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August 24, 2022

Banking Trade Groups Challenge CFPB's Authority to Regulate Customer Service

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Key Takeaways

  • The trade groups assert that the right to timely information provided by Section 1034(c ) addresses the right of a consumer to obtain the consumer’s financial data from his or her financial institution.

In response to the CFPB's Request for Information Regarding Relationship Banking and Customer Service (RFI), three leading banking trade groups have submitted a comment letter  in which they challenge the CFPB's legal authority for the RFI.  The three groups are the Consumer Bankers Association, the Bank Policy Institute, and the American Bankers Association.

In issuing the RFI, the CFPB relied on Section 1034(c) of the Consumer Financial Protection Act which requires depository institutions subject to CFPB supervision (i.e. those with more than $10 billion in assets) to provide "in a timely manner" responses to consumers requests for information about a financial product or service that the consumer obtained from the depository institution.  The CFPB described the RFI as  an "initiative to improve customer service at big banks."

The trade groups assert that the right to timely information provided by Section 1034(c ) addresses the right of a consumer to obtain the consumer's financial data from his or her financial institution.  They point out that a bank's obligation to provide information to a consumer "in a timely manner" in response to a request "is very different from an obligation to serve customers on particular terms or in a certain manner more generally" and that "the latter encompasses a much broader and complex set of interactions between consumers and their financial intuitions, which are not addressed by section 1034."  The trade groups contend that the CFPB is attempting to use the RFI "to create a legal authority that it does not have: the right to dictate the type of customer service banks provide and the manner in which they do so."

The trade groups also take issue with what they view as the RFI's implication "that banks' use of technology to better serve consumers leads to less personal and suboptimal customer service and is a departure from ‘relationship banking.'"  They observe that the term "relationship banking" as used in the RFI "seems to refer to reliance on face-to-face interactions and other activities at brick-and-mortar branch locations, as compared with the provision of customer service through telephone, online, or other technologically advanced platforms."  They assert that rather than representing a departure "from the implied personalization of ‘relationship banking,'" banks' use of "advanced digital technologies such as Artificial Intelligence (AI) and machine learning have accelerated the opportunity for banks to deliver more personalized interactions with consumers through digital channels."

The trade groups cite to numerous findings and data to refute what they call the CFPB's "flawed premise that banks provide poor service" and its "inaccurate picture" of the banking industry "as increasingly consolidated, and that such consolidation has degraded customer service."  They note that mergers "can strengthen the ability of banks to achieve economies of scale that allow them to continue to serve communities that have experienced population loss," thereby enhancing, rather than degrading, customer service.

We have also questioned whether Section 1034(c) is in fact an appropriate tool for the CFPB to use for its apparent purpose of improving customer service.  As we previously observed, the CFPB's invocation of Section 1034(c) as the basis for the RFI is yet another example of the agency's willingness to attempt to use every tool in its toolbox—whether or not appropriate and regardless of how strained the statutory interpretation-to pursue its priorities. 

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