Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations 32723 

1This interpretive rule uses the terms 

‘‘supervised nonbank’’ and ‘‘very large bank or 

credit union’’ for convenience. The more precise 

definitions of the persons that are subject to the 

Bureau’s supervisory authority under sections 1024 

and 1025 of the CFPA are set out in the statute. 12 

U.S.C. 5514(a), 5515(a). The Bureau also has certain 

additional supervisory authority regarding service 

providers to these persons, and the reasoning of this 

interpretive rule also extends to those service 

providers. 12 U.S.C. 5514(e), 5515(d). 

The Board’s meeting was widely 

publicized throughout the California 

walnut industry. All interested persons 

were invited to attend the meeting and 

participate in Board deliberations on all 

issues. Like all Board meetings, the 

September 11, 2020, meeting was a 

public meeting and all entities, both 

large and small, were able to express 

views on this issue. Finally, interested 

persons were invited to submit 

comments on this rule, including the 

regulatory and information collection 

impacts of this action on small 

businesses. 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

chapter 35), the Order’s information 

collection requirements have been 

previously approved by the OMB and 

assigned OMB No. 0581–0178 Vegetable 

and Specialty Crops. No changes in 

those requirements will be necessary as 

a result of this rule. Should any changes 

become necessary, they would be 

submitted to OMB for approval. 

This rule will not impose any 

additional reporting or recordkeeping 

requirements on either small or large 

California walnut handlers. As with all 

Federal marketing order programs, 

reports and forms are periodically 

reviewed to reduce information 

requirements and duplication by 

industry and public sector agencies. 

AMS is committed to complying with 

the E-Government Act, to promote the 

use of the internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

USDA has not identified any relevant 

Federal rules that duplicate, overlap, or 

conflict with this final rule. 

A proposed rule concerning this 

action was published in the Federal 

Register on March 5, 2021 (86 FR 

12837). The Board notified all California 

walnut handlers of the proposed 

assessment rate decrease. The proposed 

rule was made available through the 

internet by USDA and the Office of the 

Federal Register. A 30-day comment 

period ending April 5, 2021, was 

provided for interested persons to 

respond to the proposal. No comments 

were received. Accordingly, no changes 

will be made to the proposed rule. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: https://

www.ams.usda.gov/rules-regulations/ 

moa/small-businesses. Any questions 

about the compliance guide should be 

sent to Richard Lower at the previously 

mentioned address in the FOR FURTHER

INFORMATION CONTACT section. 

After consideration of all relevant 

material presented, including the 

information and recommendation 

submitted by the Board and other 

information available, it is hereby found 

that this rule will tend to effectuate the 

declared policy of the Act. 

List of Subjects in 7 CFR Part 984 

Marketing agreements, Reporting and 

recordkeeping requirements, and 

Walnuts. 

For the reasons set forth in the 

preamble, 7 CFR part 984 is amended as 

follows: 

PART 984—WALNUTS GROWN IN 

CALIFORNIA 

■ 1. The authority citation for part 984 

continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

■ 2. Section 984.347 is revised to read 

as follows: 

§ 984.347 Assessment rate. 

On and after September 1, 2020, an 

assessment rate of $0.0250 per 

kernelweight pound is established for 

California merchantable walnuts. 

Erin Morris, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2021–13039 Filed 6–22–21; 8:45 am] 

BILLING CODE P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Chapter X 

Examinations for Risks to Active-Duty 

Servicemembers and Their Covered 

Dependents 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Interpretive rule. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) has 

statutory authority to conduct 

examinations, at those institutions that 

it supervises, regarding the risks to 

active-duty servicemembers and their 

covered dependents that are presented 

by conduct that violates the Military 

Lending Act. This interpretive rule 

explains the basis for that authority. 

DATES: This interpretive rule is effective 

on June 23, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Shelton, Senior Counsel, 

Legal Division, (202) 435–7700. If you 

require this document in an alternative 

electronic format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

The Consumer Financial Protection 

Act of 2010 (CFPA) authorizes the 

Bureau to conduct examinations of 

supervised nonbanks for the purposes of 

assessing and detecting ‘‘risks to 

consumers.’’ As explained below, the 

risks to active-duty servicemembers and 

their dependents from conduct that 

violates the Military Lending Act (MLA) 

fall squarely within that category. The 

CFPA also authorizes the Bureau to 

conduct examinations of very large 

banks and credit unions for purposes of 

detecting and assessing those ‘‘risks to 

consumers’’ that are ‘‘associated’’ with 

‘‘activities subject to’’ Federal consumer 

financial laws, such as the Truth in 

Lending Act (TILA) or the CFPA.1

Because conduct that violates the MLA 

is associated with activities that are 

subject to TILA and the CFPA, that 

standard is also satisfied here. The 

Bureau’s interpretation is also entirely 

consistent with the enforcement scheme 

of the MLA, which by incorporating 

TILA’s enforcement scheme authorizes 

the Bureau to use formal administrative 

adjudications, civil enforcement actions, 

and other authorities to enforce the 

MLA. That enforcement scheme is 

complemented by the Bureau’s use of 

the examination process to detect and 

assess risks to consumers arising from 

violations of the MLA. This reading also 

avoids an unworkable gap in Bureau 

examinations that can otherwise only be 

potentially filled by the formal 

enforcement process; based on the 

Bureau’s experience, that gap leads to 

wasteful inefficiencies for both the 

Bureau and supervised institutions. 

