Page Range | 32987-33438 | |
FR Document |
Page and Subject | |
---|---|
82 FR 33437 - Captive Nations Week, 2017 | |
82 FR 33159 - Sunshine Act Meetings | |
82 FR 33009 - Special Enrollment Examination User Fee for Enrolled Agents | |
82 FR 32987 - Exercise of Time-Limited Authority To Increase the Fiscal Year 2017 Numerical Limitation for the H-2B Temporary Nonagricultural Worker Program | |
82 FR 33106 - Criteria for the Certification and Recertification of the Waste Isolation Pilot Plant's Compliance With the Disposal Regulations; Recertification Decision | |
82 FR 33123 - Proposal To Withdraw Proposed Determination To Restrict the Use of an Area as a Disposal Site; Pebble Deposit Area, Southwest Alaska | |
82 FR 33197 - Notice of Changes to SBA Secondary Market Program | |
82 FR 33143 - Oklahoma; Amendment No. 1 to Notice of a Major Disaster Declaration | |
82 FR 33141 - Collection of Information Under Review by Office of Management and Budget | |
82 FR 33144 - Changes in Flood Hazard Determinations | |
82 FR 33151 - Filing of Plat Survey; Eastern States | |
82 FR 33152 - Notice of Intent To Prepare a Supplemental Environmental Impact Statement for the Mount Hope Project, Eureka County, Nevada | |
82 FR 33126 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
82 FR 33125 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding Company | |
82 FR 33191 - Northern Lights Fund Trust and Toews Corporation | |
82 FR 33049 - North American Free Trade Agreement (NAFTA), Article 1904 Binational Panel Review: Notice of Request for Panel Review | |
82 FR 33204 - Fund Availability Under the Grants for Transportation of Veterans in Highly Rural Areas Program | |
82 FR 33200 - Portland Vancouver Junction Railroad, LLC-Operation Exemption-Rail Lines of Columbia Business Center, Clark County, Wash. | |
82 FR 33026 - Approval and Promulgation of Implementation Plans; Texas; Reasonably Available Control Technology for the 2008 8-Hour Ozone National Ambient Air Quality Standard | |
82 FR 33122 - Cross-Media Electronic Reporting: Authorized Program Revision Approval, Territory of U.S. Virgin Islands | |
82 FR 33125 - Notice of Agreements Filed | |
82 FR 33142 - Lower Mississippi River Waterway Safety Advisory Committee; Vacancies | |
82 FR 33166 - New Postal Products | |
82 FR 33137 - Findings of Research Misconduct | |
82 FR 33202 - Petition for Exemption; Summary of Petition Received; General Electric Company | |
82 FR 33201 - Petition for Exemption; Summary of Petition Received; Rolls-Royce plc | |
82 FR 33042 - Notice of Intent To Request an Early Revision and Merger of Two Currently Approved Information Collections | |
82 FR 33131 - Office of Federal High-Performance Buildings; Green Building Advisory Committee; Notification of Upcoming Conference Calls | |
82 FR 33129 - Submission for OMB Review; FSRS Registration Requirements for Prime Grant Awardees | |
82 FR 33137 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meeting | |
82 FR 33138 - National Institute on Aging; Notice of Closed Meeting | |
82 FR 33138 - Center for Scientific Review; Notice of Closed Meetings | |
82 FR 33068 - Gulf of Mexico Fishery Management Council; Public Meeting | |
82 FR 33079 - Defense Business Board; Notice of Federal Advisory Committee Meeting | |
82 FR 33200 - 30-Day Notice of Proposed Information Collection: Nonimmigrant Visa Application | |
82 FR 33130 - Submission for OMB Review; FFATA Subaward and Executive Compensation Reporting Requirements | |
82 FR 33161 - GE-Hitachi Nuclear Energy Americas, LLC; GE-Hitachi Morris Operation Independent Spent Fuel Storage Installation | |
82 FR 33160 - New ListServ for Waste Incidental to Reprocessing (WIR) Program Documents | |
82 FR 33159 - Strata Energy, Inc.; Ross Uranium In Situ Recovery Facility; Source and Byproduct Materials License | |
82 FR 33050 - Ripe Olives From Spain: Initiation of Countervailing Duty Investigation | |
82 FR 33054 - Ripe Olives From Spain: Initiation of Less-Than-Fair-Value Investigation | |
82 FR 33047 - Fresh Garlic From the People's Republic of China: Notice of Court Decision Not in Harmony With Final Rescission and Notice of Amended Final Results | |
82 FR 33059 - Narrow Woven Ribbon With Woven Selvedge From the People's Republic of China: Preliminary Results of Administrative Review and Preliminary Partial Rescission of Antidumping Duty Administrative Review; 2015-2016 | |
82 FR 33068 - Pacific Fishery Management Council; Public Meeting | |
82 FR 33156 - Certain Hand Dryers and Housings for Hand Dryers; Commission Determination To Review In-Part an Initial Determination Granting Complainant's Motion for Summary Determination of Section 337 Violation by the Defaulting Respondents | |
82 FR 33161 - STP Nuclear Operating Company; South Texas Project, Units 1 and 2 | |
82 FR 33202 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Reporting and Recordkeeping Requirements Associated With Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring | |
82 FR 33080 - Agency Information Collection Activities; Comment Request; an Impact Evaluation of Training in Multi-Tiered Systems of Support for Behavior (MTSS-B) | |
82 FR 33199 - 30-Day Notice of Proposed Information Collection: Online Application for Nonimmigrant Visa | |
82 FR 33099 - Notice of Petition for Waiver of New Shunxiang Electrical Appliance Co., Ltd., From the Department of Energy Refrigerator, Refrigerator-Freezer, Freezer Test Procedures | |
82 FR 33081 - Notice of Petition for Waiver of ITW Food Equipment Group, LLC From the Department of Energy Commercial Refrigeration Equipment Test Procedures and Grant of Interim Waiver | |
82 FR 33040 - Request for Extension of a Currently Approved Information Collection | |
82 FR 33139 - Collection of Information Under Review by Office of Management and Budget | |
82 FR 33138 - Collection of Information Under Review by Office of Management and Budget | |
82 FR 33035 - Endangered and Threatened Wildlife and Plants; 6-Month Extension of Final Determination on the Proposed Threatened Status for Chorizanthe parryi | |
82 FR 33044 - Limited-Access Highway Classification Codes | |
82 FR 33158 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Extension Without Change of a Currently Approved Collection; Notification of Change of Mailing or Premise Address | |
82 FR 33024 - Fisheries of the Exclusive Economic Zone Off Alaska; Reapportionment of the 2017 Gulf of Alaska Pacific Halibut Prohibited Species Catch Limits for the Trawl Deep-Water and Shallow-Water Fishery Categories | |
82 FR 33125 - Notice to All Interested Parties of the Termination of the Receivership of 10165-Peoples First Community Bank, Panama City, Florida | |
82 FR 33134 - Announcement of the Award of Five Single-Source Low-Cost Extension Supplement Grants Within the Office of Refugee Resettlement's Unaccompanied Alien Children's (UAC) Program | |
82 FR 33140 - Information Collection Request to Office of Management and Budget; OMB Control Number: 1625-New | |
82 FR 33198 - 60-Day Notice of Proposed Information Collection: Certificate of Eligibility for Exchange Visitor (J-1) Status | |
82 FR 33136 - Advisory Committee on Heritable Disorders in Newborns and Children | |
82 FR 33043 - Proposed Information Collection; Comment Request; Annual Retail Trade Survey | |
82 FR 33165 - Proposed Submission of Information Collection for OMB Review; Comment Request; Annual Reporting (Form 5500 Series) | |
82 FR 33070 - Agency Information Collection Activities: Comment Request | |
82 FR 33152 - Notice of Inventory Completion: U.S. Army Corps of Engineers, Huntington District; Correction | |
82 FR 33153 - Notice of Inventory Completion: History Colorado, Formerly Colorado Historical Society, Denver, CO | |
82 FR 33155 - Notice of Inventory Completion: U.S. Department of Defense, Army Corps of Engineers, Nashville District, Nashville, TN | |
82 FR 33071 - Agency Information Collection Activities: Comment Request | |
82 FR 33192 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca Equities Rule 7.38 To Specify the Ranking of an Odd Lot Order That Has a Display Price That Is Better Than Its Working Price | |
82 FR 33194 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule | |
82 FR 33189 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update Rule Cross-References and Make Non-Substantive Technical Changes to FINRA Rules | |
82 FR 33187 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7018 | |
82 FR 33170 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt New Rules That Describe the Trading of Complex Orders on the Exchange for the Exchange's Equity Options Platform | |
82 FR 33168 - Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees To Assess Connectivity Fees | |
82 FR 33072 - 36(b)(1) Arms Sales Notification | |
82 FR 33105 - Great Bay Solar 1, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
82 FR 33101 - Combined Notice of Filings #1 | |
82 FR 33126 - Granting of Requests for Early Termination of the Waiting Period Under the Premerger Notification Rules | |
82 FR 33074 - Arms Sales Notification | |
82 FR 33069 - Agency Information Collection Activities Under OMB Review | |
82 FR 33101 - Cube Yadkin Generation, LLC; Notice of Application Accepted for Filing and Soliciting Comments, Motions To Intervene, and Protests | |
82 FR 33102 - Commission Information Collection Activities (FERC-510, FERC-520, FERC-561, and FERC-583); Comment Request | |
82 FR 33151 - Nebraska; Major Disaster and Related Determinations | |
82 FR 33149 - Changes in Flood Hazard Determinations | |
82 FR 33148 - Final Flood Hazard Determinations | |
82 FR 33146 - Changes in Flood Hazard Determinations | |
82 FR 33132 - Agency Information Collection Activities: Proposed Collection; Comment Request | |
82 FR 33167 - Notice of Availability: Draft Programmatic Environmental Assessment for Commercial Off-the-Shelf Vehicle Acquisitions, Nationwide | |
82 FR 33168 - Product Change-Priority Mail Negotiated Service Agreement | |
82 FR 33133 - Agency Information Collection Activities: Proposed Collection; Comment Request | |
82 FR 33198 - Presidential Declaration of a Major Disaster for Public Assistance Only for the State of North Dakota | |
82 FR 33197 - Presidential Declaration of a Major Disaster for Public Assistance Only for the State of New York | |
82 FR 33201 - Petition for Exemption; Summary of Petition Received; Mr. Edward Silva | |
82 FR 33036 - Fisheries of the Northeastern United States; Mid-Atlantic Fishery Management Council; Omnibus Acceptable Biological Catch Framework Adjustment | |
82 FR 33076 - 36(b)(1) Arms Sales Notification | |
82 FR 33131 - Agency Information Collection Activities: Submission for OMB Review; Comment Request | |
82 FR 33072 - Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Comment Request; Financial Management Survey | |
82 FR 33040 - Information Collection Request; Certified State Mediation Program | |
82 FR 33064 - Listing Endangered or Threatened Species; 90-Day Finding on a Petition To List the Winter-Run Puget Sound Chum Salmon in the Nisqually River System and Chambers Creek as a Threatened or Endangered Evolutionarily Significant Unit Under the Endangered Species Act | |
82 FR 33032 - Approval of California Air Plan Revisions, Sacramento Metropolitan Air Quality Management District | |
82 FR 33026 - Air Plan Approval; ME; Consumer Products Alternative Control Plan | |
82 FR 33030 - Approval of California Air Plan Revisions; Sacramento Metropolitan Air Quality Management District | |
82 FR 33012 - Air Plan Approval; Maine; Motor Vehicle Fuel Requirements | |
82 FR 33014 - Air Plan Approval; ME; Consumer Products Alternative Control Plan | |
82 FR 33135 - Agency Information Collection Activities; Proposed Collection; Public Comment Request; Extension of the Certification of Maintenance of Effort for Title III and Certification of Long-Term Care Ombudsman Program Expenditures | |
82 FR 33048 - Emulsion Styrene-Butadiene Rubber From Brazil: Final Affirmative Determination of Sales at Less Than Fair Value and Final Negative Determination of Critical Circumstances | |
82 FR 33061 - Emulsion Styrene-Butadiene Rubber From Poland: Final Affirmative Determination of Sales at Less Than Fair Value | |
82 FR 33062 - Emulsion Styrene-Butadiene Rubber From Mexico: Final Affirmative Determination of Sales at Less Than Fair Value | |
82 FR 33045 - Emulsion Styrene-Butadiene Rubber From the Republic of Korea: Final Affirmative Determination of Sales at Less Than Fair Value, and Final Affirmative Determination of Critical Circumstances, in Part | |
82 FR 33016 - Administrative Amendments to Environmental Protection Agency Acquisition Regulation | |
82 FR 33105 - Environmental Laboratory Advisory Board; Notice of Charter Renewal | |
82 FR 33041 - Deschutes National Forest; Deschutes and Klamath Counties, Oregon; Ringo Project Draft Environmental Impact Statement and Forest Plan Amendment | |
82 FR 33000 - Revision of Fee Schedules; Fee Recovery for Fiscal Year 2017; Corrections | |
82 FR 33002 - Airworthiness Directives; Airbus Airplanes | |
82 FR 33007 - Airworthiness Directives; The Boeing Company Airplanes | |
82 FR 33004 - Airworthiness Directives; Fokker Services B.V. Airplanes | |
82 FR 33210 - Arbitration Agreements |
Agricultural Marketing Service
Farm Service Agency
Forest Service
National Agricultural Statistics Service
Census Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
Energy Efficiency and Renewable Energy Office
Federal Energy Regulatory Commission
Centers for Medicare & Medicaid Services
Children and Families Administration
Community Living Administration
Health Resources and Services Administration
National Institutes of Health
Coast Guard
Federal Emergency Management Agency
Fish and Wildlife Service
Land Management Bureau
National Park Service
Alcohol, Tobacco, Firearms, and Explosives Bureau
Wage and Hour Division
Federal Aviation Administration
Comptroller of the Currency
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
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U.S. Citizenship and Immigration Services, Department of Homeland Security and Employment and Training Administration and Wage and Hour Division, Department of Labor.
Temporary rule.
The Secretary of Homeland Security (“Secretary”), in consultation with the Secretary of Labor, has decided to increase the numerical limitation on H-2B nonimmigrant visas to authorize the issuance of up to an additional 15,000 through the end of Fiscal Year (FY) 2017. This is a one-time increase based on a time-limited statutory authority and does not affect the H-2B program in future fiscal years. The Departments are promulgating regulations to implement this determination.
This final rule is effective from July 19, 2017 through September 30, 2017, except for the addition of 20 CFR 655.65, which is effective from July 19, 2017 through September 30, 2020.
Regarding 8 CFR part 214: Kevin J. Cummings, Chief, Business and Foreign Workers Division, Office of Policy and Strategy, U.S. Citizenship and Immigration Services, Department of Homeland Security, 20 Massachusetts Ave NW., Suite 1100, Washington, DC 20529-2120, telephone (202) 272-8377 (not a toll-free call). Regarding 20 CFR part 655: William W. Thompson, II, Administrator, Office of Foreign Labor Certification, Employment and Training Administration, Department of Labor, Box #12-200, 200 Constitution Ave. NW., Washington, DC 20210, telephone (202) 513-7350 (this is not a toll-free number).
Individuals with hearing or speech impairments may access the telephone numbers above via TTY by calling the toll-free Federal Information Relay Service at 1-877-889-5627 (TTY/TDD).
The Immigration and Nationality Act (INA) establishes the H-2B nonimmigrant classification for a nonagricultural temporary worker “having a residence in a foreign country which he has no intention of abandoning who is coming temporarily to the United States to perform . . . temporary [non-agricultural] service or labor if unemployed persons capable of performing such service or labor cannot be found in this country.” INA section 101(a)(15)(H)(ii)(b), 8 U.S.C. 1101(a)(15)(H)(ii)(b). Employers must petition DHS for classification of prospective temporary workers as H-2B nonimmigrants. INA section 214(c)(1), 8 U.S.C. 1184(c)(1). DHS must approve this petition before the beneficiary can be considered eligible for an H-2B visa. Finally, the INA requires that “[t]he question of importing any alien as [an H-2B] nonimmigrant . . . in any specific case or specific cases shall be determined by [DHS],
DHS regulations provide that an H-2B petition for temporary employment in the United States must be accompanied by an approved temporary labor certification (TLC) from DOL. 8 CFR 214.2(h)(6)(iii)(A) & (C), (iv)(A). The TLC serves as DHS's consultation with DOL with respect to whether a qualified U.S. worker is available to fill the petitioning H-2B employer's job opportunity and whether a foreign worker's employment in the job opportunity will adversely affect the wages or working conditions of similarly employed U.S. workers.
The Departments have established regulatory procedures under which DOL certifies whether a qualified U.S. worker is available to fill the job opportunity described in the employer's petition for a temporary nonagricultural worker, and whether a foreign worker's employment in the job opportunity will adversely affect the wages or working conditions of similarly employed U.S. workers.
The INA also authorizes DHS to impose appropriate remedies against an employer for a substantial failure to meet the terms and conditions of employing an H-2B nonimmigrant worker, or for a willful misrepresentation of a material fact in a petition for an H-2B nonimmigrant worker. INA section 214(c)(14)(A), 8 U.S.C. 1184(c)(14)(A). The INA expressly authorizes DHS to delegate certain enforcement authority to DOL. INA section 214(c)(14)(B), 8 U.S.C. 1184(c)(14)(B). DHS has delegated this authority to DOL.
The INA sets the annual number of aliens who may be issued H-2B visas or otherwise provided H-2B nonimmigrant status to perform temporary nonagricultural work at 66,000, to be distributed semi-annually beginning in October and in April.
