Treatment of Pandemic Relief Payments Under Regulation E and Application of the Compulsory Use Prohibition, 23217-23219 [2020-08084]
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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
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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
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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
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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
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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:
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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 https://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
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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\
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\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.
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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.
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\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.
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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\
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\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.
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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\
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\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).
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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\
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\14\ 15 U.S.C. 1693m(d).
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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.
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\15\ 5 U.S.C. 553(d).
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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\
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\16\ 5 U.S.C. 553(b).
\17\ 5 U.S.C. 603(a), 604(a).
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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\
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\18\ 44 U.S.C. 3501-3521.
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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).
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\19\ 5 U.S.C. 801 et seq.
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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