Additionally, the Bureau is no longer 

persuaded by counterarguments that it 

does not have the relevant authority, for 

reasons that will also be discussed 

below. 

This part I is followed by part II, 

which provides some general 

background about the CFPA, the MLA, 

TILA, and the history of Bureau 

examinations regarding the MLA. Part 

III sets out the Bureau’s analysis of its 

authority with respect to supervised 

nonbanks, including the statutory text; 

the statutory scheme; and 

counterarguments that the Bureau no 


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32724 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations 

2CFPA section 1011(a), 12 U.S.C. 5491(a); see 

generally Public Law 111–203, tit. X, 124 Stat. 1376, 

1955–2113 (2010). 

3CFPA section 1002(14), 12 U.S.C. 5481(14). 

4CFPA section 1022(b)(1), 12 U.S.C. 5512(b)(1). 

5CFPA sections 1031, 1035, 12 U.S.C. 5531, 5535. 

6CFPA section 1013(e), 12 U.S.C. 5493(e). 

7 12 U.S.C. 5514, 5515. As explained in note 1, 

this interpretive rule uses the terms ‘‘supervised 

nonbank’’ and ‘‘very large bank or credit union’’ for 

convenience. 

8 12 U.S.C. 5514(b)(1). 

9 12 U.S.C. 5515(b)(1) (emphasis added). 

10Under the CFPA, the ‘‘prudential regulators’’ 

are the Board of Governors of the Federal Reserve 

System (Federal Reserve), the Office of the 

Comptroller of the Currency (OCC), the Federal 

Deposit Insurance Corporation (FDIC), and the 

National Credit Union Administration (NCUA). See 

CFPA section 1002(24), 12 U.S.C. 5481(24). For 

convenience, this interpretive rule also uses that 

term anachronistically to refer to the Federal Home 

Loan Bank Board, which existed until 1989, and the 

Office of Thrift Supervision, which existed from 

1989 until 2011. 

11As the legislative history of the CFPA explains, 

the Bureau’s new authority with respect to these 

nonbanks remedied the previous situation, where 

the ‘‘lack of any effective supervision on 

nondepositories led to a ‘race to the bottom’ in 

which the institutions with the least effective 

consumer regulation and enforcement attracted 

more business . . . .’’ S. Rept. 111–176, at 10 

(2010). At the same time, the Bureau’s authorities 

are not limited to addressing the specific problems 

that existed prior to the CFPA. See id. at 11 (‘‘The 

CFPB will have enough flexibility to address future 

problems as they arise. Creating an agency that only 

had the authority to address the problems of the 

past, such as mortgages, would be too short-sighted. 

Experience has shown that consumer protections 

must adapt to new practices and new industries.’’). 

12Note that the term ‘‘associated’’ in section 

1025(b)(1)(C) is best read as meaning ‘‘associated’’ 

with ‘‘the activities subject to such laws’’ in section 

1025(b)(1)(B), where ‘‘such laws’’ refers back to 

‘‘Federal consumer financial laws’’ in section 

1025(b)(1)(A). This reading flows naturally from the 

order in which the provisions appear. However, as 

discussed below, this interpretive rule would reach 

the same conclusion if ‘‘associated’’ in section 

1025(b)(1)(C) were read to mean ‘‘associated’’ with 

violations of Federal consumer financial laws. MLA 

violations are both associated with activities subject 

to Federal consumer financial law and associated 

with violations of Federal consumer financial law. 

Also note that, since the Bureau concludes that the 

above standards are satisfied, this interpretive rule 

does not need to consider whether there are also 

other statutory bases for the Bureau’s authority to 

conduct examinations of supervised nonbanks and 

very large banks and credit unions related to the 

MLA. 

13 10 U.S.C. 987. 

14 152 Cong. Rec. S6406 (June 22, 2006) 

(statement of Sen. Talent). 

15 10 U.S.C. 987(h). Congress added the Bureau to 

the list of agencies that the Department of Defense 

consults in 2013. 

longer finds persuasive. Part IV 

addresses the parallel issue in the 

context of very large banks and credit 

unions. Part V concludes with some 

regulatory matters. 

II. Background 

A. Consumer Financial Protection Act of 

2010 

The CFPA establishes the Bureau as 

an independent bureau in the Federal 

Reserve System and assigns the Bureau 

a range of rulemaking, enforcement, 

supervision, and other authorities.2

Many of these authorities relate to the 

body of ‘‘Federal consumer financial 

law,’’ which the CFPA defines to 

include the CFPA itself, TILA, and a 

number of other statutes, rules, and 

orders, but it does not include the 

MLA.3 For example, one of the Bureau’s 

authorities is to ‘‘prescribe rules . . . 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, 

and to prevent evasions thereof.’’ 4 A 

notable substantive provision of the 

CFPA is its prohibition on unfair, 

deceptive, or abusive acts or practices.5

The CFPA also requires the Director of 

the Bureau to establish several offices, 

including an Office of Service Member 

Affairs.6

The key CFPA provisions that are 

relevant to this interpretive rule are 

sections 1024 and 1025. Section 1024 

addresses Bureau supervision of 

specified categories of nonbanks—for 

example, any covered person who 

‘‘offers or provides to a consumer a 

payday loan’’—while section 1025 

addresses Bureau supervision of ‘‘very 

large’’ depository institutions and credit 

unions, which are generally those with 

more than $10 billion in total assets and 

their affiliates.7

Section 1024(b)(1) provides that the 

Bureau ‘‘shall require reports and 

conduct examinations on a periodic 

basis of’’ a supervised nonbank for 

purposes of: ‘‘(A) assessing compliance 

with the requirements of Federal 

consumer financial law; (B) obtaining 

information about the activities and 

compliance systems or procedures of 

such person; and (C) detecting and 

assessing risks to consumers and to 

markets for consumer financial products 

and services.’’ 8

Section 1025(b)(1) contains parallel 

but slightly different language. It 

provides that the Bureau ‘‘shall have 

exclusive authority to require reports 

and conduct examinations on a periodic 

basis of’’ very large banks and credit 

unions for purposes of: ‘‘(A) assessing 

compliance with the requirements of 

Federal consumer financial laws; (B) 