Because of the intense competition for H-2B visas in recent years, the semi-annual visa allocation, and the regulatory requirement that employers apply for labor certification 75 to 90 days before the start date of work,
On May 5, 2017, the President signed the FY 2017 Omnibus, which contains a provision (section 543 of division F, hereinafter “section 543”) permitting the Secretary of Homeland Security, under certain circumstances and after consultation with the Secretary of Labor, to increase the number of H-2B visas available to U.S. employers, notwithstanding the otherwise established statutory numerical limitation. Specifically, section 543 provides that “the Secretary of Homeland Security, after consultation with the Secretary of Labor, and upon the determination that the needs of American businesses cannot be satisfied in [FY] 2017 with U.S. workers who are willing, qualified, and able to perform temporary nonagricultural labor,” may increase the total number of aliens who may receive an H-2B visa in FY 2017 by not more than the highest number of H-2B nonimmigrants who participated in the H-2B returning worker program in any fiscal year in which returning workers were exempt from the H-2B numerical limitation.
The Departments have determined that it is appropriate to issue this final rule jointly. This determination is related to ongoing litigation following conflicting court decisions concerning DOL's authority to independently issue legislative rules to carry out its consultative function pertaining to the H-2B program under the INA.
Following consultation with the Secretary of Labor, the Secretary of Homeland Security has determined that the needs of some American businesses cannot be satisfied in FY 2017 with U.S. workers who are willing, qualified, and able to perform temporary nonagricultural labor. In accordance with the FY 2017 Omnibus, the Secretary of Homeland Security has determined that it is appropriate, for the reasons stated below, to raise the numerical limitation on H-2B nonimmigrant visas by up to an additional 15,000 for the remainder of the fiscal year. Consistent with such authority, the Secretary of Homeland Security has decided to increase the H-2B cap for FY 2017 by up to 15,000 additional visas for those American businesses that attest to a level of need such that, if they do not receive all of the workers under the cap increase, they are likely to suffer irreparable harm,
The Secretary of Homeland Security's determination to increase the numerical limitation is based on the conclusion that some businesses face closing their doors in the absence of a cap increase. Some stakeholders have reported that access to additional H-2B visas is essential to the continued viability of some small businesses that play an important role in sustaining the economy in their states, while others have stated that an increase is unnecessary and raises the possibility of abuse.
The decision to direct the benefits of this one-time cap increase to businesses that need workers to avoid irreparable harm, rather than directing the cap increase to any and all businesses seeking temporary workers, is consistent with the Secretary's broad discretion under section 543. Section 543 provides that the Secretary, upon satisfaction of the statutory business need standard,
First, DHS interprets section 543's reference to “the needs of American businesses” as describing a need different than the need required of employers in petitioning for an H-2B worker.
Second, this approach limits the one-time increase in a way that is responsive to stakeholders who, citing potential adverse impacts on U.S. workers from a general cap increase applicable to all potential employers, sought opportunities for more formal input and analysis prior to such an increase. Although the calendar does not lend itself to such additional efforts, the Secretary has determined that in the unique circumstances presented here, it is appropriate to tailor the availability of this temporary cap increase to those businesses likely to suffer irreparable harm,
Under this rule, employers must also meet, among other requirements, the generally applicable requirements that insufficient qualified U.S. workers are available to fill the petitioning H-2B employer's job opportunity and that the foreign worker's employment in the job opportunity will not adversely affect the wages or working conditions of similarly employed U.S. workers. INA section 214(c)(1), 8 U.S.C. 1184(c)(1); 8 CFR 214.2(h)(6)(iii)(A) and (D); 20 CFR 655.1. To meet this standard, in order to be eligible for additional visas under this rule, employers must have a valid TLC in accordance with 8 CFR 214.2(h)(6)(iv)(A) and (D), and 20 CFR 655 subpart A. Under DOL's H-2B regulations, TLCs expire on the last day of authorized employment. 20 CFR 655.55(a). Therefore, in order to have an unexpired TLC, the date on the employer's visa petition must not be later than the last day of authorized employment on the TLC. This rule also requires an additional recruitment for certain petitioners, as discussed below.
Accordingly, this rule increases the FY 2017 numerical limitation by up to 15,000 to ensure a sufficient number of visas to meet the level of demand in past years, but also restricts the availability of such visas by prioritizing only the most significant business needs. These provisions are each described in turn below.
DHS expects the increase of up to 15,000 visas
Most recently, in FY 2016, 18,090 returning workers were approved for H-2B petitions, despite Congress having reauthorized the returning worker program with more than three-quarters of the fiscal year remaining. Of those 18,090 workers authorized for admission, 13,382 were admitted into the United States or otherwise acquired H-2B status. While section 543 does not limit the issuance of additional H-2B visas to returning workers, the Secretary, in consideration of the statute's reference to returning workers, determined that it would be appropriate to use these recent figures as a basis for the maximum numerical limitation under section 543. This rule therefore authorizes up to 15,000 additional H-2B visas (rounded up from 13,382) for FY 2017.
To file an H-2B petition during the remainder of FY 2017, petitioners must meet all existing H-2B eligibility requirements, including having an approved, valid and unexpired TLC per 8 CFR 214.2(h)(6) and 20 CFR 655 subpart A. In addition, the petitioner must submit an attestation in which the petitioner affirms, under penalty of perjury, that it meets the business need standard set forth above. Under that standard, the petitioner must be able to establish that if they do not receive all of the workers under the cap increase, they are likely to suffer irreparable harm, that is, permanent and severe financial loss. Although the TLC process focuses on establishing whether a petitioner has a need for workers, the TLC does not directly address the harm a petitioner may face in the absence of such workers; the attestation addresses this question. The attestation must be submitted directly to USCIS, together with the Petition for a Nonimmigrant Worker (Form I-129), the valid TLC, and any other necessary documentation. The new attestation form is included in this rulemaking as Appendix A.
The attestation serves as prima facie initial evidence to DHS that the petitioner's business is likely to suffer irreparable harm.
In addition to the statement regarding the irreparable harm standard, the attestation will also state that the employer: Meets all other eligibility criteria for the available visas; will comply with all assurances, obligations, and conditions of employment set forth in the
The requirement to provide a post-TLC attestation to USCIS is sufficiently protective of U.S. workers given that the employer, in completing the TLC process, has already made one unsuccessful attempt to recruit U.S. workers. In addition, the employer is required to retain documentation, which must be provided upon request, supporting the new attestations, including a recruitment report for any additional recruitment required under this rule. Accordingly, USCIS may issue a denial or a request for additional evidence in accordance with 8 CFR 103.2(b) or 8 CFR 214.2(h)(11) based on such documentation, and DOL's WHD will be able to review this documentation and enforce the attestations. Although the employer must have such documentation on hand at the time it files the petition, the Departments have determined that if employers were required to submit the attestations to DOL before seeking a petition from DHS or to complete all recruitment before submitting a petition, the attendant delays would render any visas unlikely to satisfy the needs of American businesses given processing timeframes and that there are only a few months remaining in this fiscal year.
In accordance with the attestation requirement, whereby petitioners attest that they meet the irreparable harm standard, and the documentation retention requirements at 20 CFR 655.65, the petitioner must retain documents and records meeting their burden to demonstrate compliance with this rule, and must provide the documents and records upon the request of DHS or DOL, such as in the event of an audit or investigation. Supporting evidence may include, but is not limited to, the following types of documentation:
(1) Evidence that the business is or would be unable to meet financial or contractual obligations without H-2B workers, including evidence of contracts, reservations, orders, or other business arrangements that have been or would be cancelled absent the requested H-2B workers; and evidence demonstrating an inability to pay debts/bills;
(2) Evidence that the business has suffered or will suffer permanent and severe financial loss during the period of need, as compared to the period of need in prior years, such as: Financial statements (including profit/loss statements) comparing present period of need as compared to prior years; bank statements, tax returns or other documents showing evidence of current and past financial condition; relevant tax records, employment records, or other similar documents showing hours worked and payroll comparisons from prior years to current year;
(3) Evidence showing the number of workers needed in previous seasons to meet the employer's temporary need as compared to those currently employed, including the number of H-2B workers requested, the number of H-2B workers actually employed, the dates of their employment, and their hours worked (
(4) Evidence that the business is dependent on H-2B workers, such as: Number of H-2B workers compared to U.S. workers needed prospectively or in the past; business plan or reliable forecast showing that, due to the nature and size of the business, there is a need for a specific number of H-2B workers.
These examples of potential evidence, however, will not exclusively or necessarily establish that the business meets the irreparable harm standard, and petitioners may retain other types of evidence they believe will satisfy this standard. If an audit or investigation occurs, DHS or DOL will review all evidence available to it to confirm that the petitioner properly attested to DHS that their business would likely suffer irreparable harm. If DHS subsequently finds that the evidence does not support the employer's attestation, DHS may deny or revoke the petition consistent with existing regulatory authorities and/or notify DOL. In addition, DOL may independently take enforcement action, including, among other things, to debar the petitioner from using the H-2B program generally for not less than one year or more than 5 years from the date of the final agency decision and may disqualify the debarred party from filing any labor certification applications or labor condition applications with DOL for the same period set forth in the final debarment decision.
To the extent that evidence reflects a preference for hiring H-2B workers over U.S. workers, an investigation by other agencies enforcing employment and labor laws, such as the Immigrant and Employee Rights Section of the Department of Justice's Civil Rights Division, may be warranted.
DHS, in exercising its statutory authority under INA section 101(a)(15)(H)(ii)(b), 8 U.S.C. 1101(a)(15)(H)(ii)(b), and section 543, is responsible for adjudicating eligibility for H-2B classification. As in all cases, the burden rests with the petitioner to establish eligibility by a preponderance of the evidence. Accordingly, as noted above, where the petition lacks initial evidence, such as a properly completed attestation, DHS may deny the petition in accordance with 8 CFR 103.2(b)(8)(ii). Further, where the initial evidence submitted with the petition contains inconsistencies or is inconsistent with other evidence in the petition and underlying TLC, DHS may issue a Request for Evidence, Notice of Intent to Deny, or Denial in accordance with 8 CFR 103.2(b)(8). In addition, where it is determined that an H-2B petition filed pursuant to the FY 2017 Omnibus was granted erroneously, the H-2B petition approval may be revoked,
Because of the unique circumstances of this regulation, and because the attestation plays a vital role in achieving the purposes of this regulation, DHS and DOL intend that the attestation requirement be non-severable from the remainder of the regulation. Thus, in the event the attestation requirement is enjoined or held invalid, the remainder of the regulation, with the exception of the retention requirements, is also intended to cease operation in the relevant jurisdiction, without prejudice to workers already present in the United States under this regulation, as consistent with law.
To petition for H-2B workers under this rule, the petitioner must file a Petition for a Nonimmigrant Worker, Form-129 in accordance with applicable regulations and form instructions, and must submit the attestation described above. The attestation must be filed on Form ETA-9142-B-CAA,
To encourage timely filing of any petition seeking a visa under the FY 2017 Omnibus, DHS is notifying the public that the petition may not be approved by USCIS on or after October 1, 2017.
USCIS's current processing goals for H-2B petitions that can be adjudicated without the need for further evidence (
As with other Form I-129 filings, DHS encourages petitioners to provide a duplicate copy of Form I-129 and all supporting documentation at the time of filing if the beneficiary is seeking a nonimmigrant visa abroad. Failure to submit duplicate copies may cause a delay in the issuance of a visa to otherwise eligible applicants.
Because all employers are required to have an approved and valid TLC from DOL in order to file a Form I-129 petition with DHS in accordance with 8 CFR 214.2(h)(6)(iv)(A) and (D), employers with an approved TLC will have already conducted recruitment, as
Therefore, employers with still valid TLCs with a start date of work before June 1, 2017, will be required to conduct additional recruitment, and attest that the recruitment will be conducted, as follows. The employer must place a new job order for the job opportunity with the State Workforce Agency (SWA), serving the area of intended employment. The job order must contain the job assurances and contents set forth in 20 CFR 655.18 for recruitment of U.S. workers at the place of employment, and remain posted for at least 5 days beginning not later than the next business day after submitting a petition for H-2B worker to USCIS. In addition, eligible employers will also be required to place one newspaper advertisement, which may be published on any day of the week, meeting the advertising requirements of 20 CFR 655.41, during the period of time the SWA is actively circulating the job order for intrastate clearance. Employers must retain the additional recruitment documentation, including a recruitment report that meets the requirements for recruitment reports set forth in 20 CFR 655.48(a)(1)(2) & (7), together with a copy of the attestation and supporting documentation, as described above, for a period of 3 years from the date that the TLC was approved, consistent with the document retention requirements under 20 CFR 655.56. These requirements are similar to those that apply to seafood employers who bring in additional workers between 90 and 120 days after their certified start date of need under 20 CFR 655.15(f).
The employer must hire any qualified U.S. worker who applies or is referred for the job opportunity until 2 business days after the last date on which the job order is posted. The two business day requirement permits an additional brief period of time to enable U.S. workers to contact the employer following the job order or newspaper advertisement. Consistent with 20 CFR 655.40(a), applicants can be rejected only for lawful job-related reasons.
DOL's Wage and Hour Division has the authority to investigate the employer's attestations, as the attestations are a required part of the H-2B petition process under this rule and the attestations rely on the employer's existing, approved TLC. Where a WHD investigation determines that there has been a willful misrepresentation of a material fact or a substantial failure to meet the required terms and conditions of the attestations, WHD may institute administrative proceedings to impose sanctions and remedies, including (but not limited to) assessment of a civil money penalty, recovery of wages due, make whole relief for any U.S. worker who has been improperly rejected for employment, laid off or displaced, or debarment for 1 to 5 years.
Petitioners must also comply with any other applicable laws in their recruitment, such as avoiding unlawful discrimination against U.S. workers based on their citizenship status or national origin. Specifically, the failure to recruit and hire qualified and available U.S. workers on account of such individuals' national origin or citizenship status may violate INA section 274B, 8 U.S.C. 1324b.
This rule is issued without prior notice and opportunity to comment and with an immediate effective date pursuant to the Administrative Procedure Act (APA). 5 U.S.C. 553(b) and (d).
The APA, 5 U.S.C. 553(b)(B), authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” The good cause exception for forgoing notice and comment rulemaking “excuses notice and comment in emergency situations, or where delay could result in serious harm.”
In this case, the Departments are bypassing advance notice and comment because of the exigency created by section 543 of the Consolidated Appropriations Act, 2017 (FY 2017 Omnibus), which went into effect on May 5, 2017 and expires on September 30, 2017. Because the statutory cap was reached in mid-March, USCIS stopped accepting H-2B petitions on March 13, 2017, and given high demand by American businesses for H-2B workers, and the short period of time remaining in the fiscal year for U.S. employers to avoid the economic harms described above, a decision to undertake notice and comment rulemaking would likely delay final action on this matter by weeks or months, and would therefore complicate and likely preclude the Departments from successfully exercising the authority in section 543.
Courts have found “good cause” under the APA when an agency is moving expeditiously to avoid significant economic harm to a program, program users, or an industry. Courts have held that an agency may use the good cause exception to address “a serious threat to the financial stability of [a government] benefit program,”
Consistent with the above authorities, the Departments have bypassed notice and comment to prevent the “serious economic harm to the H-2B community,” including associated U.S. workers, that could result from ongoing uncertainty over the status of the numerical limitation,
The APA also authorizes agencies to make a rule effective immediately, upon a showing of good cause instead of imposing a 30-day delay. 5 U.S.C. 553(d)(3). The good cause exception to the 30-day effective date requirement is easier to meet than the good cause exception for foregoing notice and comment rulemaking.
The Regulatory Flexibility Act, 5 U.S.C. 601
The Unfunded Mandates Reform Act of 1995 (UMRA) is intended, among other things, to curb the practice of imposing unfunded Federal mandates on State, local, and tribal governments. Title II of the Act requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in $100 million or more expenditure (adjusted annually for inflation) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector. The value equivalent of $100 million in 1995 adjusted for inflation to 2016 levels by the Consumer Price Index for All Urban Consumer (CPI-U) is $157 million.
This rule does not exceed the $100 million expenditure in any 1 year when adjusted for inflation ($157 million in 2016 dollars), and this rulemaking does not contain such a mandate. The requirements of Title II of the Act, therefore, do not apply, and the Departments have not prepared a statement under the Act.
This temporary rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Act of 1996, Public Law 104-121, 804, 110 Stat. 847, 872 (1996), 5 U.S.C. 804(2). This rule has not been found to result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic or export markets.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 13771 (“Reducing Regulation and Controlling Regulatory Costs”) directs agencies to reduce regulation and control regulatory costs.
The Office of Management and Budget (OMB) has determined that this rule is a “significant regulatory action” although not an economically significant regulatory action. Accordingly, OMB has reviewed this regulation. This regulation is exempt from Executive Order 13771. OMB considers this final rule to be an Executive Order 13771 deregulatory action.
With this final rule, DHS is authorizing up to an additional 15,000 visas for the remainder of FY 2017, pursuant to the FY 2017 Omnibus, to be available to certain U.S. businesses under the H-2B visa classification. By the authority given under the FY 2017 Omnibus, DHS is increasing the H-2B cap for the remainder of FY 2017 for those businesses that: (1) Show that there are an insufficient number of qualified U.S. workers to meet their needs in FY 2017; and (2) attest that their businesses are likely to suffer irreparable harm without the ability to employ the H-2B workers that are the subject of their petition. This final rule aims to help prevent such harm by allowing them to hire additional H-2B workers within FY 2017. Table 1 (below) provides a brief summary of the provision and its impact.
