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Explainer: How small businesses play a role in the rulemaking process


We often hear many questions about how the rulemaking process works. We decided to write a series of posts that explain some key parts of the rulemaking process. We’ll add to the series in the coming weeks and months.

Before we propose a rule, we’re sometimes required to organize a Small Business Review Panel so that we can hear from small businesses about the potential impacts of the rule. We’re one of three federal regulators required to include the small business review process. Small businesses provide us with valuable feedback as we write regulations to help consumer financial products and services work for Americans.

How we work with small businesses

We’re a data-driven, evidence-based agency with a philosophy of issuing regulations only where there’s a strong justification for doing so. The Dodd-Frank Act, the law that created the CFPB, requires us to organize a Small Business Review Panel when we’re working on a rule that could have significant economic impacts on small entities. Small entities include small businesses, organizations, and small government bodies

Each Small Business Review Panel consists of representatives from the CFPB, Small Business Administration, and the Office of Management and Budget’s Office of Information and Regulatory Affairs. The panel holds an outreach meeting with a representative group of small businesses to discuss the potential rules we’re considering. We’ll use that feedback to inform the rulemaking process.

The panel decides which small businesses participate

First, we determine which types of small entities the proposed rule under consideration could directly affect. Then, we coordinate with the Small Business Administration to select individuals to represent these small entities. About 15 to 20 small business representatives usually participate in the process.

How the panel works

Before the outreach meeting, the panel will distribute materials to each participant, including general background, an overview of the proposals being considered, and a list of issues and questions we’ll discuss with the participants. We post these materials on our web site simultaneously so our rulemaking plans are transparent.

Small business representatives are given time to study the materials and we follow up with them to see if they have questions. Then, during the meeting, the panel hears from the representatives about the regulatory proposals. Representatives typically discuss the anticipated compliance requirements and potential costs of the proposed rule. In addition to providing verbal feedback during the meeting, the small business representatives may submit written comments.

Panel meetings

The panel’s meetings aren’t public, but we’ll publish meeting materials on our website. We want a free and open discussion with the small business representatives, and we think the best way to do that is to keep the meetings small. We’ll summarize our discussions in the panel report.

What happens next

Within 60 days of meeting, the panel will complete a report on the input we received from the small business representatives. The report may include any significant alternatives that would minimize economic impacts. We’ll publish the panel’s report along with a proposed rule, which is the next step in the rulemaking process. We’ll keep seeking feedback from consumers, consumer advocates, other regulators, and industry representatives that were not part of the panel process as we develop a proposed rule.

Explainer: Compensating consumers for Bank of America’s illegal tactics for credit card add-on products


Today we’re fining Bank of America, N.A. and FIA Card Services, N.A. for unfairly billing consumers for services relating to identity theft protection “add-on” products and for using deceptive marketing and sales practices for credit protection “add-on” products.

We are also ordering Bank of America to refund fees and provide other redress to consumers. Approximately 2.9 million consumers will be receiving or already have received up to $727 million in refunds for fees they paid for these products and services as well as additional redress.

If you’re impacted by the announcement, you don’t have to take any action to receive a credit or check. If you are one of the consumers affected by the order, Bank of America should have already notified you or will notify you directly. If you have questions about whether you are entitled to a refund, you can contact Bank of America.

Who is eligible for compensation?

Nearly 1.4 million consumers have already received or will receive refunds of at least $250 million in fees for the “credit protection” products (Credit Protection Plus and Credit Protection Deluxe). You will receive refunds if you are a Bank of America customer who enrolled in these products at any time over the phone, were charged a fee between October 1, 2010 and March 31, 2013, and either did not activate benefits or who had  a request for benefits denied.

Approximately 1.5 million consumers purchased the “identity theft protection” products (Privacy Guard, PrivacySource, and Privacy Assist) and were improperly billed for services that were not performed. As a result, consumers paid at least $459 million in fees, interest, and over-limit charges for these products without receiving full services. Today’s announcement recognizes the refunds Bank of America has already provided to consumers harmed as a result of the illegal billing practices relating to these identity theft protection products.

Eligible consumers who were enrolled in the “identity theft protection” products received refunds if they enrolled in these products between October 2000 and September 2011 but did not receive full credit monitoring services, received only partial credit monitoring and/or credit report retrieval without notice, and/or didn’t receive credit report retrieval benefits.

What do eligible consumers get?

That depends on the product consumers were enrolled in and some other factors.