obtaining information about the 

activities subject to such laws and the 

associated compliance systems or 

procedures of such persons; and (C) 

detecting and assessing associated risks 

to consumers and to markets for 

consumer financial products and 

services.’’ 9

These differences in wording between 

section 1024(b)(1) and section 

1025(b)(1) are explained by the structure 

of the statute. Very large banks and 

credit unions have long been subject to 

supervisory examinations by the 

prudential regulators, who continue to 

examine these institutions for a broad 

range of purposes.10 By contrast, the 

supervised nonbanks that are covered 

by section 1024(b)(1) were generally not 

subject to examination by the Federal 

government before the creation of the 

Bureau.11 The purposes of Bureau 

examinations under sections 1024(b)(1) 

and 1025(b)(1) are both broad. But it 

was natural, to ensure thorough Federal 

examination of supervised nonbanks, 

for Bureau examinations of those 

nonbanks to cover an even broader 

range of subject matters than the 

Bureau’s examinations of very large 

banks and credit unions. (For example, 

the Bureau can obtain information about 

all of a supervised nonbank’s 

compliance systems or procedures, not 

only those that are ‘‘associated’’ with 

activities subject to Federal consumer 

financial laws.) 

Accordingly, with respect to 

supervised nonbanks that are covered 

by section 1024(b)(1), the relevant 

question here is whether there are ‘‘risks 

to consumers’’ arising from conduct that 

violates the MLA that the Bureau may 

detect and assess. In the case of very 

large banks and credit unions that are 

covered by section 1025(b)(1), there is 

the additional question of whether such 

‘‘risks to consumers’’ are ‘‘associated’’ 

with ‘‘activities subject to’’ Federal 

consumer financial laws, such as TILA 

or the CFPA.12

B. Military Lending Act 

The MLA, also known as the Talent 

Amendment, was bipartisan legislation 

first enacted in 2006.13 As Senator 

Talent explained during the passage of 

the MLA: ‘‘The fact is, predatory payday 

lenders are targeting American troops 

and are trying to make a buck off of their 

service to our country. . . . This is a 

national problem. Predatory payday 

lenders set up shop near our military 

bases throughout the country and prey 

on our servicemembers. . . . Our troops 

deserve uniform, national protection 

against abusive financial practices that 

target them.’’ 14

The MLA establishes safeguards when 

creditors extend consumer credit to 

certain active-duty members of the 

armed forces or their covered 

dependents. The statute is implemented 

through regulations issued by the 

Department of Defense, in consultation 

with other specified agencies including 

the Bureau.15 The Department of 


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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations 32725 

16 80 FR 43559, 43560 (July 22, 2015). 

17See, e.g., 32 CFR 232.3(f)(2) (exceptions from 

definition of ‘‘consumer credit’’ for purposes of the 

MLA). 

18 10 U.S.C. 987(b); 32 CFR 232.4(c). 

19 10 U.S.C. 987(e); 32 CFR 232.8. 

20 10 U.S.C. 987(c); 32 CFR 232.6. 

21 10 U.S.C. 987(f)(3). 

22 32 CFR 232.9(c). 

23 10 U.S.C. 987(f)(1). 

24Public Law 112–239, sec. 662(b), 126 Stat. 

1631, 1786 (Jan. 2, 2013) (adding 10 U.S.C. 

987(f)(6)). The provision of the MLA concerning 

criminal penalties is excepted from this authority; 

that provision is outside the scope of this 

interpretive rule. Id. (cross-referencing 10 U.S.C. 

987(f)(1)). 

25H.R. Conf. Rep. No. 112–705, at 775 (2012). 

26 15 U.S.C. 1607(a), (c), as amended by Public 

Law 111–203, title X, § 1100A, 124 Stat. 1376, 

2107–09 (2010). The agencies’ authority to enforce 

TILA under section 108 is ‘‘subject to’’ subtitle B 

of the CFPA. Id. Subtitle B, among other things, 

allocates supervisory and enforcement authority 

between the Bureau and the prudential regulators. 

See 12 U.S.C. 5514–16. 

27 15 U.S.C. 1607(a)(1), (a)(2) (citing section 8 of 

the Federal Deposit Insurance Act, 12 U.S.C. 1818, 

and the Federal Credit Union Act, 12 U.S.C. 1751 

et seq.). 

28E.g., CFPA sections 1052–54, 12 U.S.C. 5562– 

64. 

29 15 U.S.C. 1607(b). 

30E.g., 12 U.S.C. 248, 325, 481, 1464(a), 

(d)(1)(B)(ii), (d)(1)(B)(v), 1756, 1784(a), 

1819(a)(Eighth), 1820(b), (c), (d)(1). 

31Federal Reserve, Truth in Lending for the Year 

1971, reprinted in 118 Cong. Rec. 816, 817 (Jan. 24, 

1972). 