The H-2B visa classification program was designed to serve U.S. businesses that are unable to find a sufficient number of qualified U.S. workers to perform nonagricultural work of a temporary or seasonal nature. For an H-2B nonimmigrant worker to be admitted into the United States under this visa classification, the hiring employer is required to: (1) Receive a TLC from DOL and (2) file a Form I-129 with DHS. The temporary nature of the services or labor described on the approved TLC is subject to DHS review during adjudication of Form I-129.
The H-2B cap for the second half of FY 2017 was reached on March 13, 2017. Normally, once the H-2B cap has been reached, petitioners must wait until the next half of the fiscal year, or the beginning of the next fiscal year, for additional visas to become available. However, on May 5, 2017, the President signed the FY 2017 Omnibus that contains a provision (Sec. 543 of Div. F) authorizing the Secretary of Homeland Security, under certain circumstances, to increase the number of H-2B visas available to U.S. employers, notwithstanding the established statutory numerical limitation. After consulting with the Secretary of Labor, the Secretary of the Homeland Security has determined it is appropriate to exercise his discretion and raise the H-2B cap by up to an additional 15,000 visas for the remainder of FY 2017 for those businesses who would qualify under certain circumstances.
This temporary rule would impact those employers who file Form I-129 on behalf of the nonimmigrant worker they seek to hire under the H-2B visa program. More specifically, this rule would impact those employers who could establish that their business is likely to suffer irreparable harm because they cannot employ the H-2B workers requested on their petition in this fiscal year. Due to the temporary nature of this rule and the limited time left for these additional visas to be available, DHS believes it is more reasonable to assume that eligible petitioners for these additional 15,000 visas will be those employers that have already completed the steps to receive an approved TLC prior to the issuance of this rule.
The costs for this form include filing costs and the opportunity costs of time to complete and file the form. The current filing fee for Form I-129 is $460 and the estimated time needed to complete and file Form I-129 for H-2B classification is 4.26 hours.
To estimate the total opportunity cost of time to petitioners who complete and file Form I-129, DHS uses the mean hourly wage rate of HR specialists of $31.20 as the base wage rate.
As mentioned in
Employers may use Form I-907, Request for Premium Processing Service, to request faster processing of their Form I-129 petitions for H-2B visas. The filing fee for Form I-907 is $1,225 and the time burden for completing the form is 0.5 hours. Using the wage rates established previously, the opportunity cost of time is $22.78 for an HR specialist to file Form I-907, $49.10 for an in-house lawyer to file, and $84.07 for an outsourced lawyer to file.
The remaining provisions of this rule include a new form for applicants, Form ETA-9142-B-CAA-Attestation for Admission of H-2B Workers, attached to this rulemaking as Appendix A.
The new attestation form includes new recruiting requirements, the irreparable harm standard, and document retention obligations. DOL estimates the time burden for completing and signing the form is 0.25 hour and 1 hour for retaining documents and records relating to recruitment. The petitioner must retain documents and records of a new job order for the job opportunity placed with the State Workforce Agency (SWA) and one newspaper advertisement. DOL estimates that it would take up to one hour to file and retain documents and records relating to recruitment. Using the total per hour wage for an HR specialist ($45.55), the opportunity cost of time for an HR specialist to complete the new attestation form and to retain documents relating to recruitment is $56.94.
Additionally, the new form requires that the petitioner assess and document supporting evidence for meeting the irreparable harm standard, and retain those documents and records, which we assume will require the resources of a financial analyst (or another equivalent occupation). Using the same methodology previously described for wages, the total per hour wage for a financial analyst is $68.53.
As discussed previously, we believe that the estimated 2,298 remaining unfilled certifications for the latter half of FY 2017 would include all potential employers who might request to employ H-2B workers under this rule. This number of certifications is a reasonable proxy for the number of employers who may need to review and sign the attestation. Using this estimate for the total number of certifications, DOL
Employers will place a new job order for the job opportunity with the SWA serving the area of intended employment for at least 5 days beginning no later than the next business day after submitting a petition for an H-2B worker and the attestation to USCIS. DOL estimates that an HR specialist (or another equivalent occupation) would spend 1 hour to prepare a new job order and submit it to the SWA.
Employers will also place one newspaper advertisement during the period of time the SWA is actively circulating the job order for intrastate clearance. DOL estimates that a standard job listing in an online edition of a newspaper is $250.
Therefore, the total cost for the new attestation form is estimated to be $1,597,426.
DHS anticipates some additional costs in adjudicating the additional petitions submitted as a result of the increase in cap limitation for H-2B visas. However, DHS expects these costs to be covered by the fees associated with the forms.
The inability to access H-2B workers for these entities may cause their businesses to suffer irreparable harm. Temporarily increasing the number of available H-2B visas for this fiscal year may allow some businesses to hire the additional labor resources necessary to avoid such harm. Preventing such harm may ultimately rescue the jobs of any other employees (including U.S. employees) at that establishment.
This rule does not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with section 6 of Executive Order No. 13132, 64 FR 43,255 (Aug. 4, 1999), this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.
This rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order No. 12988, 61 FR 4729 (Feb. 5, 1996).
DHS analyzes actions to determine whether NEPA applies to them and if so what degree of analysis is required. DHS Directive (Dir) 023-01 Rev. 01 establishes the procedures that DHS and its components use to comply with NEPA and the Council on Environmental Quality (CEQ) regulations for implementing NEPA, 40 CFR parts 1500 through 1508. The CEQ regulations allow federal agencies to establish, with CEQ review and concurrence, categories of actions (“categorical exclusions”) which experience has shown do not individually or cumulatively have a significant effect on the human environment and, therefore, do not require an Environmental Assessment (EA) or Environmental Impact Statement (EIS). 40 CFR 1507.3(b)(1)(iii), 1508.4. DHS Instruction 023-01 Rev. 01 establishes such Categorical Exclusions that DHS has found to have no such effect. Dir. 023-01 Rev. 01 Appendix A Table 1. For an action to be categorically excluded, DHS Instruction 023-01 Rev. 01 requires the action to satisfy each of the following three conditions: (1) The entire action clearly fits within one or more of the Categorical Exclusions; (2) the action is not a piece of a larger action; and (3) no extraordinary circumstances exist that create the potential for a significant environmental effect. Inst. 023-01 Rev. 01 section V.B (1)-(3).
This rule temporarily amends the regulations implementing the H-2B nonimmigrant visa program to increase the numerical limitation on H-2B nonimmigrant visas for the remainder of FY 2017 based on the Secretary of Homeland Security's determination, in consultation with the Secretary of Labor, consistent with the FY 2017 Omnibus. Generally, a rule which changes the number of visas which can be issued has no impact on the environment and any attempt to analyze that impact would be largely, if not completely, speculative. The Departments cannot estimate with reasonable certainty which employers will successfully petition for employees in what locations and numbers. At most, however, it is reasonably foreseeable that an increase of up to15,000 visas may be issued for temporary entry into the United States in diverse industries and locations. For purposes of the cost estimates contained in the economic analysis above, DHS bases its calculations on the assumption that all 15,000 will be issued. Even making that assumption, with a current U.S. population in excess of 323 million and a U.S. land mass of 3.794 million square miles, this is insignificant by any measure.
DHS has determined that this rule does not individually or cumulatively have a significant effect on the human environment and it thus would fit within one categorical exclusion under Environmental Planning Program, DHS Instruction 023-01 Rev. 01, Appendix A, Table 1. Specifically, the rule fits within Categorical Exclusion number A3(d) for rules that interpret or amend an existing regulation without changing its environmental effect.
This rule maintains the current human environment by helping to prevent irreparable harm to certain U.S. businesses and to prevent a significant adverse effect on the human environment that would likely result from loss of jobs and income. With the exception of recordkeeping requirements, this rulemaking terminates after September 30, 2017; it is not part of a larger action and presents no extraordinary circumstances creating the potential for significant environmental effects. No further NEPA analysis is required.
The Paperwork Reduction Act (PRA), 44 U.S.C. 3501
More specifically, this rule includes a new form (
Administrative practice and procedure, Aliens, Cultural exchange programs, Employment, Foreign officials, Health professions, Reporting and recordkeeping requirements, Students.
Administrative practice and procedure, Employment, Employment and training, Enforcement, Foreign workers, Forest and forest products, Fraud, Health professions, Immigration, Labor, Longshore and harbor work, Migrant workers, Nonimmigrant workers, Passports and visas, Penalties, Reporting and recordkeeping requirements, Unemployment, Wages, Working conditions.
For the reasons discussed in the joint preamble, part 214 of chapter I of title 8 of the Code of Federal Regulations is amended as follows:
8 U.S.C. 1101, 1102, 1103, 1182, 1184, 1186a, 1187, 1221, 1281, 1282, 1301-1305 and 1372; sec. 643, Pub. L. 104-208, 110 Stat. 3009-708; Public Law 106-386, 114 Stat. 1477-1480; section 141 of the Compacts of Free Association with the Federated States of Micronesia and the Republic of the Marshall Islands, and with the Government of Palau, 48 U.S.C. 1901 note and 1931 note, respectively; 48 U.S.C. 1806; 8 CFR part 2.
(h) * * *
(6) * * *
(x)
(B)
(C)
(D)
(E)
Accordingly, for the reasons stated in the joint preamble, 20 CFR part 655 is amended as follows:
Section 655.0 issued under 8 U.S.C. 1101(a)(15)(E)(iii), 1101(a)(15)(H)(i) and (ii), 8 U.S.C. 1103(a)(6), 1182(m), (n) and (t), 1184(c), (g), and (j), 1188, and 1288(c) and (d); sec. 3(c)(1), Pub. L. 101-238, 103 Stat. 2099, 2102 (8 U.S.C. 1182 note); sec. 221(a), Pub. L. 101-649, 104 Stat. 4978, 5027 (8 U.S.C. 1184 note); sec. 303(a)(8), Pub. L. 102-232, 105 Stat. 1733, 1748 (8 U.S.C. 1101 note); sec. 323(c), Pub. L. 103-206, 107 Stat. 2428; sec. 412(e), Pub. L. 105-277, 112 Stat.
Subpart A issued under 8 CFR 214.2(h).
Subpart B issued under 8 U.S.C. 1101(a)(15)(H)(ii)(a), 1184(c), and 1188; and 8 CFR 214.2(h).
Subparts F and G issued under 8 U.S.C. 1288(c) and (d); sec. 323(c), Pub. L. 103-206, 107 Stat. 2428; and 28 U.S.C. 2461 note, Pub. L. 114-74 at section 701.
Subparts H and I issued under 8 U.S.C. 1101(a)(15)(H)(i)(b) and (b)(1), 1182(n) and (t), and 1184(g) and (j); sec. 303(a)(8), Pub. L. 102-232, 105 Stat. 1733, 1748 (8 U.S.C. 1101 note); sec. 412(e), Pub. L. 105-277, 112 Stat. 2681; 8 CFR 214.2(h); and 28 U.S.C. 2461 note, Pub. L. 114-74 at section 701.
Subparts L and M issued under 8 U.S.C. 1101(a)(15)(H)(i)(c) and 1182(m); sec. 2(d), Pub. L. 106-95, 113 Stat. 1312, 1316 (8 U.S.C. 1182 note); Pub. L. 109-423, 120 Stat. 2900; and 8 CFR 214.2(h).
An employer filing a petition with USCIS under 8 CFR 214.2(h)(6)(x) to employ H-2B workers from July 19, 2017 through September 15, 2017 must meet the following requirements:
(a) The employer must attest on Form ETA-9142-B-CAA that without the ability to employ all of the H-2B workers requested on the petition filed pursuant to 8 CFR 214.2(h)(6)(x), its business is likely to suffer irreparable harm (that is, permanent and severe financial loss), and that the employer will provide documentary evidence of this fact to DHS or DOL upon request.
(b) An employer with a start date of work before June 1, 2017 on its approved Temporary Labor Certification, must conduct additional recruitment of U.S. workers as follows:
(1) The employer must place a new job order for the job opportunity with the State Workforce Agency, serving the area of intended employment. The job order must contain the job assurances and contents set forth in 20 CFR 655.18 for recruitment of U.S. workers at the place of employment, and remain posted for at least 5 days beginning not later than the next business day after submitting a petition for H-2B worker(s); and
(2) The employer must place one newspaper advertisement on any day of the week meeting the advertising requirements of 20 CFR 655.41, during the period of time the State Workforce Agency is actively circulating the job order for intrastate clearance; and
(3) The employer must hire any qualified U.S. worker who applies or is referred for the job opportunity until 2 business days after the last date on which the job order is posted under paragraph (c)(1) of this section. Consistent with 20 CFR 655.40(a), applicants can be rejected only for lawful job-related reasons.
(c) This section expires on October 1, 2017.
(d)
(a) An employer that files a petition with USCIS to employ H-2B workers in fiscal year 2017 under authority of the temporary increase in the numerical limitation under Public Law 115-31 must maintain for a period of 3 years from the date of certification, consistent with 20 CFR 655.56 and 29 CFR 503.17, the following:
(1) A copy of the attestation filed pursuant to regulations governing that temporary increase;
(2) Evidence establishing that employer's business is likely to suffer irreparable harm (that is, permanent and severe financial loss), if it cannot employ H-2B nonimmigrant workers in fiscal year 2017;
(3) If applicable, evidence of additional recruitment and a recruitment report that meets the requirements set forth in 20 CFR 655.48(a)(1), (2), and (7).
DOL or DHS may inspect these documents upon request.
(b) This section expires on October 1, 2020.
By virtue of my signature below, I
(A) I am an employer with an approved labor certification from the Department of Labor seeking permission to employ H-2B nonimmigrant workers for temporary employment in the United States.
(B) I was granted temporary labor certification from the Department of Labor (DOL) for my business's job opportunity, which required that the worker(s)
(C) I attest that if my business cannot employ all the H-2B nonimmigrant workers requested on my Form I-129 petition before the end of this fiscal year (September 30, 2017) in the job opportunity certified by DOL, my business is likely to suffer irreparable harm (that is, permanent and severe financial loss).
(D) I attest that my business has a bona fide temporary need for all the H-2B nonimmigrant workers requested on the Form I-129 petition, consistent with 8 CFR 214.2(h)(6)(ii).
(E) If my current labor certification contains a start date of work before June 1, 2017, I will complete a new assessment of the United States labor market in advance of H-2B nonimmigrant workers coming to the United States to begin employment before October 1, 2017, as follows:
1. I will place a new job order for the job opportunity with the State Workforce Agency (SWA) serving the area of intended employment that contains the job assurances and contents set forth in 20 CFR 655.18 for recruitment of U.S. workers at the place of employment for at least 5 days beginning not later than the next business day after submitting a petition for an H-2B nonimmigrant worker(s) and this accompanying attestation to U.S. Citizenship and Immigration Services;
2. I will place one newspaper advertisement, which may be published on any day of the week, meeting the advertising requirements of 20 CFR 655.41, during the period of time the SWA is actively circulating the job order for intrastate clearance; and
3. I will offer the job to any qualified and available U.S. worker who applies or is referred for the job opportunity until 2 business days after the last date on which the job order is posted. I understand that consistent with 20 CFR 655.40(a), applicants can be rejected only for lawful job-related reasons.
(F) I agree to retain a copy of this signed attestation form, the additional recruitment
(G) I agree to comply with all assurances, obligations, and conditions of employment set forth in the
I hereby sign this under penalty of perjury:
Nuclear Regulatory Commission.
Final rule; correction.
The U.S. Nuclear Regulatory Commission (NRC) published a final rule amending regulations that will become effective August 29, 2017. The fiscal year (FY) 2017 final fee rule, published June 30, 2017, amends the licensing, inspection, special project, and annual fees charged to NRC applicants and licensees. This document corrects the annual fees for fuel facility licensees.
Please refer to Docket ID NRC-2016-0081 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
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•
•
Michele Kaplan, Office of the Chief Financial Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone: 301-415-5256, email:
The NRC published a final rule amending its regulations in parts 170 and 171 of title 10 of the
The FY 2017 final fee rule contained inadvertent errors in the calculation of the fuel facilities fee class annual fees. Although the fuel facilities total annual fee recovery amount was correctly calculated at $28.4 million, the NRC staff incorrectly calculated the prorated unpaid portion of Lead Cascade's annual fee to be spread among the six fee categories within the fee class for the remaining licensees. When prorating Lead Cascade's expected annual fee, the NRC staff mistakenly used the 1.E. fee category, which caused the calculated unpaid prorated amount to be higher than the actual prorated amount by $1.5 million. To correct this situation, the NRC staff lowered the amount to be recovered from the remaining licensees by $1.5 million. This rule, therefore, corrects fee categories 1.A.(1)(a), 1.A.(1)(b), 1.A.(2)(b), 1.A.(2)(c), 1.E., and 2.A.(1) in the table in § 171.16(d) and Table VIII in the portion of the final rule preamble that includes these fees.
Under the Administrative Procedure Act (5 U.S.C. 553(b)), an agency may waive the normal notice and comment requirements if it finds, for good cause, that they are impracticable, unnecessary, or contrary to the public interest. As authorized by 5 U.S.C. 553(b)(3)(B) and (d)(3), the NRC finds good cause to waive notice and opportunity for comment on these amendments and to make this final rule effective on August 29, 2017, the effective date of the FY 2017 final rule. These amendments are necessary to correct an error in the NRC's fee calculations and do not involve changes to NRC policy or the exercise of agency discretion. Second, these amendments will have no adverse effect on any person or entity regulated by the NRC because these amendments will lower annual fees (if anything, these amendments will have a beneficial effect on the affected fee classes). For these reasons, an opportunity for comment would not be meaningful. These amendments need to be effective on August 29, 2017, the effective date of the FY 2017 final rule, in order to avoid incorrect payments by stakeholders in the affected fee classes and the consequent administrative burden on the NRC if refunds must be processed.