Eligible consumers who were enrolled in a “credit protection” product for less than a year, who made a request for benefits that was denied or closed, or who, complained to the CFPB or to Bank of America stating that they did not authorize enrollment in the product, will receive a refund of all fees charged from October 1, 2010 through March 31, 2013. Eligible consumers who were enrolled in a “credit protection” product for a year or more and who do not fall within any of the groups described above will receive a refund of 300 days of fees charged from October 1, 2010 through March 31, 2013.

Some consumers who were enrolled in “credit protection” product will also receive:

  1. A reduction in charged-off balances due to product fees charged from October 1, 2010 through March 31, 2013.
  2. “Credit protection” services for six months at no-cost for consumers enrolled in the product as of March 1, 2013.

Bank of America has already completed reimbursement for the “identity theft protection” eligible consumers, so eligible consumers should have already received refunds. If you have questions about receiving a refund for this product, you can contact Bank of America.

Bank of America is responsible for providing refunds

Watch out for scammers claiming they will get you a refund. When large numbers of consumers get refunds, scammers sometimes pop up. The scammer may charge you a fee or try to steal your personal information. If someone tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to “claim your refund,” it’s a scam. Please call us at (855) 411-CFPB to report the scam.

Explainer: How the final TILA-RESPA rule differs from the proposal


When we first proposed the TILA-RESPA disclosure rule, we got a lot of questions about the length of the document containing the rule. We synthesized those questions into one representative question and wrote a post to give you some answers. Now that we’re finalizing the rule, we wanted to do it again to talk about what’s changed in the last sixteen months.

So, what’s different?

Sure. Directness is probably the best approach. But let’s back up.

We received more than 27,000 individual comments and emails on the disclosure prototypes we posted throughout the supplemental Know Before You Owe project for mortgage disclosure. That’s on top of all the in-person testing we did with dozens of consumers. We also tested them with industry to make sure they could understand and use the disclosures in their business. That was all before we issued the proposal.

Once we proposed the rule, we received almost 3,000 comments, including comments received during the public comment period and additional information submitted to the record. That didn’t surprise us; this is a significant rule that affects two major federal regulations, consumers’ experience in shopping for and closing on mortgages, and almost the entire residential real estate industry. We spent a lot of time analyzing the comments and figuring out the best way to respond to them.

Did they lead to any changes to the rule?

We made a few significant changes. First, the proposal had two provisions we didn’t include in the final rule:

  • We aren’t including the “all-in APR,” as some referred to it. This provision in the proposal would have changed the definition of the finance charge, which is used to calculate the annual percentage rate, or APR. The change might have cost industry a lot and might have affected the types of loans available to consumers. A number of other mortgage rules are about to go into effect that might make these effects even bigger.

    We’re going to keep looking at this. The Dodd-Frank Act requires us to report on this rule five years after its effective date, and we’ll study this issue as part of that.

  • The proposal required machine-readable record retention. However, we heard that the data standard we were proposing wasn’t specific enough. In principle, we still think this is a good idea, but we’re going to do additional study and spend more time discussing with stakeholders before requiring any particular standard.

We also changed a couple other requirements you should be aware of.

  • The rule requires a three-day waiting period after issuing the Closing Disclosure before closing the mortgage. In the proposed rule, we said lenders should reissue that disclosure any time there are more than minor changes, followed by a new three-day waiting period. Comments suggested this might lead to frequent delays in closing mortgages. That’s clearly not good. But also not good: consumers not having time to think through significant changes. So we kept the consumers’ reviewing time in mind as we more narrowly defined the requirements.

    The new waiting period now comes only if there are substantial changes to the APR, the loan product itself changes (like a fixed rate loan becomes an adjustable rate or interest only mortgage), or the lender adds a prepayment penalty. And just to be sure, the rule guarantees consumers the right to examine the Closing Disclosure on request on the day before closing even without substantial changes.

  • The rule also requires lenders to issue the initial Loan Estimate within three days of a consumer applying for a mortgage. In the proposed rule, we included Saturdays in that three-day period. Smaller businesses like community banks and credit unions told us they’re usually closed Saturdays and this would force them to be open. That seemed like a pretty significant burden, one we didn’t want to impose, so the three-day period now includes only days the lender is actually open. If you’re open on Saturday, Saturday counts; if you’re not, it doesn’t.

Does that significantly lengthen the rule?

At least for the regulatory language, it actually isn’t much longer. The proposed amendments to regulations were 209 pages. For the final rule, that’s 279 pages.

So why does the document you sent the Federal Register seem a lot bigger than before?

