to FHFA and to the Board of Governors of the Federal Reserve System the results of the stress testing as required by 12 CFR 1238, in the form and with the content described therein and in the Summary Instructions and Guidance, with Appendices 1 through 8 thereto, accompanying this Order and dated March 10, 2020. It is so ordered, this the 10th day of March, 2020. E:\FR\FM\27APR1.SGM 27APR1

Agencies

[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Rules and Regulations]
[Pages 23217-23219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08084]


=======================================================================
-----------------------------------------------------------------------

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1005


Treatment of Pandemic Relief Payments Under Regulation E and 
Application of the Compulsory Use Prohibition

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interpretive rule.

-----------------------------------------------------------------------

SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this interpretive rule to provide guidance to government 
agencies distributing aid to consumers in response to the COVID-19 
pandemic. The Bureau concludes in this interpretive rule that certain 
pandemic-relief payments are not ``government benefits'' for purposes 
of Regulation E and the Electronic Fund Transfer Act (EFTA) and are 
therefore not subject to the compulsory use prohibition in EFTA, if 
certain conditions are met. Specifically, government benefits do not 
include payments from Federal, State, or local governments if those 
payments: Are made to provide assistance to consumers in response to 
the COVID-19 pandemic or its economic impacts; are not part of an 
already-established government benefit program; are made on a one-time 
or otherwise limited basis; and are distributed without a general 
requirement that consumers apply to the agency to receive funds.

DATES: This interpretive rule is effective on April 27, 2020.

FOR FURTHER INFORMATION CONTACT: Kristine M. Andreassen, Senior 
Counsel, Office of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Discussion

A. Background

    Section 913 of the Electronic Fund Transfer Act (EFTA) provides, 
among other things, that no person may require a consumer to establish 
an account for receipt of electronic fund transfers with a particular 
financial institution as a condition of employment or receipt of a 
government benefit.\1\ This provision, often referred to as the 
compulsory use prohibition, is implemented in Sec.  1005.10(e)(2) of 
Regulation E.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 1693k(2).
---------------------------------------------------------------------------

    In the mid-1990s, the Board of Governors of the Federal Reserve 
System (Board) extended consumer protections under Regulation E to 
accounts established by government agencies for distributing benefits 
to consumers electronically (government benefit accounts).\2\ 
Government benefits covered under the rule include Federally-
administered government benefit programs and non-needs tested State and 
local government benefit programs (they do not include accounts for 
distributing needs-tested benefits in programs established under State 
or local law or administered by a State or local agency).\3\ Provisions 
specific to government benefit accounts were codified in Sec.  1005.15 
of Regulation E.
---------------------------------------------------------------------------

    \2\ 59 FR 10678 (Mar. 7, 1994) and 62 FR 43467 (Aug. 14, 1997).
    \3\ See Sec.  1005.15(a)(2).
---------------------------------------------------------------------------

    On October 5, 2016, the Bureau issued a final rule titled ``Prepaid 
Accounts Under the Electronic Fund Transfer Act (Regulation E) and the 
Truth In Lending Act (Regulation Z)'' (2016 Final Rule).\4\ The Bureau 
subsequently amended the 2016 Final Rule twice, in 2017 and 2018.\5\ 
The 2016 Final Rule, as subsequently amended, is referred to herein as 
the Prepaid Accounts Rule. The Prepaid Accounts Rule, among other 
things, extended Regulation E coverage to prepaid accounts and adopted 
provisions specific to such accounts. The definition of ``prepaid 
account'' in the Prepaid Accounts Rule includes government benefit 
accounts (as defined in Sec.  1005.15(a)(2)), which were already 
covered by Regulation E as described above. The Prepaid Accounts Rule 
generally maintained the existing provisions specific to government 
benefit accounts, while adding certain new requirements such as pre-
acquisition disclosures. The Prepaid Accounts Rule did not change the 
compulsory use prohibition in Sec.  1005.10(e) of Regulation E, but did 
add commentary to clarify the compulsory use prohibition's application 
to government benefits (comment 10(e)(2)-2), which is in line with pre-
existing commentary regarding payroll (comment 10(e)(2)-1).
---------------------------------------------------------------------------

    \4\ 81 FR 83934 (Nov. 22, 2016).
    \5\ See 82 FR 18975 (Apr. 25, 2017) and 83 FR 6364 (Feb. 13, 
2018). These amendments, among other things, extended the effective 
date of the Prepaid Accounts Rule to April 1, 2019.
---------------------------------------------------------------------------

    Federal, State, and local governments are considering a variety of 
approaches to providing consumers relief from the economic impacts of 
the COVID-19 pandemic. These approaches may include government 
distribution of funds directly to consumers, in some cases outside of 
existing government benefit programs. In some cases, the relevant 
governmental agencies may not have access to consumers' account 
information, such as account and routing numbers, and therefore may 
have difficulty disbursing funds via direct deposit in a timely manner; 
in other cases, consumers may not have a pre-existing account that is 
capable of receiving funds via direct deposit.

