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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Rules and Regulations agencies did not propose revisions to their respective supervisory practices relating to supervisory criticisms.
The agencies also noted that the 2018
Statement was intended to focus on the appropriate use of supervisory guidance in the supervisory process, rather than the standards for supervisory criticisms.
To address any confusion concerning the scope of the 2018 Statement, the Proposed Rule removed two sentences from the 2018 Statement concerning grounds for citations and the handling of deficiencies that do not constitute violations of law.11
III. Comments on the Proposed Rule A. Overview The five agencies received approximately thirty unique comments concerning the Proposed Rule.12 The Bureau discusses below those comments that are potentially relevant to the Bureau, rather than those comments that are only potentially relevant to other agencies. As one example, the Bureau notes that the Federal banking agencies the OCC, Board, and FDIC received a comment regarding their supervisory authorities, but the Bureau did not.
Accordingly, the Bureau does not discuss that subject here.
Commenters representing trade associations for banking institutions and other businesses, State bankers associations, individual financial institutions, and one member of Congress expressed general support for the Proposed Rule. These commenters supported codification of the 2018
Statement and the reiteration by the agencies that guidance does not have the force of law and cannot give rise to binding, enforceable legal obligations.
One of these commenters stated that the Proposal would serve the interests of consumers and competition by clarifying the law for institutions and potentially removing ambiguities that could deter the development of innovative products that serve 11 The
following sentences from the 2018
Statement were not present in the Proposed Rule:
Rather, any citations will be for violations of law, regulation, or non-compliance with enforcement orders or other enforceable conditions. During examinations and other supervisory activities, examiners may identify unsafe or unsound practices or other deficiencies in risk management, including compliance risk management, or other areas that do not constitute violations of law or regulation. 2018 Statement at 2. The agencies did not intend these deletions to indicate a change in supervisory policy.
12 Of the comments received, some comments were not submitted to all agencies, and some comments were identical. Note that this total excludes comments that were directed at an unrelated rulemaking by the Financial Crimes Enforcement Network of the Department of the Treasury FinCEN.

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consumers and business clients, without uncertainty regarding potential regulatory consequences. These commenters expressed strong support as well for the clarification in the Proposed Rule that the agencies will not criticize, including through the issuance of matters requiring attention, a supervised financial institution for a violation of, or non-compliance with, supervisory guidance.
One commenter agreed with the agencies that supervisory criticisms should not be limited to violation of statutes, regulations, or orders and that supervisory guidance remains a beneficial tool to communicate supervisory expectations to the industry. The commenter stated that the proactive identification of supervisory criticism or deficiencies that do not constitute violations of law facilitates forward-looking supervision, which helps address problems before they warrant a formal enforcement action.
The commenter noted as well that supervisory guidance provides important insight to industry and ensures consistency in the supervisory approach and that supervised institutions frequently request supervisory guidance. The commenter observed that the COVID19 pandemic has amplified the requests for supervisory guidance and interpretation, and that it is apparent institutions want clarity and guidance from regulators.
Two commenters, both public interest advocacy groups, opposed the Proposed Rule, suggesting that codifying the 2018
Statement may undermine the important role that supervisory guidance can play by informing supervisory criticism, rather than merely clarifying that it will not serve as the basis for enforcement actions.
One commenter stated that it is essential for agencies to have the prophylactic authority to base criticisms on imprudent bank practices that may not yet have ripened into violations of law or significant safety and soundness concerns. The commenter stated that this is particularly important with respect to large banks, where delay in addressing concerns could lead to a broader crisis. One commenter stated that the agencies have not explained the benefits that would result from the rule or demonstrated how the rule will promote safety and soundness or consumer protection. The commenter argued that supervision is different from other forms of regulation and requires supervisory discretion, which could be constrained by the rule. One of these commenters argued that the Proposal would send a signal that banking
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institutions have wider discretion to ignore supervisory guidance.
In a comment that was specifically addressed to the Bureau, a veterans advocacy group expressed concern that the Bureaus participation in the interagency rule would bind the hands of a future administration.
B. Scope of Rule Several industry commenters requested that the Proposed Rule cover interpretive rules and clarify that interpretive rules do not have the force and effect of law. One commenter stated that the agencies should clarify whether they believe that interpretive rules can be binding. The commenter argued that, under established legal principles, interpretive rules can be binding on the agency that issues but not on the public.
Some commenters suggested that the agencies follow Administrative Conference of the United States ACUS
recommendations for issuing interpretive rules and that the agencies should clarify when particular guidance documents are or are not interpretive rules and allow the public to petition to change an interpretation. A number of commenters requested that the agencies expand the statement to address the standards that apply to MRAs and other supervisory criticisms, a suggestion made in the Petition.
One comment that specifically pertained to the Bureau, which was submitted by an association of community banks, recommended that the category of supervisory guidance be expanded to include the small entity compliance guides that the Bureau provides for small entities, which the commenter described as extremely helpful. Another comment, from an association in the debt-collection industry, generally encouraged the Bureau to issue small entity compliance guides, frequently asked questions, and advisory opinions to explain compliance expectations.
C. Role of Guidance Documents Several commenters recommended that the agencies clarify that the practices described in supervisory guidance are merely examples of conduct that may be consistent with statutory and regulations, not expectations that may form the basis for supervisory criticism. One commenter suggested that the agencies state that when supervisory guidance or interpretive rules offers examples of safe and sound conduct, compliance with consumer protection standards, appropriate risk management practices, or acceptable practices through supervisory guidance, the agencies will
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