It is. The preamble provides context for the proposed forms and regulatory changes. The mortgage market is big, and mortgage disclosure regulation has 43 years of history. Also, before writing the rule, we spent a lot of time talking to industry and consumers and analyzing costs and benefits. That’s a lot of context, and that means a long preamble.

If that paragraph looks familiar, it should. We wrote it when we proposed the rule. We just copied and pasted it here. (Hey, it’s still accurate, except 43 years is now 44.) This time, the preamble contains even more information. We have a responsibility to acknowledge and explain our reactions to the comments we received in the public comment period. Again, there were almost 3,000 of them. Some of them asked us to study something or to provide evidence or more explanation for things we had decided. As you’ll see in the table below, this accounts for the bulk of the increase.

Finally, based on these public comments, we modified some of the guidance and interpretations that accompany the rule. We had to explain what we were changing and why. That also made it longer, but it also clarifies a number of things that we heard weren’t clear in the proposal. We believe that in the long run, this clarity will make compliance easier for industry.

Here’s a quick breakdown of what’s in the document:

Content Pages
Proposed amendments to regulations
Proposed guidance regarding compliance with the amended regulations
Signature page

Okay, bottom-line this. What does the new rule do?

This rule is about improving the way consumers get loan information when they apply for and close on a mortgage. Most of the requirements are about two disclosure documents, the Loan Estimate and the Closing Disclosure. There are also some key provisions about timing. Yesterday’s post describes the basic requirements, and it details why the new disclosures improve the experience of getting a mortgage.

How long does industry have to comply with this?

The rule generally is effective for any loan applications that a lender receives on or after August 1, 2015. Some provisions become applicable right on August 1, 2015, because they apply to things that can happen before an application is received. For industry, that probably seems fast. For consumers, it may seem like a long time. Our goal was to give industry enough time to make system changes, devise new business practices, and train staff. Consumers will be better off if industry has the time and support it needs to understand and comply with the rule. To that end, in the next few months we’ll start an implementation support program for mortgage providers and servicers who will have to comply.

Can I hear from you as you release more information about the rule?

Yes! If you want to hear from us about the implementation support efforts, sign up here. [put an email signup form to the right] We’re also creating tools to help consumers interested in owning a home. Sign up on our Owning a Home page to be one of the first to know as we release them.

Explainer: Changes to federal student loan interest rates


Updated on August 13, 2013

We’ve received questions from consumers about the changes in federal student loan interest rates that are scheduled to take effect on July 1. We’ve answered some of these questions below.

Will changes in federal student loan interest rates impact me?

For the vast majority of borrowers currently on the hook for over $1 trillion in student loan debt, the answer is no. Existing loans are not impacted. Existing borrowers can learn more about their options by using our Repay Student Debt tool and Ask CFPB .

However, for undergraduates taking out Direct Subsidized Loans, there will be some changes. The Congressional Budget Office estimates that there will be approximately 9.4 million Direct Subsidized Loans made in 2014, with a total value of over $28 billion. Currently, there are roughly 39 million borrowers with federal student loans. Here’s a comparison of some terms between this month and next month:

Key terms of Direct Subsidized Loans

July 1
Interest rate while in school 0 percent 0 percent
Interest rate after school 3.4 percent 6.8 percent
Loan limit per year $3,500 to $5,500 $3,500 to $5,500

As of last July, graduate and professional students cannot take out new subsidized loans, so this change won’t affect non-undergraduates. Again, this does not impact rates in loans you already took out or loans that aren’t based on financial need, like the Direct Unsubsidized Loan.

Loans under the new interest rate structure continue to have 0 percent interest while in school. Here’s how it might impact your approximate monthly payments on the standard ten-year repayment schedule:

Subsidized loan debt after grace period Payment under existing rate Payment under new rate Increase in annual interest cost
$5,000 $49.21 $57.54 $99.96
$10,000 $98.42 $115.08 $199.92
$15,000 $147.63 $172.62 $299.88
$20,000 $196.84 $230.16 $399.84

Many of you have asked about the various proposals from lawmakers that might change the future interest rate structure for federal student loans. If rates change to a variable structure, this may make it more challenging for families to use the existing version of our Paying for College tools to estimate monthly student loan payments. We’ll be monitoring these proposals closely and will be asking for your feedback on how to adjust the tool should these proposals become law.

Is it true the government makes a profit on student loans?