32Federal Reserve, Annual Report to Congress for 

1982 (Apr. 1983). 

33Statement by John C. Dugan, Comptroller of the 

Currency, Before the H. Comm. on Fin. Servcs. 

(June 13, 2007). 

34CFPB Examination Procedures, Short Term, 

Small Dollar Lending, at Procedures 11 (Sept. 

2013), https://files.consumerfinance.gov/f/201309_

cfpb_payday_manual_revisions.pdf. These 

particular procedures are no longer applicable, 

among other reasons because they do not reflect 

subsequent revisions to the Department of Defense’s 

regulations implementing the MLA. 

Defense has explained that under its 

implementing regulations, as revised in 

2015, consumer credit for purposes of 

the MLA is, in general, ‘‘defined 

consistently with credit that for decades 

has been subject to the disclosure 

requirements of the Truth in Lending 

Act (TILA), codified in [the Bureau’s] 

Regulation Z.’’ 16 However, there are 

some instances where the definition of 

consumer credit under the MLA and its 

implementing regulations is narrower 

than under TILA.17

One of the MLA’s safeguards is a 

prohibition on imposing interest at a 

military annual percentage rate (MAPR) 

of greater than 36 percent, where MAPR 

is calculated by reference to TILA’s 

annual percentage rate (APR), with 

some specified differences.18 The MLA 

also establishes a number of other 

limitations on the terms of credit 

transactions, such as a prohibition on 

rolling over credit under certain 

circumstances; a prohibition on 

requiring, as a condition for the 

extension of credit that, the borrower 

establish an allotment to repay an 

obligation; and a prohibition on 

prepayment penalties or fees.19 The 

MLA requires disclosures that are based 

on TILA disclosures with additional 

supplementary information, such as a 

statement regarding the MAPR in 

addition to the disclosure of the TILA 

APR.20

Conduct that violates the MLA may 

also violate TILA’s disclosure 

requirements, or occur concurrently 

with violations of TILA’s disclosure 

requirements, since the MLA’s 

disclosure requirements incorporate and 

supplement TILA’s. Conduct that 

violates the MLA may also overlap with 

violations of the CFPA’s prohibition on 

deceptive acts or practices or other 

violations of Federal consumer financial 

law. 

Congress provided that any contract 

prohibited by the MLA ‘‘is void from the 

inception of such contract.’’ 21 As the 

MLA’s implementing regulations further 

explain, any contract with a covered 

borrower that fails to comply with the 

MLA or which contains one or more 

provisions prohibited under the MLA is 

void from the inception of the 

contract.22 The MLA also provides 

criminal penalties for creditors that 

knowingly violate the statute.23

However, as originally enacted in 2006, 

the MLA did not address administrative 

enforcement. 

In 2013, Congress amended the MLA 

to provide that it ‘‘shall be enforced by 

the agencies specified’’ in section 108 of 

TILA, ‘‘in the manner set forth in that 

section or under any other applicable 

authorities available to such agencies by 

law.’’ 24 As the conference report 

explained, ‘‘for the purposes of the 

enforcement authority under this 

section, a violation of the Military 

Lending Act would be treated as though 

it were a violation of the Truth in 

Lending Act.’’ 25 Thus, the authorities in 

section 108 of TILA, which are 

discussed below, are applicable to the 

MLA. 

C. Truth in Lending Act 

Section 108 addresses administrative 

enforcement of TILA. It provides that 

TILA ‘‘shall be enforced’’ by a list of 

enforcing agencies, including the 

applicable prudential regulators and, 

since 2010, the Bureau.26 In the case of 

the prudential regulators, section 108 

specifies that they shall enforce TILA 

under statutory provisions that 

authorize, among other things, 

administrative adjudications for ceaseand-desist orders and civil money 

penalties.27 In the case of the Bureau, 

section 108 provides that TILA shall be 

enforced under subtitle E of the CFPA. 

Subtitle E authorizes the Bureau to, 

among other things, conduct 

administrative adjudications, initiate 

civil enforcement actions, and send civil 

investigative demands.28 Section 108 

further provides that each of the 

enforcing agencies ‘‘may exercise, for 

the purpose of enforcing compliance’’ 

with TILA, ‘‘any other authority 

conferred on it by law.’’ 29

As general background, since TILA’s 

enactment in 1968, the prudential 

regulators have relied heavily on bank 

examinations in order to implement 

TILA. As noted above, each of the 

prudential regulators has longstanding 

statutory authority to ‘‘examine’’ or 

conduct ‘‘examinations’’ of banks or 

credit unions.30 As the Federal Reserve 

reported to Congress in 1972, in its 

capacity as the agency that wrote 

regulations to implement TILA: ‘‘For the 

most part, compliance [with TILA] is 

determined by [the prudential 

regulators] during the regular periodic 

examinations of the creditors under 

their jurisdiction.’’ 31 The Federal 

Reserve similarly reported to Congress 

in 1983 that the five prudential 

regulators ‘‘enforce compliance with 

[TILA and three other consumer finance 

statutes] mainly through periodic 

examinations.’’ 32 Along the same lines, 

the Comptroller of the Currency testified 

to Congress in 2007 that the ‘‘primary 

method that federal banking agencies 

use to implement consumer protection 

standards is direct supervision—not 

formal enforcement actions—of the 

banks we supervise.’’ 33

D. History of Bureau Examinations 

Regarding the MLA 

In September 2013, the Bureau 

amended its short-term, small-dollar 

lending examination procedures to 

advise examiners that they ‘‘should 

review for MLA violations, which 

evidence risks to consumers and may 

require supervisory or enforcement 

action.’’ 34 This was about two years into 

the history of the Bureau’s examination 

program and about nine months after 

the MLA was amended to provide the 

Bureau with authority to enforce the 

MLA in the same manner as it is 

authorized to enforce TILA. As far as the 

Bureau is aware, no supervised entity 

ever disputed the propriety of this 

aspect of the Bureau’s examinations by 


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32726 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations 

35See Letter from Kathleen L. Kraninger, Director 

of the Bureau, to Senator Sherrod Brown (Feb. 1, 

2019). 