In FR Doc. 2017-13520, appearing on page 30682 in the
1. Beginning on page 30686, in section a., Fuel Facilities, Table VIII is corrected to read as follows:
(d) * * *
For the Nuclear Regulatory Commission.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule.
We are adopting a new airworthiness directive (AD) for all Airbus Model A321 series airplanes. This AD was prompted by a determination from fatigue testing that cracks could develop in the cabin floor beam junction at certain fuselage frame locations. This AD requires repetitive inspections for cracking in the cabin floor beam junction at certain fuselage frame locations, and repair if necessary. We are issuing this AD to address the unsafe condition on these products.
This AD is effective August 23, 2017.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of August 23, 2017.
For service information identified in this final rule, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email:
You may examine the AD docket on the Internet at
Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; fax: 425-227-1149.
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Airbus Model A321 series airplanes. The NPRM published in the
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2016-0105, dated June 6, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition on all Airbus Model A321 series airplanes. The MCAI states:
Following the results of a new full scale fatigue test campaign on the A321 airframe in the context of the A321 extended service goal, it was identified that cracks could develop in the cabin floor beam junctions at fuselage frame (FR) 35.1 and FR 35.2, on both left hand (LH) and right hand (RH) sides, also on aeroplanes operated in the context of design service goal.
This condition, if not detected and corrected, could reduce the structural integrity of the fuselage.
Prompted by these findings, Airbus developed an inspection programme, published in Service Bulletin (SB) A320-53-1317, SB A320-53-1318, SB A320-53-1319, and SB A320-53-1320, each containing instructions for a different location.
For the reasons described above, this [EASA] AD requires repetitive detailed inspections (DET) of the affected cabin floor beam junctions [for cracking] and, depending on findings, accomplishment of a repair.
This [EASA] AD is considered an interim action, pending development of a permanent solution.
You may examine the MCAI in the AD docket on the Internet at
We gave the public the opportunity to participate in developing this AD. The following presents the comment received on the NPRM and the FAA's response.
Delta Airlines (DAL) requested that we revise the proposed AD to permit use of later approved revisions of service information as we have done in previous alternative methods of compliance (AMOCs). DAL stated that Airbus service bulletins are EASA approved, and through the bi-lateral agreement with the European Union, these subsequent service bulletin revisions should be allowed to be used by U.S. operators without seeking an AMOC. DAL also explained that having the ability to utilize future service bulletin revisions without seeking an AMOC is more efficient and preserves the required level of safety. DAL added that they operate airplanes that are not listed in the service bulletin applicability, but are included in the proposed AD. DAL claimed that without a provision allowing later approved revisions, they might have to apply for multiple AMOCs as the service information is updated.
We do not agree with DAL's request. We may not refer to any document that does not yet exist in an AD. In general terms, we are required by Office of the Federal Register (OFR) regulations to either publish the service document contents as part of the actual AD language; or submit the service document to the OFR for approval as “referenced” material, in which case we may only refer to such material in the text of an AD. The AD may refer to the
To allow operators to use later revisions of the referenced document (issued after publication of the AD), either we must revise the AD to reference specific later revisions, or operators must request approval to use later revisions as an AMOC under the provisions of paragraph (i)(1) of this AD.
In addition, in accordance with 14 CFR part 39.27, if there is a conflict between an AD and service information, operators must follow the requirements of the AD. We have not changed this AD in this regard.
We reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this AD as proposed except for minor editorial changes. We have determined that these minor changes:
• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and
• Do not add any additional burden upon the public than was already proposed in the NPRM.
We reviewed the following service information, which describes procedures for inspections for cracking on the frame to cabin floor beam junction at certain fuselage frame locations, and repairs. This service information is distinct because it applies to different locations on the airplanes.
• Airbus Service Bulletin A320-53-1317, dated December 15, 2015 (FR 35.1 on the right-hand side).
• Airbus Service Bulletin A320-53-1318, dated October 9, 2015 (FR 35.1 on the left-hand side).
• Airbus Service Bulletin A320-53-1319, dated October 9, 2015 (FR 35.2 on the right-hand side).
• Airbus Service Bulletin A320-53-1320, dated October 9, 2015 (FR 35.2 on the left-hand side).
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD affects 175 airplanes of U.S. registry.
We estimate the following costs to comply with this AD:
We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective August 23, 2017.
None.
This AD applies to Airbus Model A321-111, -112, -131, -211, -212, -213, -231, and -232 airplanes, certificated in any category, all manufacturer serial numbers.
Air Transport Association (ATA) of America Code 53, Fuselage.
This AD was prompted by a determination from fatigue testing on the Model A321 airframe that cracks could develop in the cabin floor beam junction at certain fuselage frame locations. We are issuing this AD to detect and correct cracking in the cabin floor beam junction at certain fuselage frame locations, which could result in reduced structural integrity of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Before exceeding 36,900 total flight cycles since first flight of the airplane, or within 2,100 flight cycles after the effective date of this AD, whichever occurs later: Do a detailed inspection for cracking of the frame to cabin floor beam junction on the aft and forward sides at frame (FR) 35.1 and FR 35.2 on the left-hand and right-hand sides, in accordance with the Accomplishment Instructions of the Airbus service information specified in paragraphs (g)(1), (g)(2), (g)(3), and (g)(4) of this AD. Repeat the inspection of the frame to cabin floor beam junction on the aft and forward sides at FR 35.1 and FR 35.2 on the left-hand and right-hand sides thereafter at intervals not to exceed 15,300 flight cycles.
(1) Airbus Service Bulletin A320-53-1317, dated December 15, 2015 (FR 35.1 right-hand side).
(2) Airbus Service Bulletin A320-53-1318, dated October 9, 2015 (FR 35.1 left-hand side).
(3) Airbus Service Bulletin A320-53-1319, dated October 9, 2015 (FR 35.2 right-hand side).
(4) Airbus Service Bulletin A320-53-1320, dated October 9, 2015 (FR 35.2 left-hand side).
If any crack is found during any inspection required by paragraph (g) of this AD: Before further flight, repair using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA). Although the service information specified in paragraph (g) of this AD specifies to contact Airbus for repair instructions, and specifies that action as “RC” (Required for Compliance), this AD requires repair as specified in this paragraph. Repair of an airplane as required by this paragraph does not constitute terminating action for the repetitive actions required by paragraph (g) of this AD, unless otherwise specified in the instructions provided by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA DOA.
The following provisions also apply to this AD:
(1)
(2)
(3)
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2016-0105, dated June 6, 2016, for related information. This MCAI may be found in the AD docket on the Internet at
(2) For more information about this AD, contact Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; fax: 425-227-1149. Information may be emailed to:
(3) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (k)(3) and (k)(4) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) Airbus Service Bulletin A320-53-1317, dated December 15, 2015
(ii) Airbus Service Bulletin A320-53-1318, dated October 9, 2015.
(iii) Airbus Service Bulletin A320-53-1319, dated October 9, 2015.
(iv) Airbus Service Bulletin A320-53-1320, dated October 9, 2015.
(3) For service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email:
(4) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule.
We are adopting a new airworthiness directive (AD) for all Fokker Services B.V. Model F28 Mark 0100 airplanes. This AD was prompted by an evaluation by the design approval holder (DAH) indicating that certain wing fuel tank access panels are subject to widespread fatigue damage (WFD). This AD requires replacement of affected access panels and modification of the coamings of the associated access holes. We are issuing this AD to address the unsafe condition on these products.
This AD is effective August 23, 2017.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of August 23, 2017.
For service information identified in this final rule, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone: +31 (0)88-6280-350; fax: +31 (0)88-6280-111; email:
You may examine the AD docket on the Internet at
Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1137; fax 425-227-1149.
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Fokker Services B.V. Model F28 Mark 0100 airplanes. The NPRM published in the
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2014-0158, dated July 7, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Fokker Services B.V. Model F28 Mark 0100 series airplanes. The MCAI states:
Based on findings on test articles, fatigue-induced cracks may develop in the coamings of certain wing fuel tank access panels Part Number (P/N) D12395-403 and P/N D12450-403, installed on Fokker F28 Mark 0100 aeroplanes.
To ensure the continued structural integrity with respect to fatigue, repetitive inspections were included in the Airworthiness Limitations Section (ALS) of the Instructions for Continued Airworthiness. Fokker Services also developed precautionary measures to reduce stress loads in the affected areas by replacement of the affected access panels with new panels, P/N D19701-401 and P/N D19701-403, having thinner skin, and a modification by introducing internal patches to the coamings of the affected access holes.
These precautionary measures were introduced with Service Bulletins (SB) SBF100-57-027 and SBF100-57-028. As part of the Widespread Fatigue Damage re-evaluation, it was concluded that repetitive inspections through the ALS do not provide a sufficient level of protection against the fatigue-induced cracks.
This condition, if not corrected, would affect the structural integrity of the lower wing skins of both outer wings in the areas surrounding the affected fuel tank access panels.
For the reasons described above, this [EASA] AD requires replacement of the affected access panels and modification of the coamings of these access holes.
Post-modification inspection requirements depend on the actual number of flight cycles accumulated at the moment of modification. Related detailed information is provided in SBF100-57-027 and SBF100-57-028, as well as in Fokker Services ALS Report SE-623 Issue 12.
Fokker Services All Operators Message AOF100.178#05 provides additional information concerning the subject addressed by this [EASA] AD.
You may examine the MCAI in the AD docket on the Internet at
We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.
We reviewed the relevant data and determined that air safety and the public interest require adopting this AD as proposed except for minor editorial changes. We have determined that these minor changes:
• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and
• Do not add any additional burden upon the public than was already proposed in the NPRM.
Fokker Services B.V. has issued the following service information:
• Fokker Service Bulletin SBF100-57-027, Revision 2, dated December 11, 2013, which provides instructions to replace certain fuel tank access panels.
• Fokker Service Bulletin SBF100-57-028, Revision 2, dated December 11, 2013, which provides instructions to modify the coamings of certain fuel tank access holes.
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD affects 15 airplanes of U.S. registry.
We estimate the following costs to comply with this AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with
We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective August 23, 2017.
None.
This AD applies to Fokker Services B.V. Model F28 Mark 0100 airplanes, certificated in any category, all serial numbers.
Air Transport Association (ATA) of America Code 57, Wings.
This AD was prompted by an evaluation by the design approval holder indicating that certain wing fuel tank access panels are subject to widespread fatigue damage. We are issuing this AD to prevent fatigue cracking in the wing structure, which could result in reduced structural integrity of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Within 63,000 flight cycles since first flight of the airplane, or within 90 days after the effective date of this AD, whichever occurs later, accomplish the actions specified in paragraphs (g)(1) and (g)(2) of this AD, as applicable.
(1) For airplanes identified in Fokker Service Bulletin SBF100-57-028, Revision 2, dated December 11, 2013: Modify the coamings of the fuel tank access holes at the access panel locations identified in, and in accordance with the Accomplishment Instructions of Fokker Service Bulletin SBF100-57-028, Revision 2, dated December 11, 2013.
(2) For airplanes identified in Fokker Service Bulletin SBF100-57-027, Revision 2, dated December 11, 2013: Replace access panels having part number D12395-403 and D12450-403 with new panels having part number D19701-401 and D19701-403, at the access panel locations identified in, and in accordance with the Accomplishment Instructions of Fokker Service Bulletin SBF100-57-027, Revision 2, dated December 11, 2013.
(1) For airplanes that, on the effective date of this AD, have an access panel with part number D12395-403 or D12450-403 installed at any of the affected locations: After accomplishing the actions required by paragraphs (g)(1) and (g)(2) of this AD, as applicable, no person may install, on any airplane, access panels having part number D12395-403 or D12450-403 at any access panel location as identified in Fokker Service Bulletin SBF100-57-027, Revision 2, dated December 11, 2013.
(2) For airplanes that, on the effective date of this AD, do not have an access panel with part number D12395-403 or D12450-403 installed at any of the affected locations: As of the effective date of this AD, no person may install, on any airplane, access panels having part number D12395-403 or D12450-403 at any access panel location as identified in Fokker Service Bulletin SBF100-57-027, Revision 2, dated December 11, 2013.
(1) This paragraph provides credit for actions required by paragraph (g)(1) of this AD, if those actions were performed before the effective date of this AD using the service information specified in paragraph (i)(1)(i) or (i)(1)(ii) of this AD.
(i) Fokker Service Bulletin SBF100-57-028, dated May 2, 1994.
(ii) Fokker Service Bulletin SBF100-57-028, Revision 1, dated November 1, 1994.
(2) This paragraph provides credit for actions required by paragraph (g)(2) of this AD, if those actions were performed before the effective date of this AD using the service information specified in paragraph (i)(2)(i) or (i)(2)(ii) of this AD.
(i) Fokker Service Bulletin SBF100-57-027, dated September 13, 1993.
(ii) Fokker Service Bulletin SBF100-57-027, Revision 1, dated May 2, 1994.
The following provisions also apply to this AD:
(1)
(2)
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2014-0158, dated July 7, 2014, for related information. This MCAI may be found in the AD docket on the Internet at
(2) For more information about this AD, contact Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1137; fax 425-227-1149.
(3) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (l)(3) and (l)(4) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) Fokker Service Bulletin SBF100-57-027, Revision 2, dated December 11, 2013.
(ii) Fokker Service Bulletin SBF100-57-028, Revision 2, dated December 11, 2013.
(3) For service information identified in this AD, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone: +31 (0)88-6280-350; fax: +31 (0)88-6280-111; email:
(4) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), DOT.
Final rule.
We are adopting a new airworthiness directive (AD) for certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes. This AD was prompted by a report of an aborted takeoff because the rudder pedals were not operating correctly. Investigation revealed a protruding screw in the rudder pedal heel rest adjacent to the pedals. This AD requires a torque check of the screws in the cover assembly of the heel rest for both the Captain and the First Officer's rudder pedals, and corrective action if necessary. We are issuing this AD to address the unsafe condition on these products.
This AD is effective August 23, 2017.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of August 23, 2017.
For service information identified in this final rule, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet
You may examine the AD docket on the Internet at
Kelly McGuckin, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6490; fax: 425-917-6590; email:
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes. The NPRM published in the
We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.
Boeing, Air Line Pilots Association, International, and Tyler Myers supported the intent of the NPRM.
United Airlines noted that the NPRM did not address whether or not the final rule would allow operators to take credit for accomplishment of the actions in Boeing Alert Service Bulletin 737-25A1732, Revision 1, dated August 15, 2016 (“BASB 737-25A1732, Revision 1”), if completed prior to the effective date of the final rule. We infer that the commenter is requesting that the final rule include a statement that accomplishment of the actions specified in BASB 737-25A1732, Revision 1, prior to the effective date of the final rule is acceptable for compliance with the requirements of the final rule.
We agree with the commenter that operators should be able to take credit for accomplishment of the actions in BASB 737-25A1732, Revision 1, prior to the effective date of this AD. This allowance was provided in paragraph (f) of the proposed AD in the statement “Comply with this AD within the compliance times specified unless already done.” However, since the NPRM was issued, Boeing has published, and we have reviewed, Boeing Alert Service Bulletin 737-25A1732, Revision 2, dated April 13,
We have revised paragraphs (c), (g), and (h) of this AD to refer to BASB 737-25A1732, Revision 2. We have also added paragraph (i) to this AD to give credit for actions accomplished using the work instructions in BASB 737-25A1732, Revision 1; and redesignated the subsequent paragraphs accordingly.
Aviation Partners Boeing stated that the installation of winglets per Supplemental Type Certificate (STC) ST00830SE does not affect the accomplishment of the manufacturer's service instructions.
We agree with the commenter that STC ST00830SE does not affect the accomplishment of the manufacturer's service instructions. Therefore, the installation of STC ST00830SE does not affect the ability to accomplish the actions required by this AD. We have not changed this AD in this regard.
We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD as proposed, except for minor editorial changes. We have determined that these minor changes:
• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and
• Do not add any additional burden upon the public than was already proposed in the NPRM.
We reviewed Boeing Alert Service Bulletin 737-25A1732, Revision 2, dated April 13, 2017. The service information describes procedures for a torque check of the screws in the cover assembly of the heel rest for both the Captain and the First Officer's rudder pedals, and corrective action. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD affects 1,187 airplanes of U.S. registry. We estimate the following costs to comply with this AD:
We have received no definitive data that will enable us to provide cost estimates for the on-condition actions specified in this AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective August 23, 2017.
None.
This AD applies to The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes, certificated in any category, as identified in Boeing Alert Service Bulletin 737-25A1732, Revision 2, dated April 13, 2017.
Air Transport Association (ATA) of America Code 25, Equipment and Furnishings.
This AD was prompted by a report of an aborted takeoff because the rudder pedals were not operating correctly. Investigation revealed a protruding screw in the rudder pedal heel rest adjacent to the pedals. It was determined that the screws in the cover assembly of the heel rest for both the Captain and the First Officer's rudder pedals might
Comply with this AD within the compliance times specified, unless already done.
Within 21 months after the effective date of this AD: Do a one-time torque check of the screws in the cover assembly of the heel rest for both the Captain and the First Officer's rudder pedals, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 737-25A1732, Revision 2, dated April 13, 2017.
If the results of the torque check required by paragraph (g) of this AD indicate that any screw does not hold torque to the required value, before further flight, replace the affected screw and associated nutplate, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 737-25A1732, Revision 2, dated April 13, 2017.
This paragraph provides credit for the actions specified in paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD using Boeing Alert Service Bulletin 737-25A1732, Revision 1, dated August 15, 2016.