The Congressional Budget Office regularly releases projections on the costs of various loan programs. The latest calculations show that in fiscal year 2013, for every $1 lent to new borrowers, Direct Subsidized Loans are expected to bring in $1.14 in revenue, and Direct Unsubsidized Loans will bring in $1.40 in revenue. Of course, these are just estimates. For example, if borrowers have access to attractive refinance options to take advantage of historically low interest rates, these revenues would go down.

It’s worth noting that the Congressional Budget Office calculates these estimates in a way that may not include all of the operating costs of administering the loan program, so it can’t be exactly compared to the way a bank might account for its profits and losses.

What should I do if rates double?

Given that the in-school rate is still 0 percent, a Direct Subsidized Loan is still likely the best option if you qualify. Since almost all private student loans accrue interest while you’re in school, you’d need to find an equivalent fixed rate option of less than 4 percent if you want your payments to be the same or less compared to the Direct Subsidized Loan.

Even if you are able to find that rate, you’d miss out on some important benefits, like Income-Based Repayment and 0 percent interest if you went back to school.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To find out more information about the CFPB’s work for students and young Americans, visit


Updated on August 13, 2013:
Last week, the president signed legislation passed by Congress to adjust federal student loan interest rates for this academic year. Here’s what the new rates look like:

Loans Interest rates
Direct Subsidized and Unsubsidized Loans (for undergraduate students): Fixed at 3.86%
Direct Unsubsidized Loans (for graduate/professional students): Fixed at 5.41%
Direct PLUS Loans (for parents and graduate/professional students): Fixed at 6.41%

The rate for Perkins Loans (for undergraduate and graduate/professional students) remains fixed at 5%.

Explainer: Why did it take 1,099 pages to propose a three-page mortgage disclosure?


Dear CFPB,

Recently, I saw your notice of proposed rulemaking to combine and simplify existing mortgage disclosures. It’s 1,099 pages long! Why does it take so many pages to create something that’s supposed to be easy to use and understand?

Interested in your regulations

Dear Interested,

This is a great question, one you’re not alone in asking — 1,099 is a lot of pages, as those of us who were involved in writing them can attest.

Let’s start with some background. Currently, two federal laws – the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) – mandate that consumers receive disclosures of certain information about mortgage loans. The Dodd-Frank Act required the CFPB to propose a rule to combine the TILA and RESPA disclosures.

If you want to see the new combined disclosures, combine and simplify existing mortgage disclosures check them out here. If you want to see what the proposal means for you, we’ve provided summaries, one on what it would mean for consumers and one with more technical detail.

You said “propose a rule to combine the disclosures” instead of just “propose combined disclosures.” Why?
It’s an important distinction. The rule explains how we would expect industry to use the disclosures: when to issue them, how they apply to different loans, what various terms mean, etc.

And that proposed rule is 1,099 pages?
Actually, no. We are not proposing 1,099 pages of new regulations. That page count is for the notice of the proposed rule, not the rule. Like notices of proposed rulemaking issued by other agencies (particularly the Federal Reserve Board), our proposal consists of three basic parts: (1) the preamble explaining the proposal; (2) the text of the proposed regulations; and (3) guidance on how to comply with those regulations.

In terms of pages, the new regulations are only a small part. Most of the pages explain what we are doing and why we are doing it. As required by law, we analyze the costs and benefits of the proposal for consumers and industry. We also provide thorough guidance on how to comply including samples of completed forms, which the industry requested during our outreach and Small Business Review Panel process. Because of the variability of mortgage loan and real estate transactions, industry wanted specific guidance for many different potential scenarios. This added to the page count.

Here’s how the notice breaks down:

Content Pages
  • Directions on how to submit comments
  • Summary of the proposed rule
  • Overview of the mortgage market and the mortgage shopping process
  • Summary of 43 years of TILA and RESPA mortgage disclosure regulation
  • Summary of the Dodd-Frank Act provisions requiring the Bureau to combine the TILA and RESPA mortgage disclosures and related Dodd-Frank Act mortgage rulemakings
  • Summary of the Bureau’s outreach, disclosure testing, and Small Business Review Panel
  • Statement of the Bureau’s legal authority
  • Detailed explanations of the reasons for each aspect of the proposed rule and requests for comment
  • Analyses of the costs and benefits of the proposed rule for consumers and industry, as required by the Dodd-Frank Act, the Regulatory Flexibility Act (as amended by the Small Business Regulatory Enforcement Fairness Act), and the Paperwork Reduction Act
Proposed amendments to regulations
  • New rules
  • Technical and conforming amendments to existing rules
Proposed guidance regarding compliance with the amended regulations
Signature page

The preamble is long.
It is. The preamble provides context for the proposed forms and regulatory changes. The mortgage market is big, and mortgage disclosure regulation has 43 years of history. Also, before writing the rule, we spent a lot of time talking to industry and consumers and analyzing costs and benefits. That’s a lot of context, and that means a long preamble.