36Letter from Kathleen L. Kraninger, Director of 

the Bureau, to the Hon. Nancy Pelosi, Speaker, 

House of Representatives (Jan. 17, 2019), https://

files.consumerfinance.gov/f/documents/cfpb_MLAlegislative-proposal-to-Pelosi.pdf. No legal 

conclusion can be drawn from the fact that this 

particular proposal has not as yet been enacted. 

37The statute also includes the authority to 

‘‘require reports.’’ CFPA sections 1024(b)(1), 

1025(b)(1), 12 U.S.C. 5514, 5515. This analysis 

focuses on the authority to conduct examinations 

for simplicity, but the same analysis would be 

applicable to requiring reports, because the same 

operative statutory language is also applicable to 

requiring reports. 

38City of Arlington, Tex. v. FCC, 569 U.S. 290, 

296 (2013) (Scalia, J.). 

39Roberts v. Sea-Land Servs., Inc., 566 U.S. 93, 

103 (2012) (quoting FDA v. Brown & Williamson 

Tobacco Corp., 529 U.S. 120, 133 (2000) (quoting 

Gustafson v. Alloyd Co., 513 U.S. 561, 569 (1995))). 

40See CFPA section 1055, 12 U.S.C. 5565. 41See 32 CFR 232.5. 

appealing a supervisory determination 

regarding the MLA. 

In 2018, the Bureau discontinued 

examination activity regarding the MLA. 

This was because the Bureau changed 

its position, taking the view that it 

lacked the authority to engage in MLArelated examination activity, for reasons 

that will be discussed below.35 In 2019, 

the Bureau wrote to Congress to suggest 

legislation to ‘‘clarify the [Bureau’s] 

authority to supervise for compliance 

with the [MLA].’’ 36

The Bureau is now returning to the 

original position that it took from 2013 

until 2018. The Bureau believes that it 

does have the requisite authority, and 

that the view that it originally took in 

2013 was the correct one, for the reasons 

discussed below. 

III. Analysis of Section 1024(b)(1)(C) 

(Supervised Nonbanks) 

A. Statutory Text 

Section 1024(b)(1)(C) of the CFPA, in 

relevant part, straightforwardly 

authorizes the Bureau to conduct 

examinations of supervised nonbanks 

for purposes of detecting and assessing 

‘‘risks to consumers.’’ 37 As the Supreme 

Court has explained in another context: 

‘‘Congress knows to speak in plain 

terms when it wishes to circumscribe, 

and in capacious terms when it wishes 

to enlarge, agency discretion.’’ 38

‘‘Risks to consumers’’ that arise from 

conduct that violates the MLA fall well 

within that capacious phrase. Such 

conduct risks having adverse financial 

consequences for active-duty service 

members and their covered dependents. 

One reason why these consequences can 

be particularly significant for military 

families is that financial status can 

affect servicemembers’ ability to 

maintain their security clearances and 

therefore maintain their military careers. 

Congress considered the risk of harm 

from contracts made in violation of the 

MLA so severe that it made such 

contracts entirely void. 

B. Statutory Scheme 

A statute should be interpreted ‘‘as a 

symmetrical and coherent regulatory 

scheme.’’ 39 Here, the statutory scheme 

provides additional confirmation that 

‘‘risks to consumers’’ include conduct 

that violates the MLA, for three main 

reasons. 

First, the Bureau believes that risks of 

harm to consumers that the Bureau can 

address through its enforcement 

authority, when that proves necessary, 

are logically within the core of ‘‘risks to 

consumers’’ that the Bureau can detect 

and assess. There can be many types of 

risks to consumers, and the Bureau’s 

ability to use its range of authorities to 

remedy those risks can vary in 

effectiveness. But if ‘‘risks to 

consumers’’ did not include, at the very 

least, those risks that are so severe and 

so central to the Bureau’s consumerprotection mission that they can lead to 

a Bureau enforcement action for civil 

money penalties, restitution, 

disgorgement, and other relief,40 it is 

unclear what remaining meaning the 

category would have. It would be 

anomalous to read out of the category of 

‘‘risks to consumers’’ a type of risk that 

the Bureau can—out of all the potential 

risks to consumers—forcefully remedy 

through enforcement action if that 

becomes necessary. Thus, not only does 

conduct that violates the MLA fall 

within the plain language of ‘‘risks to 

consumers,’’ in the Bureau’s view it is 

not a borderline case, but sits within the 

core of the provision. 