(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (k)(1) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Seattle ACO, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD.
(4) For service information that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (j)(4)(i) and (j)(4)(ii) of this AD apply.
(i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. If a step or sub-step is labeled “RC Exempt,” then the RC requirement is removed from that step or sub-step. An AMOC is required for any deviations to RC steps, including substeps and identified figures.
(ii) Steps not labeled as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the RC steps, including substeps and identified figures, can still be done as specified, and the airplane can be put back in an airworthy condition.
(1) For more information about this AD, contact Kelly McGuckin, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle ACO, 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6490; fax: 425-917-6590; email:
(2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (l)(3) and (l)(4) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Boeing Alert Service Bulletin 737-25A1732, Revision 2, dated April 13, 2017.
(ii) Reserved.
(3) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P. O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet
(4) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Internal Revenue Service (IRS), Treasury.
Final regulation.
This document contains a final regulation changing the amount of the user fee for the special enrollment examination to become an enrolled agent. The charging of user fees is authorized by the Independent Offices Appropriations Act of 1952. The final regulation affects individuals taking the enrolled agent special enrollment examination.
Jonathan R. Black, (202) 317-6845 (not a toll-free number).
This document contains amendments to 26 CFR part 300 regarding user fees. On January 26, 2016, a notice of proposed rulemaking (REG-134122-15) proposing to change the amount of the Enrolled Agent Special Enrollment Examination (EA-SEE) user fee was published in the
Section 330 of title 31 of the United States Code authorizes the Secretary of the Treasury to regulate the practice of
Section 10.4(a) of Circular 230 authorizes the IRS to grant status as enrolled agents to individuals who demonstrate special competence in tax matters by passing a written examination (the EA-SEE) administered by, or under the oversight of, the IRS and who have not engaged in any conduct that would justify suspension or disbarment under Circular 230. There were a total of 51,755 active enrolled agents as of September 1, 2016.
Beginning in 2006, the IRS engaged the services of a third-party contractor to develop and administer the EA-SEE. The EA-SEE is composed of three parts, which are offered in a testing period that begins each May 1 and ends the last day of the following February. The EA-SEE is not available in March and April, during which period it is updated to reflect recent changes in the relevant law. More information on the EA-SEE, including content, scoring, and how to register, can be found on the IRS Web site at
The Independent Offices Appropriations Act of 1952 (IOAA) (31 U.S.C. 9701) authorizes each agency to promulgate regulations establishing the charge for services provided by the agency (user fees). The IOAA provides that these user fee regulations are subject to policies prescribed by the President and shall be as uniform as practicable. Those policies are currently set forth in the Office of Management and Budget (OMB) Circular A-25 (OMB Circular), 58 FR 38142 (July 15, 1993).
The IOAA states that the services provided by an agency should be self-sustaining to the extent possible. 31 U.S.C. 9701(a). The OMB Circular states that agencies that provide services that confer special benefits on identifiable recipients beyond those accruing to the general public are to establish user fees that recover the full cost of providing those services. The OMB Circular requires that agencies identify all services that confer special benefits and determine whether user fees should be assessed for those services.
Agencies are to review user fees biennially and update them as necessary to reflect changes in the cost of providing the underlying services. During this biennial review, an agency must calculate the full cost of providing each service, taking into account all direct and indirect costs to any part of the U.S. government. The full cost of providing a service includes, but is not limited to, salaries, retirement benefits, rents, utilities, travel, and management costs, as well as an appropriate allocation of overhead and other support costs associated with providing the service.
An agency should set the user fee at an amount that recovers the full cost of providing the service unless the agency requests, and OMB grants, an exception to the full-cost requirement. OMB may grant exceptions only where the cost of collecting the fees would represent an unduly large part of the fee for the activity, or where any other condition exists that, in the opinion of the agency head, justifies an exception. When OMB grants an exception, the agency does not collect the full cost of providing the service that confers a special benefit on identifiable recipients rather than the public at large, and the agency therefore must fund the remaining cost of providing the service from other available funding sources. When OMB grants an exception, the agency, and by extension all taxpayers, subsidizes the cost of the service to the recipients who should otherwise be required to pay the full cost of providing the service as the IOAA and the OMB Circular direct.
As discussed earlier, Circular 230 section 10.4(a) provides that the IRS will grant enrolled agent status to an applicant if the applicant, among other things, demonstrates special competence in tax matters by written examination. The EA-SEE is the written examination that tests special competence in tax matters for purposes of that provision, and an applicant must pass all three parts of the EA-SEE to be granted enrolled agent status through written examination. The IRS confers a benefit on individuals who take the EA-SEE beyond those that accrue to the general public by providing them with an opportunity to demonstrate special competence in tax matters by passing a written examination and therefore satisfying one of the requirements for becoming an enrolled agent under Circular 230 section 10.4(a). Because the opportunity to take the EA-SEE is a special benefit, the IRS charges a user fee to take the examination.
Pursuant to the guidelines in the OMB Circular, the IRS has calculated its cost of providing examination services under the enrolled agent program. The user fee is implemented under the authority of the IOAA and the OMB Circular and recovers the full cost of overseeing the program. The user fee was $11 to take each part of the EA-SEE and was set in 2006. The IRS does not intend to subsidize any of the cost of making the EA-SEE available to examinees and is not applying for an exception to the full-cost requirement from OMB. As a result, this regulation increases the user fee to the full cost to the IRS for overseeing the EA-SEE program, $81 per part, effective for examinees who register on or after March 1, 2018, to take the EA-SEE. The contractor who administers the EA-SEE also charges individuals taking the EA-SEE an additional fee for its services. For the May 2016 to February 2017 testing period, the contractor's fee was $98 for each part of the EA-SEE. For the May 2017 to February 2019 testing periods, the contractor's fee is $100.94. For the May 2019 to February 2020 testing period, the contractor's fee will be $103.97. The contract was subject to public procurement procedures, and there were no tenders that were more competitive.
The comments submitted on the January 26, 2016 proposed rule and the October 25, 2016 proposed rule are available at
All of the comments received opposed increasing the user fee for the EA-SEE. Specifically, comments expressed concern that the increased user fee would discourage individuals from becoming enrolled agents. The comments stated that discouraging individuals would be counter-productive considering that the IRS and taxpayers benefit from having more tax professionals who meet the standards required of an enrolled agent. Comments suggested that the IRS should work to increase the number of people taking the EA-SEE each year and focus its attention on encouraging unenrolled preparers, particularly those who participate in the Annual Filing Season Program in Rev. Proc. 2014-42, to become enrolled agents, which would result in a reduced user fee on a per-part basis when the IRS redetermines the
The Treasury Department and the IRS do not intend the user fee to discourage individuals from becoming enrolled agents and have considered the possible impact of increasing the user fee on the number of individuals taking the EA-SEE. Enrolled agents play a valuable role in the tax administration process, and the IRS uses the EA-SEE to ensure their qualifications. The IRS welcomes a continuing dialogue on how it can attract more individuals to take the EA-SEE and thereby lower the cost per part by spreading the fixed costs of administration over a larger population of examinees. The Treasury Department and the IRS have considered the potential impact on the number of individuals if the full cost of the EA-SEE program is collected and concluded not to seek an exemption to the full-cost requirement. Additionally, efforts to improve unenrolled preparers' knowledge of federal tax law, such as implementation of the Annual Filing Season Program, have not substantially affected the number of individuals taking the EA-SEE and have no direct relationship with the user fee.
Some comments alternatively recommended that the fee remain the same for taking the EA-SEE the first time, but that subsequent attempts to take and pass the EA-SEE should be subject to a higher fee. Comments suggested that the fee for subsequent attempts could be rebated if the individual passed the EA-SEE. The comments explained that this would discourage all but the most serious candidates from taking the EA-SEE. Comments also suggested that the IRS could increase the fee gradually over a period of years, in order to encourage preparers to become enrolled agents sooner rather than later, and that the IRS should retain the $11 per part user fee for a two-year window so that everyone who passed at least one part of the EA-SEE (presumably prior to the announcement of the fee increase) would have an opportunity to complete all parts of the EA-SEE without an unexpected fee increase.
The Treasury Department and the IRS considered these comments but have declined to implement them. The Treasury Department and the IRS do not have information to forecast how many examinees are likely to pass each part of the EA-SEE the first time versus on later attempts, and it therefore would not be able to adequately determine the cost allocation between first-time and repeat examinees. Additionally, the Treasury Department and the IRS think examinees should be charged the full cost to the IRS of overseeing the administration of the EA-SEE, regardless of whether they have already taken one or two parts, given the absolute amount of the user fee ($81 per part). This final regulation increases the user fee to the full cost to the IRS, and the IRS has determined that it will not seek an exception to the full-cost requirement from OMB.
Comments recommended the IRS consider alternative means to reduce costs after the existing agreement with the contractor who administers the EA-SEE expires in 2020. Contractor costs are unrelated to this user fee regulation, and any concerns related to such costs should be directed to the RPO.
Comments also asked how it was possible that the IRS did not notice the increased costs over the course of the decade following the last user fee increase. Although the OMB Circular directs the IRS to set its fees every two years, the IRS was unable to obtain accurate estimates of its total costs until recently, because it had insufficient data to estimate the change in size of the testing population.
Comments suggested that the IRS should not charge a user fee to register for the EA-SEE, because the IRS and the general public benefit from the existence of enrolled agents. Whether a benefit accrues to the IRS and the general public, however, is not relevant to whether a user fee is appropriate under the OMB Circular. As discussed in the October 25, 2016 proposed rule, it is appropriate under the OMB Circular to charge a user fee for taking the EA-SEE because taking the EA-SEE provides a benefit to examinees.
Comments observed that the IRS charges user fees inconsistently because, for example, the IRS does not charge user fees for toll-free telephone service, continuing-education webinars, walk-in service, notice letters, the annual filing season program record of completion, etc. This regulation deals only with the user fee for the EA-SEE, which, as discussed earlier, is compliant with the requirements of the OMB Circular, and the appropriateness of the EA-SEE user fee is not contingent on whether the IRS charges, or should charge, user fees for other activities.
Comments further questioned the determination of the amount of the EA-SEE user fee. One comment assumed that the increase in revenue was allocable to ten full-time equivalent employees and questioned how so much time was involved in oversight of the EA-SEE—the comment noted that, after accounting for the cost of background investigations, the salary of a GS-12 step 1 employee in Washington, DC, when multiplied by the overhead rate and again multiplied by ten, equals approximately the expected increase in annual revenue to the IRS from the increased user fee. Comments also questioned how much time staff spent reviewing surveys and setting the annual cut score, among other things. The preamble to the October 25, 2016 proposed rule addresses most questions about costing methodology. As stated in that preamble, eight individuals spend approximately seventy-five percent of their time on the EA-SEE, and two individuals spend approximately ten-percent of their time on the EA-SEE. That amounts to just over six people working full time. The calculation in the comment on employee hours did not appear to account for the cost of benefits, which are calculated as 28.5 percent of salary, and the variance between the ten employee salaries, which range from GS-7 to GS-15, in calculating the number of employees involved. RPO employees do not track the time spent on each individual task associated with the EA-SEE, but—as stated in the preamble to the October 25, 2016 proposed rule—managers who are familiar with the employees' work provided estimates of the total time involved, based on their knowledge and experience.
Finally, comments asked the IRS to request an exception to the full-cost requirement from the OMB and
Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory assessment is not required. Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities. The user fee primarily affects individuals who take the enrolled agent examination, many of whom may not be classified as small entities under the Regulatory Flexibility Act. Therefore, a substantial number of small entities is not likely to be affected. Further, the economic impact on any small entities affected would be limited to paying the $70 difference in cost per part between the $81 user fee and the previous $11 user fee, which is unlikely to present a significant economic impact. Moreover, the total economic impact of this regulation is approximately $1.57 million, which is the product of the approximately 22,425 parts of the EA-SEE administered annually and the $70 increase in the fee. Accordingly, the rule is not expected to have a significant economic impact on a substantial number of small entities, and a regulatory flexibility analysis is not required.
The principal author of this regulation is Jonathan R. Black of the Office of the Associate Chief Counsel (Procedure and Administration).
Rev. Proc. 2014-42, Annual Filing Season Program, is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS Web site at
Reporting and recordkeeping requirements, User fees.
Accordingly, 26 CFR part 300 is amended as follows:
31 U.S.C. 9701.
(b)
(d)
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted by the State of Maine Department of Environmental Protection (Maine DEP) on August 28, 2015. This SIP revision includes a revised motor vehicle fuel volatility regulation that has been updated to be consistent with existing Federal regulations which require retailers to sell reformulated gasoline (RFG) in the counties of York, Cumberland, Sagadahoc, Androscoggin, Kennebec, Knox, and Lincoln, as of June 1, 2015. The intended effect of this action is to approve of this amendment into the Maine SIP. This action is being taken under the Clean Air Act.
This rule is effective on August 18, 2017.
EPA has established a docket for this action under Docket Identification No. EPA-R01-OAR-2015-0648. All documents in the docket are listed on the
John Rogan, Air Quality Planning Unit, U.S. Environmental Protection Agency, New England Regional Office, 5 Post Office Square—Suite 100, (Mail Code OEP05-2), Boston, MA 02109-3912, telephone (617) 918-1645, facsimile (617) 918-0645, email
Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.
On May 8, 2017 (82 FR 21346), EPA published a Notice of Proposed Rulemaking (NPR) for the State of Maine. The NPR proposed approval of Maine's revised Chapter 119, Motor
EPA is approving Maine's August 28, 2015 SIP revision. Specifically, EPA is approving Maine's revised Chapter 119, Motor Vehicle Fuel Volatility Limits, and incorporating it into the Maine SIP. EPA is approving this SIP revision because it meets all applicable requirements of the Clean Air Act and relevant EPA guidance, and it will not interfere with attainment or maintenance of the ozone NAAQS.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the State of Maine's revised Chapter 119 described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents generally available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 18, 2017. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
Part 52 of chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(c) * * *
Environmental Protection Agency (EPA).
Direct final rule.
The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted by the Maine Department of Environmental Protection (Maine DEP). The SIP revision consists of an Alternative Control Plan (ACP) for the control of volatile organic compound (VOC) emissions from Reckitt Benckiser's Air Wick Air Freshener Single Phase Aerosol Spray, issued pursuant to Maine's consumer products rule. This action is being taken in accordance with the Clean Air Act.
This direct final rule will be effective September 18, 2017, unless EPA receives adverse comments by August 18, 2017. If adverse comments are received, EPA will publish a timely withdrawal of the direct final rule in the
Submit your comments, identified by Docket ID No. EPA-R01-OAR-2017-0023 at
David L. Mackintosh, Air Quality Planning Unit, U.S. Environmental Protection Agency, EPA New England Regional Office, 5 Post Office Square—Suite 100, (Mail Code OEP05-2), Boston, MA 02109-3912, tel. 617-918-1584, email
Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.
Maine's Chapter 152, “Control of Emissions of Volatile Organic Compounds from Consumer Products” (Chapter 152) became effective in the State of Maine on September 1, 2004 and was approved by EPA into the Maine SIP on October 24, 2005 (70 FR 61382). Maine subsequently amended this rule. The current amended version of the rule became effective in the State of Maine on December 15, 2007 and was approved by EPA into the Maine SIP on May 22, 2012 (77 FR 30216). Chapter 152 contains VOC content limits for the manufacture and sale of various consumer products in the state of Maine. Chapter 152 also provides for state and EPA approval of ACPs by allowing the responsible party the option of voluntarily applying for such agreements.
On March 30, 2012, the Maine DEP received an ACP application from Reckitt Benckiser LLC (Reckitt) for Reckitt's Air Wick Air Freshener Single-Phase Aerosol Spray pursuant to Chapter 152. The Maine DEP approved the Reckitt ACP effective April 23, 2013 and on the same day sent EPA the ACP for approval into the Maine SIP.
Reckitt manufactures Air Wick Air Freshener Single-Phase Aerosol Spray (Product), which is offered for retail sale and wholesale distribution in the State of Maine. The Product contains 4.6% VOCs by weight. The Chapter 152 regulatory content limit for single-phase aerosol air freshener is 30% VOCs by weight. Reckitt's ACP generates VOC credits, expressed in pounds of VOCs, based on the difference between the Product VOC content and regulatory VOC limit for each unit sold in the State of Maine. Credits generated are subject to the conditions in the ACP Approval. Reckitt shall monitor Maine sales of the Product and each calendar quarter shall provide to the Maine DEP accurate records and documentation as a basis for compliance reporting. Only sales in the State of Maine that are substantiated by accurate documentation shall be used in the calculation of VOC emissions and emission reductions (surplus reductions). The resulting surplus reduction credits shall be discounted by 5% prior to the issuance
Surplus reduction certificates shall not constitute instruments, securities, or any other form of property. The issuance, use and trading of all surplus reductions shall be subject to the conditions within the ACP. Any surplus reductions issued by Maine DEP may be used by Reckitt until the reductions expire, are traded to another responsible party operating under a SIP-approved ACP, or until the ACP is canceled. A valid surplus reduction shall be in effect starting five days after the date of issuance by the Maine DEP, for a continuous period of one year at the end of which period the surplus reduction shall then expire. Surplus reductions cannot be applied retroactively to any compliance period prior to the compliance period in which the reductions were generated. While valid, surplus reductions certificates can only be used in the State of Maine to:
(1) Adjust either the Consumer Product ACP emissions of either Reckitt or another ACP responsible party to which the reductions were traded, provided the surplus reductions are not to be used by any ACP responsible party to lower its ACP emissions when its ACP emissions are equal to or less than the ACP limit during the applicable compliance period; or
(2) be traded for the purpose of reconciling another approved Consumer Product ACP responsible party's shortfalls.