B. Use of Electronic Fund Transfers in Government Benefit Disbursement

    The Bureau notes that Regulation E provides significant flexibility 
to government agencies that wish to disburse government benefits via 
electronic fund transfers. As stated above, EFTA and Regulation E 
prohibit requiring consumers to establish accounts for receipt of 
electronic fund transfers with a particular financial institution as a 
condition of receipt of a government benefit.\6\ The compulsory use 
prohibition does not require the agency to also offer payment through 
any other method the consumer may prefer; it simply requires that 
government agencies provide the consumer a choice. Specifically, 
comment 10(e)(2)-2 to Regulation E states that a government agency may 
require direct deposit of benefits by electronic means if recipients 
are allowed to choose the institution that will receive the direct 
deposit.\7\
---------------------------------------------------------------------------

    \6\ See EFTA section 913(a)(2) (15 U.S.C. 1693k(2)) and Sec.  
1005.10(e)(2).
    \7\ Government agencies are permitted to provide paper checks as 
an option for payment, but are not required to do so by EFTA or 
Regulation E. Similarly, government agencies may, but are not 
required to, offer direct deposit into an account of the consumer's 
choosing as an alternative method of payment.
---------------------------------------------------------------------------

    In the preamble to the 2016 Final Rule, the Bureau recognized that 
in some cases, circumstances may require that financial institutions or 
other persons disburse funds to consumers within a certain period. 
Consumers may be presented with options of how to receive payment but 
fail to exercise a choice. In such cases, the Bureau noted

[[Page 23218]]

that, depending on the facts and circumstances, it may be reasonable 
for a financial institution or other person in this scenario to employ 
a reasonable default enrollment method.\8\
---------------------------------------------------------------------------

    \8\ 81 FR 83934, 83985 (Nov. 22, 2016).
---------------------------------------------------------------------------

C. Application of the Compulsory Use Prohibition to COVID-19 Pandemic 
Relief Payments

    The Bureau is aware of the extraordinary circumstances created by 
the COVID-19 pandemic and the impact the pandemic has had, and will 
continue to have, on consumers. Government agencies are responding to 
these impacts by disbursing funds directly to consumers, among other 
measures.
    In response to the pandemic and its effects, it is important for 
consumers to be able to receive economic stimulus payments in a fast, 
secure, and efficient manner. The Bureau believes that consumers, for 
many reasons, will typically prefer to receive these payments via 
direct deposit into an existing account of their choosing, if they have 
such an account. However, the Bureau appreciates that government 
agencies making these disbursements will not be able to make all of 
these payments via direct deposit to an account of the consumer's 
choice. Government agencies may be unable to do so either because they 
do not have access to the account information, such as account and 
routing numbers, for some consumers, or because some consumers 
receiving payments do not have a pre-existing account that can accept 
direct deposits. In such cases, the disbursement of funds via 
alternative means, such as a newly-issued prepaid account, may be 
faster, more secure, more convenient, and less expensive--for both the 
government agency and the consumer--than making disbursements through 
other methods such as paper check.\9\
---------------------------------------------------------------------------

    \9\ In addition, consumers without a pre-existing account will 
typically need to visit an in-person location, such as a check 
cashing outlet, to obtain cash from a paper check.
---------------------------------------------------------------------------

    Given the unique nature of this type of pandemic relief payment, 
the Bureau believes it is reasonable to interpret the term ``government 
benefit,'' as used in EFTA section 913 and Regulation E Sec.  
1005.10(e)(2), to exclude certain of these payments. Specifically, the 
Bureau interprets the term ``government benefit'' to exclude payments 
from Federal, State, or local governments if those payments are made:
    1. To provide assistance to consumers in response to the COVID-19 
pandemic or its economic impacts;
    2. Outside of an already-established government benefit program: 
For example, payments made pursuant to an existing government benefit 
program would not qualify for this exclusion, even if the volume or 
dollar value of the program's payments is increased due to the COVID-19 
pandemic;
    3. On a one-time or otherwise limited basis: Thus, a limited series 
of related payments made to the same consumer could qualify for this 
exclusion; and
    4. Without a general requirement that consumers apply to the agency 
to receive funds: Filing a tax return, or consumer provision of 
information necessary to complete a consumer identification and 
verification process prior to activating an access device, does not by 
itself constitute an application to receive funds.
    The term ``government benefit'' is not defined in EFTA or 
Regulation E. However, the Bureau's interpretation herein is aligned 
with a common understanding of the scope of the term ``government 
benefit.'' In the preamble to its 2016 Final Rule, the Bureau 
identified examples of government benefit programs that were covered by 
the Board's 1994 and 1997 rulemakings.\10\ In contrast, the payments 
that would not be considered a government benefit under this 
interpretive rule are one-time or otherwise limited payments 
specifically in response to the COVID-19 pandemic, not part of any 
existing government benefit program. Further, for payments under this 
interpretation, consumers likely would not generally be required to 
apply to the government for these types of pandemic relief payments, 
which may make it difficult for government agencies to determine 
consumers' payment preferences while making payments in a timely 
manner.
---------------------------------------------------------------------------