Second, the Bureau’s textual 

interpretation is the most effective way 

of carrying out the statutory scheme of 

the CFPA and MLA. When the Bureau 

is already examining a supervised 

nonbank or very large bank or credit 

union for potential violations of TILA 

that are intertwined with potential 

violations of the MLA, it is especially 

inefficient for both the Bureau and the 

supervised institution if the Bureau 

relies exclusively on enforcement tools 

under Subtitle E of the CFPA to identify 

and address MLA violations, closing off 

any use of the Bureau’s supervisory 

process to detect and assess these risks 

to consumers. As one example, under 

the contrary interpretation, verifying 

TILA disclosures may be the work of a 

Bureau examiner, but scrutinizing the 

related MLA disclosures in the very 

same document would be reserved to a 

Bureau enforcement attorney, who 

would normally obtain copies of those 

disclosures by sending a civil 

investigative demand. The Bureau 

believes that the capacious reference to 

‘‘risks to consumers’’ in section 

1024(b)(1)(C)—when read according to 

its plain terms—avoids this incongruous 

result by allowing examiners to consider 

the potentially overlapping MLA and 

TILA issues together in one review. 

A third reason why examinations 

regarding the MLA complement the 

Bureau’s enforcement authority under 

Subtitle E is that such examinations can 

play a role in preventing violations of 

the MLA before they occur. In a Bureau 

examination to detect and assess the 

risk that consumers will be harmed by 

violations of the MLA, the Bureau is 

able to detect and assess not only fully 

completed violations of the MLA, but 

also practices by the supervised 

institution that present a danger of 

violations of the MLA and therefore risk 

harm to consumers. For example, one 

important practical step that creditors 

generally need to take, in order to avoid 

violations of the MLA, is to correctly 

identify which of their borrowers are 

active-duty servicemembers or covered 

dependents and therefore protected by 

the MLA.41 If examiners observe an 

error or deficiency in the processes that 

a supervised institution uses to identify 

borrowers that are covered by the MLA, 

they can alert the institution of their 

assessment in their examination report 

or supervisory letter, and this may occur 

before the danger manifests in an actual 

violation of the MLA that in turn harms 

consumers. When Bureau examiners 

work cooperatively with supervised 

institutions to identify and address risks 

to consumers before they harm 

consumers, both the Bureau and 

supervised institutions can often avoid 

an after-the-fact enforcement action 

under Subtitle E of the CFPA. The 

Bureau believes that this is a prime 

example of a proper exercise of its 

authority under section 1024(b)(1)(C) to 

conduct examinations for the purpose of 

detecting and assessing risks to 

consumers. 

C. Discussion of Counterarguments 

During the period when it ceased 

MLA-related examination activity, the 

Bureau was persuaded by arguments 

that it lacked this authority. But for the 

following reasons, the Bureau no longer 

finds these arguments persuasive. 

First, the Bureau’s interpretation 

during this period was informed by the 

fact that the MLA is not a Federal 

consumer financial law, which is the 

focus of the examination authority in 

the separate section 1024(b)(1)(A) of the 


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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations 32727 

42City of Arlington, 569 U.S. at 296. 

43United States v. Gaubert, 499 U.S. 315, 319–20, 

329–30 (1991). 

44 10 U.S.C. 987(f)(6); 15 U.S.C. 1607(b). 

45B.H. ex rel. Hawk v. Easton Area Sch. Dist., 725 

F.3d 293, 317 (3d Cir. 2013). 

46 Little Sisters of the Poor Saints Peter & Paul 

Home v. Pennsylvania, 140 S. Ct. 2367, 2381 (2020) 

(Thomas, J.) (internal citations, brackets, and 

quotation marks omitted). 

CFPA. The Bureau asserted that 

Congress confined the Bureau’s 

authority to assess compliance to 

Federal consumer financial law and not 

compliance with other laws; that 

Congress intended not to confer 

examination authority with respect to 

the MLA, since it did not add the MLA 

to the definition of Federal consumer 

financial law; and that the Bureau 

would be circumventing Congress’s 

intentions by conducting examinations 

related to the MLA. 

The Bureau no longer accepts this 

argument, because the argument relies 

on assumptions about Congress’s 

intentions that are not expressed 

anywhere in the statutory text or any 

legislative history. There is nothing in 

the statute to suggest that ‘‘risks to 

consumers’’ can never include 

violations of law. (Indeed, in the case of 

the MLA, Congress enacted it precisely 

because there were risks to active-duty 

servicemembers and their families.) 

Moreover, to the extent it is appropriate 

to speculate about Congress’ choice to 

not amend the definition of Federal 

consumer financial law, it is 

understandable why Congress would 

not have added the MLA to that 

definition. As noted above, the Bureau 

has general rulemaking authority with 

respect to Federal consumer financial 

law, but Congress gave the Department 

of Defense, not the Bureau, general 

rulemaking authority for the MLA. 

Adding the MLA to the definition of 

Federal consumer financial law would 

have led to potential confusion about 

which agency, or both, has this 

significant rulemaking authority. Lastly, 

to assert that the Bureau is 

circumventing Congress’s intentions is 

conclusory. Again, had Congress wished 

to more closely ‘‘circumscribe . . . 