EPA has reviewed the ACP and has determined that it is approvable. Reckitt must still, at a minimum, comply with the VOC content limits in Maine's SIP-approved Chapter 152. However, to the extent that the company documents, as outlined in the ACP, the sales of Product in Maine with a VOC content below these limits, the Maine DEP will issue VOC emission reduction credits that may be used in the future. Since to date, this is the first and only Consumer Product ACP submitted by the State of Maine for SIP approval, reduction certificates generated may only be held for future use until they expire (
EPA is approving, and incorporating into the Maine SIP, an ACP for Reckitt Benckiser's Air Wick Air Freshener Single Phase Aerosol Spray.
The EPA is publishing this action without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comments. However, in the proposed rules section of this
This rule will be effective September 18, 2017 without further notice unless the Agency receives relevant adverse comments by August 18, 2017.
If the EPA receives such comments, then EPA will publish a notice withdrawing the final rule and informing the public that the rule will not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period on the proposed rule. All parties interested in commenting on the proposed rule should do so at this time. If no such comments are received, the public is advised that this rule will be effective on September 18, 2017 and no further action will be taken on the proposed rule. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the alternative control plan issued by the Maine DEP to Reckitt described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these materials generally available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 18, 2017. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of this
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
Part 52 of chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(d) * * *
Environmental Protection Agency (EPA).
Direct final rule.
The Environmental Protection Agency (EPA) is issuing a final rule to amend the Environmental Protection Agency Acquisition Regulation (EPAAR) to make administrative updates, corrections and minor edits. EPA does not anticipate any adverse comments.
This rule is effective on September 18, 2017 without further notice, unless EPA receives adverse comment by August 18, 2017. If EPA receives adverse comment, we will publish a timely withdrawal in the
Submit your comments, identified by Docket ID No. EPA-HQ-OARM-2017-0126, at
Julianne Odend'hal, Office of Acquisition Management (Mail Code 3802R), U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone
EPA is publishing this rule without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comment. The EPAAR is being amended to make administrative changes including updates, corrections and minor edits. None of these changes are substantive or of a nature to cause any significant expense for EPA or its contractors. If EPA receives adverse comment, we will publish a timely withdrawal in the
This action applies to contractors who have or wish to have contracts with the EPA.
A.
B.
• Identify the rulemaking by docket number and other identifying information (subject heading,
•
• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.
• Describe any assumptions and provide any technical information and/or data that you used.
• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.
• Provide specific examples to illustrate your concerns, and suggest alternatives.
• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.
• Make sure to submit your comments by the comment period deadline identified.
EPAAR Parts 1501, 1504, 1509, 1515, 1516, 1517, 1519, 1535, 1552 and 1553 are being amended to make administrative changes including updates, corrections and minor edits.
This direct final rule amends the EPAAR to make the following changes: (1) EPAAR 1501.603-1 is amended to remove outdated policy reference “chapter 8 of the EPA “Contracts Management Manual” ” and to add in its place “the EPA Acquisition Guide (EPAAG) subsection 1.6.4”; (2) EPAAR 1504.804-5 is amended to remove outdated policy reference “Unit 42 of the EPA Acquisition Handbook” and to add in its place “the EPA Acquisition Guide (EPAAG) subsection 4.8.1”; (3) EPAAR 1509.507-1(a)(1) is amended to clarify the FAR reference by removing “(FAR) 48 CFR” and adding in its place “FAR”; (4) EPAAR 1515.404-473(a) is amended to remove “except those identified in EPAAR (48 CFR) 1516.404-273(b)” and to add in its place “except those otherwise identified in the EPAAR” because the EPAAR reference no longer exists; (5) EPAAR 1516.301-70 is amended to clarify the FAR reference by removing “48 CFR” and adding in its place “in FAR”; (6) EPAAR 1516.406(b) is amended to correct the EPAAR reference by removing “clause” and adding in its place “provision”; (7) EPAAR 1517.208 is amended to include a prescription for 48 CFR 1552.217-70 by adding a new paragraph (a) stating that the Contracting Officer shall insert the provision at 1552.217-70, Evaluation of Contract Options, in solicitations containing options, and re-designating existing paragraphs (a) through (g) as paragraphs (b) through (h); (8) EPAAR part 1519 is amended to correct an office title by removing “Office of Small Business Programs (OSBP)” and “OSBP”, and adding in their place “Office of Small and Disadvantaged Business Utilization (OSDBU)” and “OSDBU” respectively wherever they appear in part 1519; (9) EPAAR 1535.007(a), (b) and (c) are amended to clarify the EPAAR references by adding “the provision at”; (10) EPAAR 1552.209-71 Alternate I introductory text is amended to add “(SEP 1998)”; (11) EPAAR 1552.209-73 Alternate I introductory text is amended to add “(JAN 2015)”; (12) EPAAR 1552.211-74 Alternate I and II introductory texts are amended to add “(APR 1984)” and Alternate III and IV introductory texts are amended to add “(DEC 2014)”; (13) EPAAR 1552.216-72 Alternate I introductory text is amended to add “(JUL 2014)”; (14) EPAAR 1552.216-75 introductory text and the ending text are amended to correct the EPAAR references by removing “clause” and adding in their place “provision”; (15) EPAAR 1552.217-76 clause title is amended to add “(MAR 1984)”; (16) EPAAR 1552.217-77 introductory text is amended by removing “1517.208(g)” and adding in its place “1517.208(h)”; (17) EPAAR 1552.219-70(b) and (d) are amended to correct an office title by removing “Office of Small Business Programs (OSBP)” and “OSBP”, and adding in their place “Office of Small and Disadvantaged Business Utilization (OSDBU)” and “OSDBU” respectively; (18) EPAAR 1552.219-71(f)(2)(v) and (k) are amended to correct an office title by removing “Office of Small Business Programs (OSBP)” and adding in its place “Office of Small and Disadvantaged Business Utilization (OSDBU)”, and 1552.219-71(k) is amended to update the address to Office of Small and Disadvantaged Business Utilization, U.S. Environmental Protection Agency, William Jefferson Clinton North Building, Mail Code 1230A, 1200 Pennsylvania Avenue NW., Washington, DC 20450, Telephone: (202) 566-2075, Fax: (202) 566-0266; (19) EPAAR 1552.223-71 is amended by removing the following Web site addresses: “
This action is exempt from review by the Office of Management and Budget (OMB) because it is limited to matters of agency organization.
This action does not impose an information collection burden under the PRA because it does not contain any information collection activities.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to the rule. This action amends the EPAAR to make administrative changes including updates, corrections, and minor edits. We have therefore concluded that this action will have no net regulatory burden for all directly regulated small entities.
This action does not contain an unfunded mandate of $100 million or more as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.
This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). Thus, Executive Order 13175 does not apply to this action. In the spirit of Executive Order 13175, and consistent with EPA policy to promote communication between EPA and Tribal governments, EPA specifically solicits additional comment on this rule from Tribal officials.
EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.
This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not a significant regulatory action under Executive Order 12866.
This rulemaking does not involve technical standards.
Executive Order 12898 (59 FR 7629, (February 16, 1994)) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment.
The Congressional Review Act, 5 U.S.C. 801
Government procurement.
For the reasons stated in the preamble, 48 CFR parts 1501, 1504, 1509, 1515, 1516, 1517, 1519, 1535, 1552 and 1553 are amended as set forth below:
5 U.S.C. 301; Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c); and 41 U.S.C. 418b.
EPA Contracting Officers shall be selected and appointed and their appointments terminated in accordance with the Contracting Officer warrant program specified in EPA Acquisition Guide (EPAAG) subsection 1.6.4.
5 U.S.C. 301; Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c); 41 U.S.C. 418b.
In addition to those procedures set forth in FAR 4.804-5, the contracting office shall, before final payment is made under a cost reimbursement type contract, verify the allowability, allocability, and reasonableness of costs claimed. Verification of total costs incurred should be obtained from the Office of Audit through the Financial Analysis and Oversight Service Center in the form of a final audit report. Similar verification of actual costs shall be made for other contracts when cost incentives, price redeterminations, or cost-reimbursement elements are involved. Termination settlement proposals shall be submitted to the Financial Analysis and Oversight Service Center for review by the Office of Audit as prescribed by FAR 49.107. All such audits will be coordinated through the cost advisory group in the contracting office. Exceptions to these procedures are the quick close-out procedures as described in FAR 42.708 and EPA Acquisition Guide (EPAAG) subsection 4.8.1.
Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c).
(a) * * *
(1) Include the information prescribed in FAR 9.507-1;
5 U.S.C. 301; Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c); and 41 U.S.C. 418b.
(a) In addition to the limitations established by statute (see FAR 15.404-4(b)(4)(i)), no administrative ceilings on profits or fees shall be established, except those otherwise identified in the EPAAR.
5 U.S.C. 301 and 41 U.S.C. 418b.
The policy of EPA for cost-reimbursement, term form contracts is to make provisional payment of fee (
(b) The Contracting Officer shall insert the provision at 48 CFR 1552.216-75, Base Fee and Award Fee Proposal, in all solicitations which contemplate the award of cost-plus-award-fee contracts. The Contracting Officer shall insert the appropriate percentages.
5 U.S.C. 301; Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c); and 41 U.S.C. 418b.
(a) The Contracting Officer shall insert the provision at 48 CFR 1552.217-70, Evaluation of Contract Options, in solicitations containing options.
(b) The Contracting Officer shall insert the clause at 48 CFR 1552.217-71, Option to Extend the Term of the Contract—Cost-Type Contract, when applicable.
(c) The Contracting Officer shall insert the clause at 48 CFR 1552.217-72, Option to Extend the Term of the Contract—Cost-Plus-Award-Fee Contract, when applicable.
(d) The Contracting Officer shall insert the clause at 48 CFR 1552.217-73, Option for Increased Quantity—Cost-Type Contract, when applicable.
(e) The Contracting Officer shall insert the clause at 48 CFR 1552.217-74, Option for Increased Quantity—Cost-Plus-Award-Fee Contract, when applicable.
(f) The Contracting Officer shall insert the clause at 48 CFR 1552.217-75, Option to Extend the Effective Period of the Contract—Time and Materials or Labor Hour Contract, when applicable.
(g) The Contracting Officer shall insert the clause at 48 CFR 1552.217-76, Option to Extend the Effective Period of the Contract—Indefinite Delivery/Indefinite Quantity Contract, when applicable.
(h) The Contracting officer shall insert the clause at 48 CFR 1552.217-77, Option to Extend the Term of the Contract—Fixed Price, when applicable.
Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c).
Each program's Assistant or Associate Administrator shall be responsible for developing its socioeconomic goals on a fiscal year basis. The goals shall be developed in collaboration with the supporting Chiefs of Contracting Offices (CCOs) or Regional Acquisition Managers (RAMs), the assigned Small Business Specialist (SBS), and the Office of Small and Disadvantaged Business Utilization (OSDBU). The goals will be based on advance procurement plans and past performance. The goals shall be submitted to the Director of OSDBU, at least thirty (30) days prior to the start of the fiscal year.
The Director of the Office of Small and Disadvantaged Business Utilization (OSDBU) provides guidance and advice, as appropriate, to Agency program and contracts officials on small business programs. The OSDBU Director is the central point of contact for inquiries concerning the small business programs from industry, the Small Business Administration (SBA), and the Congress; and shall advise the Administrator and staff of such inquiries as required. The OSDBU Director shall represent the Agency in the negotiations with the other Government agencies on small business programs matters.
(a) Small Business Specialists (SBSs) shall be appointed in writing. Regional SBSs will normally be appointed from members of staffs of the appointing authority. The appointing authorities for regional SBSs are the RAMs. The SBSs for EPA headquarters, Research Triangle Park (RTP), and Cincinnati shall be appointed by the OSDBU Director. The SBS is administratively responsible directly to the appointing authority and, on matters relating to small business programs activities, receives technical guidance from the OSDBU Director.
(b) A copy of each appointment and termination of all SBSs shall be forwarded to the OSDBU Director. In addition to performing the duties outlined in paragraph (c) of this section that are normally performed in the activity to which assigned, the SBS shall perform such additional functions as may be prescribed from time to time in furtherance of overall small business programs goals. The SBS may be appointed on either a full- or part-time basis; however, when appointed on a part-time basis, small business duties shall take precedence over collateral responsibilities.
(c) The SBS appointed pursuant to paragraph (a) of this section shall perform the following duties as appropriate:
(1) Maintain a program designed to locate capable small business sources for current and future acquisitions;
(2) Coordinate inquiries and requests for advice from small business concerns on acquisition matters;
(3) Review all proposed solicitations in excess of the simplified acquisition threshold, assure that small business concerns will be afforded an equitable opportunity to compete, and, as appropriate, initiate recommendations for small business set-asides, or offers of requirements to the Small Business Administration (SBA) for the 8(a) program, and complete EPA Form 1900-37, “Record of Procurement Request Review,” as appropriate;
(4) Take action to assure the availability of adequate specifications and drawings, when necessary, to obtain small business participation in an acquisition. When small business concerns cannot be given an opportunity on a current acquisition, initiate action, in writing, with appropriate technical and contracting personnel to ensure that necessary specifications and/or drawings for future acquisitions are available;
(5) Review proposed contracts for possible breakout of items or services suitable for acquisition from small business concerns;
(6) Participate in the evaluation of a prime contractor's small business subcontracting programs;
(7) Assure that adequate records are maintained, and accurate reports prepared, concerning small business participation in acquisition programs;
(8) Make available to SBA copies of solicitations when so requested; and
(9) Act as liaison with the appropriate SBA office or representative in connection with matters concerning the small business programs including set-asides.
(a) The contracting officer shall insert the clause at 48 CFR 1552.219-70, Mentor-Protégé Program, in all contracts under which the contractor has been approved to participate in the EPA Mentor-Protégé Program.
(b) The contracting officer shall insert the provision at 48 CFR 1552.219-71, Procedures for Participation in the EPA Mentor-Protégé Program, in all solicitations valued at $500,000 or more which will be cost-plus-award-fee or cost-plus fixed-fee contracts.
(a) If no Small Business Administration (SBA) representative is available, the Small Business Specialist (SBS) shall initiate recommendations to the contracting officer for small business set-asides with respect to individual acquisitions or classes of acquisitions or portions thereof.
(b) When the SBS has recommended that all, or a portion, of an individual acquisition or class of acquisitions be set aside for small business, the contracting officer shall:
(1) Promptly concur in the recommendation; or
(2) Promptly disapprove the recommendation, stating in writing the reasons for disapproval. If the contracting officer disapproves the recommendation of the SBS, the SBS may appeal to the appropriate appointing authority, whose decision shall be final.
(a) Each proposed acquisition for construction estimated to cost between $10,000 and $1,000,000 shall be set-aside for exclusive small business participation. Such set-asides shall be considered to be unilateral small business set-asides, and shall be withdrawn in accordance with the procedure of FAR 19.506 only if found not to serve the best interest of the Government.
(b) Small business set-aside preferences for construction acquisitions in excess of $1,000,000 shall be considered on a case-by-case basis.
One copy of the determination required by FAR 19.705-2(c) shall be placed in the contract file and one copy provided to the Director of the Office of Small and Disadvantaged Business Utilization.
In determining the acceptability of a proposed subcontracting plan, the
The synopsis of contract award, where applicable, shall include a statement identifying the contract as one containing Public Law 95-507 subcontracting plans and goals.
Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c).
(a) Contracting officers shall insert the provision at 48 CFR 1552.235-73, Access to Federal Insecticide, Fungicide, and Rodenticide Act Confidential Business Information, in all solicitations when the contracting officer has determined that EPA may furnish the contractor with confidential business information which EPA had obtained from third parties under the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136
(b) Contracting officers shall insert the provision at 48 CFR 1552.235-75, Access to Toxic Substances Control Act Confidential Business Information, in all solicitations when the contracting officer has determined that EPA may furnish the contractor with confidential business information which EPA had obtained from third parties under the Toxic Substances Control Act (15 U.S.C. 2601
(c) Contracting officers shall insert the provision at 48 CFR 1552.235-81, Institutional Oversight of Life Sciences Dual Use Research of Concern-Representation, when notified in the Advance Procurement Plan (APP) or by an EPA funding/requesting office, in accordance with the Institutional Oversight of Life Sciences Dual Use Research of Concern (iDURC) EPA Order 1000.19, Policy and Procedures for Managing Dual Use Research of Concern, in solicitations that will result in a contract under which EPA funding will be used by the recipient to conduct or sponsor “life sciences research”.
5 U.S.C. 301 and 41 U.S.C. 418b.
As prescribed in 1519.203(a), insert the following clause:
(a) The Contractor has been approved to participate in the EPA Mentor-Protégé Program. The purpose of the Program is to increase the participation of small disadvantaged businesses (SDBs) as subcontractors, suppliers, and ultimately as prime contractors; establish a mutually beneficial relationship with SDBs and EPA's large business prime contractors (although small businesses may participate as Mentors); develop the technical and corporate administrative expertise of SDBs which will ultimately lead to greater success in competition for contract opportunities; promote the economic stability of SDBs; and aid in the achievement of goals for the use of SDBs in subcontracting activities under EPA contracts.
(b) The Contractor shall submit an executed Mentor-Protégé agreement to the Contracting Officer, with a copy to the Office of Small and Disadvantaged Business Utilization (OSDBU) or the Small Business Specialist, within thirty (30) calendar days after the effective date of the contract. The Contracting Officer will notify the Contractor within thirty (30) calendar days from its submission if the agreement is not accepted.