Why bother with all this context?
First, some of it is required by law. Second, we believe that part of our commitment to open government is providing more rather than less information about our work. Finally, we want your comments to help us understand the market better, and providing context can lead to more informative comments. Explaining what we considered in writing the proposal makes it easier to craft specific responses or to draw our attention to something you think we’ve missed. Comments that provide new insight or information can be the ones that have the greatest impact on what we do next.

That leaves 415 pages. Only part of that is new rules, though. What else is left?
The technical and conforming amendments make sure the new rules don’t conflict with existing rules, that they make the right cross-references, etc. This actually accounts for more than half of the proposed regulatory language.

The proposed guidance explains what certain regulatory language means in context. For example, the phrase “within three business days” appears a lot in this notice, as in: a creditor must deliver the loan estimate disclosure “within three business days” of application. But what counts as a business day? If a bank is closed the Friday before an Independence Day that falls on Saturday, does that Friday count as a business day? (Answer for purposes of delivery of this disclosure: yes.) Providing guidance that clarifies issues like these can save time, energy, and costs for both industry and regulators.

And the signature gets its own page?
Yes. We don’t expect a lot of comments on that page.

So where can I comment on this notice of proposed rulemaking?
First, we hope you’ll take a look at the Know Before You Owe project that helped us develop the proposed disclosures. Then, review the rule and submit your comments at

Explainer: What is a nonbank, and what makes one “larger”?


Dear CFPB,

I noticed you posted a request for public comments on “larger participants” for your “nonbank supervision” program. I don’t understand what this is about. I know what a bank is – I walk past one every day on my way to work – but what is a nonbank? And larger than what, anyway?


Dear Consumer,

Those are great questions. You’re not the first person to read the phrase “nonbank” and lapse into a state of confusion. “What is a nonbank?” you ask yourself. Worry no more! The CFPB Web Team is on the case, with help from our Nonbank Supervision team. Here’s the lowdown:

The Dodd-Frank Act – the law that created the CFPB – gave us the job of supervising large banks, thrifts, and credit unions, and other financial institutions. Supervision, as we’ve explained previously, involves observing financial institutions — for example, by asking for information about their practices or conducting examinations. In our case, we do this mainly to make sure they comply with federal laws that protect consumers.

Bank supervision isn’t new. What is new is that, for the first time, under the Dodd-Frank Act, many nonbank financial companies will also be subject to federal supervision.

So what IS a nonbank? For our purposes, a nonbank is a company that offers consumer financial products or services, but does not have a bank, thrift, or credit union charter and does not take deposits.

Huh? Today, there are thousands of companies that offer financial products that are not banks, and consumers interact with them on a regular basis. If you’ve taken out a payday loan, received a call from a debt collector, or accessed your credit report, you probably have interacted with one, too. Other kinds of nonbanks include finance companies or companies that wire or send money for you.

Products from nonbanks form a significant chunk of the overall consumer financial marketplace. The number of nonbank companies that provide consumer financial products and services has grown over the last few decades. Under Dodd-Frank, many of these nonbanks will be subject to a federal supervision program for the first time.

What’s a “larger participant”? Our nonbank supervision program may look at all sizes of nonbank mortgage companies, payday lenders, and private student lenders. But Dodd-Frank says that in other markets, the Bureau’s supervision program generally covers only institutions that are “larger participant[s] of a market for other consumer financial products or services.”

“Larger”? Larger than what? Well, that’s what the CFPB has to figure out. Congress did not set the thresholds for inclusion in this supervision program for these other markets. Congress required that we define what these size thresholds should be, so we can lay the foundation to start this part of our nonbank supervision program. In other words, it’s our job to figure out exactly how large “larger” really is.

How do you do that? We start by asking the public for input. We’ve posted a Notice and Request for Comment on some important questions that need answers, like how to set thresholds and criteria for defining larger participants, and what markets we should cover in our initial rule. We’ll also conduct our own analysis to determine what threshold works best, but since this decision affects millions of consumers – including you – we are asking for input from everyone who wants to give it.

Can you end this blog post with a clever segue? We can! Now that you know what a nonbank is and why they matter, please take a moment to look at the Notice and file comments as indicated there. We want your input.