agency discretion,’’ it would not have 

used the ‘‘capacious terms’’ that it did.42

Second, the Bureau’s prior 

interpretation was informed by the fact 

that Congress conferred authority on the 

Bureau to enforce the MLA through 

subtitle E of the CFPA, by incorporating 

TILA’s enforcement scheme, without 

specifically addressing the Bureau’s 

supervisory authority under section 

1024. According to this line of 

argument, this specific conferral of 

certain enforcement authorities implies 

an unstated exclusion of supervisory 

authority. But the Supreme Court has 

rejected just such an argument. The 

Court has recognized that where 

financial regulators have formal 

enforcement powers regarding a specific 

subject but also ‘‘broad statutory 

authority to supervise financial 

institutions,’’ there is nothing that 

prevents ‘‘the regulators from invoking 

less formal means of supervision of 

financial institutions,’’ given that there 

is ‘‘no prohibition against the use of 

supervisory mechanisms not 

specifically set forth in statute or 

regulation.’’ 43 This is particularly true 

here, where Congress has expressly 

authorized the Bureau to rely upon ‘‘any 

other applicable authorities available 

to’’ the Bureau to enforce the MLA, and 

where TILA’s enforcement regime 

likewise authorizes the Bureau to 

exercise ‘‘any other authority conferred 

on it by law’’ to aid in its enforcement 

of that statute.44 Thus, there is no reason 

to infer that Congress’s conferral of 

certain specific enforcement authorities 

foreclosed the use of other authorities to 

ensure conformity with the MLA and 

securing its protections for 

servicemembers and their families. 

Moreover, when Congress incorporated 

TILA’s enforcement scheme into the 

MLA in 2013, there had been forty years 

of consistent history of regulators taking 

this kind of approach in the TILA 

context—using their generally-framed 

authorities to examine supervised 

institutions in order to supplement the 

formal enforcement measures that 

section 108 of TILA specifically 

references. 

Third, the Bureau’s prior 

interpretation was influenced by a 

concern that reading the phrase ‘‘risks to 

consumers’’ in sections 1024(b)(1)(C) to 

include those risks to consumers that 

arise from conduct that violates the 

MLA might lead to a similar reading 

with respect to other statutes that, like 

the MLA, are not covered by sections 

1024(b)(1)(A). But, as already explained, 

there is nothing in the statutory text to 

suggest that ‘‘risks to consumers’’ are 

somehow limited to conduct that is 

lawful and that ‘‘risks to consumers’’ 

can never include conduct that violates 

the law. It is also appropriate to step 

back and recognize that this is a 

‘‘slippery slope’’ argument. ‘‘Like all 

slippery-slope arguments, the . . . point 

can be inverted with equal logical 

force.’’ 45 Not exercising the Bureau’s 

authority to identify these important 

risks to active-duty servicemembers and 

their families would be a slippery slope 

towards making the authority that 

Congress expressly conferred on the 

Bureau, to seek out ‘‘risks to 

consumers,’’ a dead letter. As discussed 

above, the Bureau believes that the very 

harmful conduct that Congress sought to 

prevent in the MLA, which the Bureau 

has the authority to remedy through its 

other authorities (specifically 

enforcement action), sits within the core 

of this authority. There could doubtless 

be debate about the outer limits of the 

authority, but that is simply because 

Congress chose to frame it in such 

flexible terms, and that is not a reason 

for the Bureau to boycott this core 

application of the authority. 

The Bureau would note, in 

conclusion, that a common feature of 

the above arguments against the 

Bureau’s authority is that they do not 

dispute the plain fact that conduct that 

violates the MLA presents risks to 

consumers. Instead, the arguments all 

implicitly rely on variations of a 

mistaken premise: that Congress could 

not have meant what it said when it 

used the words ‘‘risks to consumers’’ to 

confer examination authority on a 

consumer protection agency in the 

aftermath of a financial crisis. But it is 

‘‘a fundamental principle of statutory 

interpretation that absent provisions 

cannot be supplied by the courts. This 

principle applies not only to adding 

terms not found in the statute, but also 

to imposing limits on an agency’s 

discretion that are not supported by the 

text.’’ 46

IV. Analysis of Section 1025(b)(1)(C) 

(Very Large Banks and Credit Unions) 

Section 1025(b)(1)(C) of the CFPA 

authorizes the Bureau, in relevant part, 

to conduct examinations of very large 

banks and credit unions for purposes of 

detecting and assessing ‘‘risks to 

consumers’’ that are ‘‘associated’’ with 

‘‘activities subject to’’ Federal consumer 

financial laws. This requirement that 

there be an association with activities 

subject to Federal consumer financial 

laws is present in section 1025(b)(1)(C) 

but not section 1024(b)(1)(C), which 

narrows section 1025(b)(1)(C) in 

comparison to section 1024(b)(1)(C). 

The Bureau previously assumed that 

MLA-related issues could not be 

‘‘associated’’ risks to consumers under 

section 1025(b)(1)(C). But as explained 

above, the activity of extending 

‘‘consumer credit’’ under the MLA is a 

subset of the activity of extending 

‘‘consumer credit’’ under TILA. Indeed, 

violations of the MLA can overlap with 

violations of TILA’s disclosure 

requirements, as well as the CFPA’s 

prohibition on deceptive acts or 

practices or other violations of Federal 


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32728 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations 

47The Bureau’s previous concerns that it lacked 

authority under section 1024(b)(1)(C) were also 

applicable to section 1025(b)(1)(C). But for the 

reasons already discussed in the context of section 

1024(b)(1)(C), the Bureau no longer finds those 

arguments persuasive. 

48 12 U.S.C. 5512(b)(1). 

49 5 U.S.C. 553(b). 

50 5 U.S.C. 603(a), 604(a). 

51 44 U.S.C. 3501–3521. 

52 5 U.S.C. 801 et seq. 