(c) The Contractor as a Mentor under the Program agrees to fulfill the terms of its agreement(s) with the Protégé firm(s).
(d) If the Contractor or Protégé firm is suspended or debarred while performing under an approved Mentor-Protégé agreement, the Contractor shall promptly give notice of the suspension or debarment to the OSDBU and the Contracting Officer.
(e) Costs incurred by the Contractor in fulfilling their agreement(s) with the Protégé firm(s) are not reimbursable on a direct basis under this contract.
(f) In an attachment to Individual Subcontract Reports (ISR), the Contractor shall report on the progress made under their Mentor-Protégé agreement(s), providing:
(1) The number of agreements in effect; and
(2) The progress in achieving the developmental assistance objectives under each agreement, including whether the objectives of the agreement have been met, problem areas encountered, and any other appropriate information.
As prescribed in 1519.203(b), insert the following provision:
(a) This provision sets forth the procedures for participation in the EPA Mentor-Protégé Program (hereafter referred to as the Program). The purpose of the Program is to increase the participation of concerns owned and/or controlled by socially and economically disadvantaged individuals as subcontractors, suppliers, and ultimately as prime contractors; to establish a mutually beneficial relationship between these concerns and EPA's large business prime contractors (although small businesses may participate as Mentors); to develop the technical and corporate administrative expertise of these concerns, which will ultimately lead to greater success in competition for contract opportunities; to promote the economic stability of these concerns; and to aid in the achievement of goals for the use of these concerns in subcontracting activities under EPA contracts. If the successful offeror is accepted into the Program they shall serve as a Mentor to a Protégé firm(s), providing developmental assistance in accordance with an agreement with the Protégé firm(s).
(b) To participate as a Mentor, the offeror must receive approval in accordance with paragraph (h) of this section.
(c) A Protégé must be a concern owned and/or controlled by socially and economically disadvantaged individuals within the meaning of section 8(a)(5) and (6) of the Small Business Act (15 U.S.C. 637(a)(5) and (6)), including historically black colleges and universities. Further, in accordance with Public Law 102-389 (the 1993 Appropriation Act), for EPA's contracting purposes, economically and socially disadvantaged individuals shall be deemed to include women.
(d) Where there may be a concern regarding the Protégé firm's eligibility to participate in the program, the protégé's eligibility will be determined by the contracting officer after the SBA has completed any formal determinations.
(e) The offeror shall submit an application in accordance with paragraph (k) of this section as part of its proposal which shall include as a minimum the following information.
(1) A statement and supporting documentation that the offeror is currently performing under at least one active Federal contract with an approved subcontracting plan and is eligible for the award of Federal contracts;
(2) A summary of the offeror's historical and recent activities and accomplishments under any disadvantaged subcontracting programs. The offeror is encouraged to include any initiatives or outreach information believed pertinent to approval as a Mentor firm;
(3) The total dollar amount (including the value of all option periods or quantities) of EPA contracts and subcontracts received by the offeror during its two preceding fiscal years. (Show prime contracts and subcontracts separately per year);
(4) The total dollar amount and percentage of subcontract awards made to all concerns owned and/or controlled by disadvantaged individuals under EPA contracts during its two preceding fiscal years.
(5) The number and total dollar amount of subcontract awards made to the identified Protégé firm(s) during the two preceding fiscal years (if any).
(f) In addition to the information required by paragraph (e) of this section, the offeror shall submit as a part of the application the following information for each proposed Mentor-Protégé relationship:
(1) Information on the offeror's ability to provide developmental assistance to the identified Protégé firm and how the assistance will potentially increase contracting and subcontracting opportunities for the Protégé firm.
(2) A letter of intent indicating that both the Mentor firm and the Protégé firm intend to enter into a contractual relationship under which the Protégé will perform as a subcontractor under the contract resulting from this solicitation and that the firms will negotiate a Mentor-Protégé agreement. The letter of intent must be signed by both parties and contain the following information:
(i) The name, address and phone number of both parties;
(ii) The Protégé firm's business classification, based upon the NAICS code(s) which represents the contemplated supplies or services to be provided by the Protégé firm to the Mentor firm;
(iii) A statement that the Protégé firm meets the eligibility criteria;
(iv) A preliminary assessment of the developmental needs of the Protégé firm and the proposed developmental assistance the Mentor firm envisions providing the Protégé. The offeror shall address those needs and how their assistance will enhance the Protégé. The offeror shall develop a schedule to assess the needs of the Protégé and establish criteria to evaluate the success in the Program;
(v) A statement that if the offeror or Protégé firm is suspended or debarred while performing under an approved Mentor-Protégé agreement the offeror shall promptly give notice of the suspension or debarment to the EPA Office of Small and Disadvantaged Business Utilization (OSDBU) and the Contracting Officer. The statement shall require the Protégé firm to notify the Contractor if it is suspended or debarred.
(g) The application will be evaluated on the extent to which the offeror's proposal addresses the items listed in paragraphs (e) and (f) of this section. To the maximum extent possible, the application should be limited to not more than 10 single pages, double spaced. The offeror may identify more than one Protégé in its application.
(h) If the offeror is determined to be in the competitive range, or is awarded a contract without discussions, the offeror will be advised by the Contracting Officer whether their application is approved or rejected. The Contracting Officer, if necessary, may request additional information in connection with the offeror's submission of its revised or best and final offer. If the successful offeror has submitted an approved application, they shall comply with the clause titled “Mentor-Protégé Program.”
(i) Subcontracts of $1,000,000 or less awarded to firms approved as Protégés under the Program are exempt from the requirements for competition set forth in FAR 44.202-2(a)(5) and 52.244-5(b). However, price reasonableness must still be determined and the requirements in FAR 44.202-2(a)(8) for cost and price analysis continue to apply.
(j) Costs incurred by the offeror in fulfilling their agreement(s) with a Protégé firm(s) are not reimbursable as a direct cost under the contract. Unless EPA is the responsible audit agency under FAR 42.703-1, offerors are encouraged to enter into an advance agreement with their responsible audit agency on the treatment of such costs when determining indirect cost rates. Where EPA is the responsible audit agency, these costs will be considered in determining indirect cost rates.
(k)
As prescribed in 1523.703-1, insert the following provision, or language substantially the same as the provision, in solicitations for meetings and conference facilities.
(a) The mission of the EPA is to protect human health and the environment. As such, all EPA meetings and conferences will be
(b) Potential meeting or conference facility providers for EPA shall provide information about the environmentally preferable features and practices identified by the checklist contained in paragraph (c) of this section, addressing sustainability for meeting and conference facilities including lodging and non-lodging oriented facilities.
(c) The following list of questions is provided to assist contracting officers in evaluating the environmental preferability of prospective meeting and conference facility providers. More information about EPA's Green Meetings initiative may be found on the Internet at
(1) Does your facility track energy usage and/or GHG emissions through ENERGY STAR Portfolio Manager (
(2) If available for your building type, does your facility currently qualify for the Energy Star certification for superior energy performance? Y/N _, NA_
(3) Does your facility track water use through ENERGY STAR Portfolio Manager or another equivalent tracking tool and/or undertake best management practices to reduce water use in the facility (
(4) Do you use landscaping professionals who are either certified by a WaterSense recognized program or actively undertake the WaterSense “Water-Smart” landscaping design practices (
(5) Based on the amount of renewable energy your buildings uses, does (or would) your facility qualify as a partner under EPA's Green Power Partnership program (
(6) Do you restrict idling of motor vehicles in front of your facility, at the loading dock and elsewhere at your facility? Y/N_
(7) Does your facility have a default practice of not changing bedding and towels unless requested by guests? Y/N_, NA_
(8) Does your facility participate in EPA's WasteWise (
(9) Do you divert from landfill at least 50% of the total solid waste generated at your facility? Y/N_
(10) Will your facility be able to divert from the landfill at least 75% of the total solid waste expected to be generated during this conference/event? Y/N_
(11) Do you divert from landfill at least 50% of the food waste generated at your facility (through donation, use as animal feed, recycling, anaerobic digestion, or composting)? Y/N_
(12) Will your facility be able to divert from landfill at least 75% of the food waste expected to be generated during this conference/event (through donation, use as animal feed, recycling, anaerobic digestion, or composting)? Y/N_
(13) Does your facility provide recycling containers for visitors, guests and staff (paper and beverage at minimum)? Y/N_
(14) With respect to any food and beverage prepared and/or served at your facility, does at least 50% of it on average meet sustainability attributes such as: Local, organic, fair trade, fair labor, antibiotic-free, etc.? Y/N_
(15) Will your facility be able to ensure that at least 75% of the food and beverage expected to be served during this conference/event meets sustainability attributes such as: Local, organic, fair trade, fair labor, antibiotic-free, etc.? Y/N_
(16) Does your facility use Design for the Environment (DfE) cleaning products (
(17) Is your facility prepared to document or demonstrate all of the claims you have made above? Y/N_
(d) The contractor shall include any additional “Green Meeting” information in their proposal which is believed is pertinent to better assist us in considering environmental preferability in selecting our meeting venue.
As prescribed in 1542.705-70, insert the following clause in all cost-reimbursement and non-commercial time and materials type contracts. If ceilings are not being established, enter “not applicable” in paragraph (c) of the clause.
(a) In accordance with paragraph (d) of the “Allowable Cost and Payment” clause, the final indirect cost rates applicable to this contract shall be established between the Contractor and the appropriate Government representative (EPA, other Government agency, or auditor), as provided by FAR 42.703-1(a). EPA's procedures require a Contracting Officer determination of indirect cost rates for its contracts. In those cases where EPA is the cognizant agency (see FAR 42.705-1), the final rate proposal shall be submitted to the cognizant audit activity and to the following designated Contracting Officer: U.S. Environmental Protection Agency, Manager, Financial Analysis and Oversight Service Center, Mail Code 3802R, Policy, Training Oversight Division, 1200 Pennsylvania Avenue NW., Washington, DC 20460.
Where EPA is not the cognizant agency, the final rate proposal shall be submitted to the above-cited address, to the cognizant audit agency, and to the designated Contracting Officer of the cognizant agency. Upon establishment of the final indirect cost rates, the Contractor shall submit an executed Certificate of Current Cost or Pricing Data (see FAR 15.406-2) applicable to the data furnished in connection with the final rates to the cognizant audit agency. The final rates shall be contained in a written understanding between the Contractor and the appropriate Government representative. Pursuant to the “Allowable Cost and Payment” clause, the allowable indirect costs under this contract shall be obtained by applying the final agreed upon rate(s) to the appropriate bases.
(b) Until final annual indirect cost rates are established for any period, the Government shall reimburse the contractor at billing rates established by the appropriate Government representative in accordance with FAR 42.704, subject to adjustment when the final rates are established. The established billing rates are currently as follows:
These billing rates may be prospectively or retroactively revised by mutual agreement, at the request of either the Government or the Contractor, to prevent substantial overpayment or underpayment.
(c) Notwithstanding the provisions of paragraphs (a) and (b) of this clause, ceilings are hereby established on indirect costs reimbursable under this contract. The Government shall not be obligated to pay the Contractor any additional amount on account of indirect costs in excess of the ceiling rates listed below:
Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c).
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; reapportionment.
NMFS is reapportioning the seasonal apportionments of the 2017 Pacific halibut prohibited species catch (PSC) limits for the trawl deep-water and shallow-water species fishery categories in the Gulf of Alaska. This action is necessary to account for the actual halibut PSC use by the trawl deep-water and shallow-water species fishery categories from May 15, 2017 through June 30, 2017. This action is consistent with the goals and objectives of the Fishery Management Plan for Groundfish of the Gulf of Alaska.
Effective 1200 hours, Alaska local time (A.l.t.), July 17, 2017, through 2400 hours, A.l.t., December 31, 2017.
Obren Davis, 907-586-7228.
NMFS manages the groundfish fishery in the Gulf of Alaska (GOA) exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The final 2017 and 2018 harvest specifications for groundfish in the GOA (82 FR 12032, February 27, 2017) apportions the 2017 Pacific halibut PSC limit for trawl gear in the GOA to two trawl fishery categories: A deep-water species fishery and a shallow-water species fishery. The halibut PSC limit for these two trawl fishery categories is further apportioned by season, including four seasonal apportionments to the shallow-water species fishery and three seasonal apportionments to the deep-water species fishery. The two fishery categories also are apportioned a combined, fifth seasonal halibut PSC limit. Unused seasonal apportionments are added to the next season apportionment during a fishing year.
Regulations at § 679.21(d)(4)(iii)(D) require NMFS to combine management of the available trawl halibut PSC limits in the second season (April 1 through July 1) deep-water and shallow-water species fishery categories for use in either fishery from May 15 through June 30 of each year. Furthermore, NMFS is required to reapportion the halibut PSC limit between the deep-water and shallow-water species fisheries after June 30 to account for actual halibut PSC use by each fishery category during May 15 through June 30. As of July 13, 2017, NMFS has determined that the trawl deep-water and shallow-water fisheries used 196 metric tons (mt) and 33 mt of halibut PSC, respectively, from May 15 through June 30. Accordingly, pursuant to § 679.21(d)(4)(iii)(D), the Regional Administrator is reapportioning the combined first and second seasonal apportionments (810 mt) of halibut PSC limit between the trawl deep-water and shallow-water fishery categories to account for the actual PSC use (722 mt) in each fishery. Therefore, Table 15 of the final 2017 and 2018 harvest specifications for groundfish in the GOA (82 FR 12032, February 27, 2017) is revised consistent with this adjustment.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would allow for harvests that exceed the originally specified apportionment of the halibut PSC limits to the deep-water and shallow-water fishery categories. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of July 13, 2017.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by § 679.20 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a State Implementation Plan (SIP) revision submitted by the Maine Department of Environmental Protection (Maine DEP). The SIP revision consists of an Alternative Control Plan (ACP) for the control of volatile organic compound emissions from Reckitt Benckiser's Air Wick Air Freshener Single Phase Aerosol Spray, issued pursuant to Maine's consumer products rule. This action is being taken in accordance with the Clean Air Act.
Written comments must be received on or before August 18, 2017.
Submit your comments, identified by Docket ID No. EPA-R01-OAR-2017-0023 at
David L. Mackintosh, Air Quality Planning Unit, U.S. Environmental Protection Agency, EPA New England Regional Office, 5 Post Office Square—Suite 100, (Mail Code OEP05-2), Boston, MA 02109-3912, tel. 617-918-1584, email
In the Final Rules Section of this
For additional information, see the direct final rule which is located in the Rules Section of this
Environmental Protection Agency (EPA).
Proposed rule.
Pursuant to the Federal Clean Air Act (CAA or Act), the Environmental Protection Agency (EPA) is proposing to conditionally approve revisions to the Texas State Implementation Plan (SIP) addressing Oxides of Nitrogen (NO
Comments must be received on or before August 18, 2017.
Submit your comments, identified by Docket No. EPA-R06-OAR-2015-0496 or via email to
Mr. Alan Shar (6MM-AA), (214) 665-6691,
Throughout this document “we,” “us,” and “our” refer to EPA.
Section 172(c)(1) of the Clean Air Act (CAA, Act) requires that SIPs for nonattainment areas “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology) and shall provide for attainment of the primary National Ambient Air Quality Standards (NAAQS).” The EPA has defined RACT as the lowest emissions limitation that a particular source is capable of meeting by the application of control technology that is reasonably available, considering technological and economic feasibility. See September 17, 1979 (44 FR 53761).
Section 182(b)(2) of the Act requires states to submit a SIP revision and implement RACT for major stationary sources in moderate and above ozone nonattainment areas. For a Moderate, Serious, or Severe area a major stationary source is one that emits, or has the potential to emit, 100, 50, or 25 tons per year (tpy) or more of VOCs or NO
The DFW nonattainment area was designated nonattainment for the 1997 8-Hour ozone standard and classified as Moderate with an attainment deadline of June 15, 2010. See January 14, 2009 (74 FR 1903).
The DFW area was later reclassified to Serious on December 20, 2010 (75 FR 79302) because it failed to attain the 1997 8-Hour standard by its attainment deadline of June 15, 2010. Thus, per section 182(c) of the CAA, a major stationary source in the DFW area, is one which emits, or has the potential to emit, 50 tpy or more of VOCs or NO
The EPA designated the DFW area as nonattainment for the 2008 8-Hour ozone NAAQS with a moderate classification. The designated area for the 2008 standard includes Wise County, which was not included as part of the nonattainment area for the 1997 8-Hour Ozone standard. See May 21, 2012 (77 FR 30088), 40 CFR 81.344; and Mississippi Commission on Environmental Quality vs. EPA, No. 12-1309 (D.C. Cir., June 2, 2015) (upholding EPA's inclusion of Wise County in the DFW 2008 8-Hour ozone nonattainment area).