    \10\ See 81 FR 83934, 83995 (Nov. 22, 2016). This interpretive 
rule does not change the status of any existing government benefit 
program under Regulation E.
---------------------------------------------------------------------------

    Direct deposit is generally the fastest, most efficient, and most 
secure way to disburse funds to consumers, but to make payments in that 
manner a government agency needs to have access to consumers' account 
information. However, given the unique circumstances due to the COVID-
19 pandemic, the Bureau recognizes that payments covered by this 
interpretive rule are different than government benefits referred to in 
Sec.  1005.10(e)(2). Thus, a government agency (as well as persons 
acting on behalf of a government agency) may require consumers to 
establish an account with a particular financial institution as a 
condition of receiving pandemic relief payments that meet the above 
conditions under this interpretive rule.
    This interpretive rule is limited to the definition of ``government 
benefit'' under Regulation E and EFTA. Therefore, while accounts 
established to receive pandemic relief payments, as described above, do 
not constitute government benefit accounts as defined in Sec.  
1005.15(a)(2), the Bureau emphasizes that they may still be ``prepaid 
accounts'' under one of the other prongs of that definition in Sec.  
1005.2(b)(3).\11\ However, the Bureau notes Regulation E excludes from 
the definition of ``prepaid account'' (and therefore coverage under 
Regulation E) an account that is directly or indirectly established 
through a third party and loaded only with qualified disaster relief 
payments (i.e., funds made available through a qualified disaster 
relief program as defined in 26 U.S.C. 139(b)).\12\
---------------------------------------------------------------------------

    \11\ To the extent that they are prepaid accounts, the 
requirements of the Prepaid Accounts Rule (including the rule's pre-
acquisition disclosure requirements) apply.
    \12\ See Sec.  1005.2(b)(3)(ii)(B) and comment 2(b)(3)(ii)-2.
---------------------------------------------------------------------------

    The Bureau is issuing this interpretive rule based on its authority 
to interpret EFTA and Regulation E, including under section 1022(b)(1) 
of the Dodd-Frank Act, which authorizes guidance as may be necessary or 
appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of the Federal consumer financial laws.\13\
---------------------------------------------------------------------------

    \13\ 12 U.S.C. 5512(b)(1). The relevant provisions of EFTA and 
Regulation E form part of Federal consumer financial law. 12 U.S.C. 
5481(12)(C), (14).
---------------------------------------------------------------------------

    By operation of EFTA section 916(d), no provision of EFTA sections 
916 or 917 imposing any liability applies to any act done or omitted in 
good faith in conformity with this interpretive rule, notwithstanding 
that after such act or omission has occurred, the interpretive rule is 
amended, rescinded, or determined by judicial or other authority to be 
invalid for any reason.\14\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 1693m(d).
---------------------------------------------------------------------------

II. Effective Date

    Because this rule is solely interpretive, it is not subject to the 
30-day delayed effective date for substantive rules under section 
553(d) of the Administrative Procedure Act.\15\ Therefore, this rule is 
effective on April 27, 2020, the same date that it is published in the 
Federal Register.
---------------------------------------------------------------------------

    \15\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

III. Regulatory Requirements

    This rule articulates the Bureau's interpretation of Regulation E 
and EFTA. As an interpretive rule, it is

[[Page 23219]]

exempt from the notice-and-comment rulemaking requirements of the 
Administrative Procedure Act.\16\ Because no notice of proposed 
rulemaking is required, the Regulatory Flexibility Act does not require 
an initial or final regulatory flexibility analysis.\17\
---------------------------------------------------------------------------

    \16\ 5 U.S.C. 553(b).
    \17\ 5 U.S.C. 603(a), 604(a).
---------------------------------------------------------------------------

    The Bureau has determined that this interpretive rule does not 
impose any new or revise any existing recordkeeping, reporting, or 
disclosure requirements on covered entities or members of the public 
that would be collections of information requiring approval by the 
Office of Management and Budget under the Paperwork Reduction Act.\18\
---------------------------------------------------------------------------

    \18\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

IV. Congressional Review Act

    Pursuant to the Congressional Review Act,\19\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the rule's 
published effective date. The Office of Information and Regulatory 
Affairs has designated this interpretive rule as not a ``major rule'' 
as defined by 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    \19\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

V. Signing Authority

    The Director of the Bureau, having reviewed and approved this 
document is delegating the authority to electronically sign this 
document to Laura Galban, a Bureau Federal Register Liaison, for 
purposes of publication in the Federal Register.

    Dated: April 13, 2020.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-08084 Filed 4-23-20; 11:15 am]
 BILLING CODE 4810-AM-P