1Public Law 101–73, title III, § 308, Aug. 9, 1989, 

103 Stat. 353, as amended by Public Law 111–203, 

title III, § 367(4), July 21, 2010, 124 Stat. 1556, 

codified at 12 U.S.C. 1463 note. 

consumer financial law. The analysis 

under section 1025(b)(1)(C) of the CFPA 

is otherwise similar to that under 

section 1024(b)(1)(C) of the CFPA, and 

so there is no need to repeat it here.47

The Bureau recognizes the role of the 

prudential regulators in conducting 

MLA supervision, including 

examinations, at very large banks and 

credit unions. Applicable statutes grant 

the prudential regulators broad 

supervisory and examination powers, 

which they use for various purposes, 

including assuring the safety and 

soundness of supervised institutions, 

assuring compliance with laws and 

regulations at those institutions, and 

other purposes. By contrast, the 

Bureau’s authority under section 

1025(b)(1)(C) concerns a targeted 

purpose: Detecting and assessing those 

‘‘risks to consumers’’ that are 

‘‘associated’’ with ‘‘activities subject to’’ 

Federal consumer financial laws, such 

as TILA. Conducting examinations for 

that particular purpose is distinct from 

the prudential regulators’ authority to 

conduct examinations for the purpose of 

assessing compliance with the MLA (or 

for safety and soundness or other 

purposes) —including the fact that the 

prudential regulators’ purposes are not 

based on the association with Federal 

consumer financial law discussed 

above. Even though some of the 

activities in Bureau examinations may 

be similar to activities in prudential 

regulators’ examinations, they are for a 

different purpose. Nothing in the CFPA 

or in this interpretive rule limits in any 

way, or should be deemed to limit in 

any way, the prudential regulators’ 

consumer compliance examinations of 

very large banks or credit unions, or 

their subsidiaries, for the purpose of 

assessing compliance with the MLA. 

Section 1025 has a number of 

provisions that promote coordination 

and efficiency among the Bureau and 

the prudential regulators. The agencies 

work with each other to minimize 

regulatory burden that may result from 

their complementary authorities, while 

ensuring the efficient and effective 

protection of covered borrowers. 

V. Regulatory Matters 

This is an interpretive rule issued 

under the Bureau’s authority to interpret 

the CFPA, including under section 

1022(b)(1) of CFPA, which authorizes 

guidance as may be necessary or 

appropriate to enable the Bureau to 

administer and carry out the purposes 

and objectives of Federal consumer 

financial laws, such as the CFPA.48

As an interpretive rule, this rule is 

exempt from the notice-and-comment 

rulemaking requirements of the 

Administrative Procedure Act.49

Because no notice of proposed 

rulemaking is required, the Regulatory 

Flexibility Act does not require an 

initial or final regulatory flexibility 

analysis.50 The Bureau has also 

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.51

Pursuant to the Congressional Review 

Act,52 the Bureau will submit a report 

containing this interpretive rule and 

other required information to the United 

States Senate, the United States 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). 

Dated: June 16, 2021. 

David Uejio, 

Acting Director, Bureau of Consumer 

Financial Protection. 

[FR Doc. 2021–13074 Filed 6–22–21; 8:45 am] 

BILLING CODE 4810–AM–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Chapter III 

RIN 3064–ZA19 

Statement of Policy Regarding Minority 

Depository Institutions 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final statement of policy. 

SUMMARY: The FDIC is issuing its 

Statement of Policy Regarding Minority 

Depository Institutions. Section 308 of 

the Financial Institutions Reform, 

Recovery and Enforcement Act of 1989 

established several goals related to 

encouraging, assisting, and preserving 

minority depository institutions. The 

FDIC has long recognized the unique 

role and importance of minority 

depository institutions and historically 

has taken steps to preserve and 

encourage minority-owned and 

minority-led financial institutions. The 

Statement of Policy updates, 

strengthens, and clarifies the agency’s 

policies and procedures related to 

minority depository institutions. 

DATES: The Statement of Policy is 

effective August 23, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Misty Mobley, Senior Review Examiner, 

Division of Risk Management and 

Supervision, (202) 898–3771, 

mimobley@fdic.gov; Lauren Whitaker, 

Senior Attorney, (202) 898–3872, 

lwhitaker@fdic.gov; Jason Pan, Senior 

Attorney, (202) 898–7272, jpan@

fdic.gov; or Gregory Feder, Counsel, 

(202) 898–8724, gfeder@fdic.gov, Legal 

Division, Federal Deposit Insurance 

Corporation, 550 17th Street NW, 

Washington, DC 20429. For the hearing 

impaired only, TDD users may contact 

(202) 925–4618. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. The Proposed Statement of Policy 

A. Proposed Revisions 

B. Comments 

III. Final Statement of Policy Regarding 

Minority Depository Institutions 

IV. Administrative Matters 

I. Background 

Section 308 of the Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA) 1

established several goals related to 

minority depository institutions (MDIs): 

(1) Preserving the number of MDIs; (2) 

preserving the minority character in 

cases of merger or acquisition; (3) 

providing technical assistance to 

prevent insolvency of institutions not 

now insolvent; (4) promoting and 

encouraging creation of new MDIs; and 

(5) providing for training, technical 

assistance, and education programs. 

On April 3, 1990, the Board of 

Directors of the Federal Deposit 

Insurance Corporation (FDIC Board and 

FDIC, respectively) adopted the Policy 

Statement on Encouragement and 

Preservation of Minority Ownership of 

Financial Institutions (1990 Policy 

Statement). The framework for the 1990 

Policy Statement resulted from key 

provisions contained in Section 308 of 

FIRREA. The 1990 Policy Statement 

provided information to the public and 

minority banking industry regarding the 


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