Thus, based on the moderate classification of the DFW area for the 2008 ozone standard, under section 182(b) of the CAA, a major stationary source in Wise County is one that emits, or has the potential to emit, 100 tpy or more of VOCs or NO
Sections 182(b)(2)(A) and (B) of the CAA require that states must ensure RACT is in place for each source category for which EPA has issued a CTG, and for any major source not covered by a CTG. The EPA has not issued CTGs for sources of NO
The requirements for RACT are included in 182(b)(2) of the Act and further explained in our “SIP Requirements Rule” of March 6, 2015 (80 FR 12279), which explains States should refer to existing CTGs and ACTs as well as all relevant technical information including recent technical information received during the public comment period to determine if RACT is being applied. States may conclude, in some cases, that sources already addressed by RACT determinations to meet the 1-Hour and/or the 1997 8-Hour ozone NAAQS do not need to implement additional controls to meet the 2008 ozone NAAQS RACT requirement. The EPA has previously found that Texas NO
Texas adopted new rules for wood-fired boilers in the DFW area, and new rules for major sources in the added county, Wise County, and determined they were RACT. We have reviewed the wood-fired boilers rules and the rules for major sources in Wise County and
Table 1 below contains a list of affected source categories, EPA reference documents, and the corresponding sections of 30 TAC Chapter 117 that TCEQ determined were RACT for sources of NO
On April 13, 2016 (81 FR 21747), we approved revisions to 30 TAC Chapter 117 (NO
We have reviewed the emission limitations and control requirements for the above source categories, Table 1, in 30 TAC Chapter 117, and compared them against EPA's ACT documents, available technical information, and guidelines. Based on our review and evaluation we found the emission limitations and control requirements in 30 TAC Chapter 117 for the above source categories to be consistent with our guidance and ACT documents, and based upon available technical information that the corresponding sections in 30 TAC Chapter 117 provide for the lowest emission limitation through application of control techniques that are reasonably available considering technological and economic feasibility. For more information, see part 3, section 6 of the TSD prepared in conjunction with this action. Also, see part 4 of the TSD for the March 27, 2015 (80 FR 16291) at
We are proposing to find that the control requirements for the source categories identified in Table 1 are RACT for all affected sources in the ten County DFW area under the 2008 8-Hour ozone NAAQS. See part 3, sections 5-7 of the TSD.
States are not required to adopt RACT limits for source categories for which no sources exist in a nonattainment area and can submit a negative declaration to that effect. Texas has reviewed its emissions inventory and determined that there are no nitric and adipic acid manufacturing operations in the DFW area. See Table F-1, page 8 of the Appendix F, titled “State Rules Addressing NO
As detailed in Table 2 below, EPA has issued guidance on NO
The source cap provision is a NO
Currently, three companies operate four cement kilns in Ellis County. Below we evaluate whether RACT is in place for these plants.
Ash Grove Cement Company (Ash Grove) operated three kilns in Ellis County. A federally enforceable 2013 consent decree, not a part of this SIP submittal, required by September 10, 2014 shutdown of two kilns and reconstruction of kiln #3 with Selective Noncatalytic Reduction (SNCR) with an emission limitation of 1.5 pounds of NO
Holcim U.S., Inc. (Holcim) currently has two dry preheater/precalciner kilns equipped with SNCR. There has not been a long wet cement kiln associated with the Holcim operations in Ellis County. The current section 117.3123 source cap is established at 5.3 tpd NO
Martin Marietta (MM) currently operates one dry preheater/precalciner kiln #5. The existing section 117.3123 source cap allocated to this kiln is set at 7.9 tpd NO
We are proposing to conditionally approve 1.95 lbs/ton of clinker as RACT for MM following the State's written commitment to EPA. The commitment letter states that through an agreed order between TCEQ and MM, certain conditions of MM's air permit, concerning the NO
We have reviewed the emission limitations and control requirements for the source category listed in Table 2 above, the corresponding sections in 30 TAC Chapter 117, and the Appendix F of the July 10, 2015 DFW SIP submittal, and compared them against EPA's ACT documents and guidelines. Based on our review and evaluation we found the emission limitations and control requirements in 30 TAC Chapter 117 and the Appendix F of the July 10, 2015 DFW SIP submittal for the above source category to be consistent with our guidance and ACT documents. We have also found these limits are among the most stringent in place in the country, at this time. As such, we are proposing that they provide for the lowest emission limitation through application of control techniques that are reasonably available considering technological and economic feasibility. For more information, see parts 2 and 4 of the TSD prepared in conjunction with this action.
Under section 110(k)(4) of the Act the Administrator may approve a plan revision based on a commitment of the State to adopt specific enforceable measures by a date certain, but not later than 1 year after the date of approval of the plan revision. Any such conditional approval shall be treated as a disapproval, if the State fails to comply with such commitment. If the State does not meet its commitment within the specified time period by 1) not adopting and submitting measures by the date it committed to, 2) not submitting anything, or 3) EPA finding the submittal incomplete, the approval will be converted to a disapproval. The Regional Administrator would send a letter to the State finding that it did not meet its commitment or that the submittal is incomplete and that the SIP submittal was therefore disapproved. The 18-month clock for sanctions and the two-year clock for a Federal Implementation Plan would start as of the date of the letter. Subsequently, a notice to that effect would be published in the
We are proposing to conditionally approve revisions to the Texas SIP addressing NO
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Additional information about these statutes and Executive Orders can be found at
This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.
This action does not impose an information collection burden under the PRA because this action does not impose additional requirements beyond those imposed by state law.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action will not impose any requirements on small entities beyond those imposed by state law.
This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action does not impose additional requirements beyond those imposed by state law. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, will result from this action.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.
This action does not have tribal implications, as specified in Executive Order 13175, because the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction, and will not impose substantial direct costs on tribal governments or preempt tribal law. Thus, Executive Order 13175 does not apply to this action.
The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not impose additional requirements beyond those imposed by state law.
This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.
Section 12(d) of the NTTAA directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. The EPA believes that this action is not subject to the requirements of section 12(d) of the NTTAA because application of those requirements would be inconsistent with the CAA.
The EPA lacks the discretionary authority to address environmental justice in this rulemaking.
Environmental protection, Air pollution control, Hydrocarbons, Incorporation by reference, Intergovernmental relations, Nitrogen dioxides, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve revisions to the Sacramento Metropolitan Air Quality Management District (SMAQMD) portion of the California State Implementation Plan (SIP). These revisions concern emissions of volatile organic compounds (VOC) from organic chemical manufacturing operations. We are proposing to approve a local rule and a rule rescission to regulate these emission sources under the Clean Air Act (CAA or the Act). We are taking comments on this proposal and plan to follow with a final action.
Any comments must arrive by August 18, 2017.
Submit your comments, identified by Docket ID No. EPA-R09-OAR-2016-0740 at
Arnold Lazarus, EPA Region IX, (415) 972-3024,
Throughout this document, “we,” “us” and “our” refer to the EPA.
Table 1 lists the rules addressed by this action with the dates that they were amended or repealed by the local air agency and submitted by the California Air Resources Board (CARB).
On September 27, 2016, the EPA determined that the submittal for SMAQMD Rule 455 and Rule 464 met the completeness criteria in 40 CFR part 51 Appendix V, which must be met before formal review by the EPA.
We approved an earlier version of SMAQMD Rule 464 into the SIP on October 3, 2011 (76 FR 61057), and we approved SMAQMD Rule 455 into the SIP on January 24, 1985 (50 FR 3338).
VOCs help produce ground-level ozone, also known as “smog,” and particulate matter (PM), which harm human health and the environment. Section 110(a) of the CAA requires states to submit regulations that control VOC emissions. SMAQMD Rule 455, “Pharmaceutical Manufacturing,” was approved into the SIP on January 24, 1985 (50 FR 3338). EPA re-evaluated Rule 455 as part of our review of the SMAQMD's 2006 Reasonably Available Control Technology (RACT) SIP, and concluded that Rule 455 did not meet the requirements of Federal CAA section 110(a)(2) because it lacked test methods, recordkeeping, and monitoring requirements that are necessary to ensure that the rule is enforceable. 81 FR 53280, 53281 (August 12, 2016). The SMAQMD subsequently repealed Rule 455 and simultaneously amended Rule 464 to include pharmaceutical and cosmetic manufacture. Rule 464 limits VOC emissions from organic chemical plants and pharmaceutical and cosmetic manufacturing; its controls for pharmaceutical manufacturing replace Rule 455. The EPA's technical support documents (TSDs) have more information about these rules.
SIP rules must be enforceable (see CAA section 110(a)(2)), must not interfere with applicable requirements concerning attainment and reasonable further progress or other CAA requirements (see CAA section 110(l)), and must not modify certain SIP control requirements in nonattainment areas without ensuring equivalent or greater emissions reductions (see CAA section 193).
Generally, SIP rules in ozone nonattainment areas classified as moderate or above must require RACT for each category of sources covered by a control techniques guidelines (CTG) document as well as each major source of VOCs (see CAA sections 182(b)(2)). The SMAQMD regulates an ozone nonattainment area classified as severe nonattainment for the 1997 and the 2008 8-hour ozone National Ambient Air Quality Standards (NAAQS) (40 CFR 81.305). Therefore, Rule 464 must implement RACT.
Guidance and policy documents that we use to evaluate enforceability, revision/relaxation and rule stringency requirements for the applicable criteria pollutants include the following:
1. “State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” 57 FR 13498 (April 16, 1992); 57 FR 18070 (April 28, 1992).
2. “Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,” U.S. EPA, May 25, 1988; revised January 11, 1990 (“The Bluebook”).
3. “Guidance Document for Correcting Common VOC & Other Rule Deficiencies,” EPA Region 9, August 21, 2001 (“The Little Bluebook”).
4. “Control of Volatile Organic Emissions from Manufacture of Synthesized Pharmaceutical Products,” EPA-450/2-78-029, December 1978.
5. “Control of Volatile Organic Compound Emissions from Reactor Processes and Distillation Operations Processes in the Synthetic Organic Chemical Manufacturing Industry,” EPA-450/4-91-031, August 1993.
We believe this rule and rule rescission are consistent with CAA requirements and relevant guidance regarding enforceability, RACT, and SIP revisions. The TSDs have more information on our evaluation.
The EPA partially approved and partially disapproved the RACT SIP revisions submitted by California on July 11, 2007 and January 21, 2009 for the SMAQMD severe ozone
As authorized in section 110(k)(3) of the Act, the EPA proposes to fully approve the submitted rule and rule rescission because we believe they fulfill all relevant requirements. We will accept comments from the public on this proposal until August 18, 2017. If we take final action to approve the submitted rule and rule rescission, our final action will incorporate these rules into the federally enforceable SIP.
In this rule, the EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference the SMAQMD rules described in Table 1 of this preamble. The EPA has made, and will continue to make, these materials available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this proposed action merely proposes to approve state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide the EPA with the discretionary authority to address disproportionate human health or environmental effects with practical, appropriate, and legally permissible methods under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Particulate matter, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a revision to the Sacramento Metropolitan Air Quality Management District (SMAQMD) portion of the California State Implementation Plan (SIP). This revision concerns emissions of volatile organic compounds (VOC) from landfill gas flaring at the Kiefer Landfill in Sacramento, California. We are proposing to approve portions of two SMAQMD operating permits that limit VOC emissions from this facility under the Clean Air Act (CAA or the Act). We are taking comments on this proposal and plan to follow with a final action.
Any comments must arrive by August 18, 2017.
Submit your comments, identified by Docket ID No. EPA-R09-OAR-2017-0196 at
Stanley Tong, EPA Region IX, (415) 947-4122,
Throughout this document, “we,” “us” and “our” refer to the EPA.
On January 24, 2017, the California Air Resources Board (CARB) submitted portions of SMAQMD Permits to Operate for the Kiefer Landfill. Specifically, CARB submitted permit conditions 2, 8, 13, 14, 16, 17, 22, 23, 24, 25, 26, 27, 37, 39 and 40 (or portions thereof) and Attachment A from SMAQMD Permits 24360 and 24361. SMAQMD adopted these portions of Permits 24360 and 24361 for inclusion in the California SIP on July 28, 2016. Please see the docket for a copy of the complete submitted documents.
On April 17, 2017, the EPA determined that the submittals for SMAQMD met the completeness criteria in 40 CFR part 51 Appendix V, which must be met before formal EPA review.
There are no previous versions of SMAQMD Permits 24360 or 24361 regulating VOC emissions from the Kiefer Landfill in the SIP. However, the SMAQMD adopted and submitted Permit No. 17359 for oxides of nitrogen (NOx) emissions from the Kiefer Landfill gas flare on October 26, 2006, and we approved it into the SIP on April 12, 2011 (76 FR 20242).
VOCs help produce ground-level ozone, smog and particulate matter, which harm human health and the environment. Section 110(a) of the CAA requires states to submit regulations that control VOC emissions. Additionally, section 182(b)(2)(C) of the Act requires states to submit SIP provisions requiring the implementation of Reasonably Available Control Technology (RACT) for any major stationary source
On August 12, 2016, the EPA partially approved and partially disapproved the SMAQMD's SIP revision to address RACT requirements for the 1997 8-hour ozone NAAQS, based in part on our conclusion that the submittal did not satisfy the CAA section 182 requirements for the Kiefer Landfill. See 81 FR 53280. Our final action stated that sanctions would be imposed under CAA section 179 and 40 CFR 52.31 unless the EPA approved SIP revisions correcting these deficiencies within 18 months of the effective date of our final rulemaking action.
The SMAQMD adopted the submitted portions of Permits 24360 and 24361 to address the VOC RACT deficiencies identified by the EPA for the Kiefer Landfill. The submitted portions relate to the control of VOC emissions from gas flares at the Kiefer Landfill (Permit 24360 applies to flare No. 1; and Permit 24361 applies to flare No. 2). They contain emission limits, equipment operational requirements, reporting and recordkeeping requirements, monitoring and testing requirements, and a stipulation that for federal enforcement purposes, the RACT provisions in the permits remain in effect as part of the SIP until replaced pursuant to 40 CFR part 51 and approved by the EPA.
SIP provisions must be enforceable (see CAA section 110(a)(2)), must not interfere with applicable requirements concerning attainment and reasonable further progress or other CAA requirements (see CAA section 110(l)), and must not modify certain SIP control requirements in nonattainment areas without ensuring equivalent or greater emissions reductions (see CAA section 193).
Generally, the SIP must require RACT for each category of sources covered by a control techniques guidelines (CTG) document as well as each major source of VOCs or NO
Guidance and policy documents that we use to evaluate enforceability, revision/relaxation and rule stringency requirements for the applicable criteria pollutants include the following:
1. “State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” 57 FR 13498 (April 16, 1992); 57 FR 18070 (April 28, 1992).
2. “Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,” EPA, May 25, 1988; revised January 11, 1990 (“The Bluebook”).
3. “Guidance Document for Correcting Common VOC & Other Rule Deficiencies,” EPA Region 9, August 21, 2001 (“The Little Bluebook”).
4. “Final Rule to Implement the 8-Hour Ozone National Ambient Air Quality Standard—Phase 2,” 70 FR 71612 (November 29, 2005).
5. Memorandum from William T. Harnett to Regional Air Division Directors, “RACT Qs & As—Reasonably Available Control Technology (RACT); Questions and Answers” (May 18, 2006).
We are proposing to approve the submitted portions of SMAQMD Permits 24360 and 24361 into the SMAQMD portion of the California SIP because they satisfy the applicable CAA requirements for approval. Specifically, for SMAQMD Permit 24360, we propose to approve permit conditions 2, 8, 13, 14, 16, 17, 22, 23, 24, 25, 26, 27, 37, 39 and 40 (or portions thereof), and Attachment A, which together establish an enforceable VOC limitation satisfying
The VOC limitations contained in these permits are consistent with the limitations contained in other California air district rules for similar facilities. For example, permit condition 8 for landfill flares No. 1 and No. 2 specifies a VOC destruction efficiency of 98% or 20 parts per million by volume, dry, at 3% Oxygen, measured as hexane. South Coast Air Quality Management District Rule 1150.1, “Control of Gaseous Emissions from Municipal Solid Waste Landfills” (April 1, 2011), and Bay Area Air Quality Management District Rule 8-34, “Solid Waste Disposal Sites” (June 15, 2005), apply this same limit. Other California air district rules such as Yolo Solano Air Quality Management District Rule 2-38, “Standards for Municipal Solid Waste Landfills” (March 12, 1997) and San Diego Air Pollution Control District Rule 59.1, “Municipal Solid Waste Landfills” (June 17, 1998) reference 40 CFR part 60, subpart WWW, “Standards of Performance for Municipal Solid Waste Landfills,” for applicable requirements, which includes these same limits. The operational standards for the landfill flares are thus also consistent with the landfill flare standards in 40 CFR part 60, subpart WWW, and are also consistent with 40 CFR part 63, subpart AAAA, “National Emission Standards for Hazardous Air Pollutants, Municipal Solid Waste Landfills.” Because the applicable SIP currently does not contain VOC limitations for the Kiefer Landfill gas flares, the approval of these permit conditions strengthens the SIP. In sum, the submitted permit conditions satisfy the applicable requirements and guidance regarding enforceability, RACT, and SIP relaxations and may, therefore, be approved into the California SIP.
As stated earlier, on August 12, 2016 (81 FR 53280), the EPA partially approved and partially disapproved the SMAQMD's RACT SIP revisions submitted by California on July 11, 2007 and January 21, 2009, based in part on our conclusion that the state had not fully satisfied CAA section 182 RACT requirements for the pharmaceuticals manufacturing CTG category and for the Kiefer Landfill. We are separately but contemporaneously proposing approval of a SIP revision intended to address the deficiencies identified in our 2016 partial disapproval of the SMAQMD's RACT SIP regarding the pharmaceuticals manufacturing CTG category.
Please see the docket for a copy of the complete submitted documents.
As authorized in section 110(k)(3) of the Act, the EPA proposes to fully approve the specific permit conditions of SMAQMD Permits 24360 and 24361 as submitted by CARB on January 24, 2017, because we believe they fulfill all relevant requirements. We will accept comments from the public on this proposal until August 18, 2017. If we take final action to approve the submitted documents, our final action will incorporate these documents into the federally enforceable SIP.
In this rulemaking, the EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference the SMAQMD permits described in Section I.A of this preamble. The EPA has made, and will continue to make, these materials available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this proposed action merely proposes to approve state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide the EPA with the discretionary authority to address disproportionate human health or environmental effects with practical, appropriate, and legally permissible methods under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Particulate matter, Reporting
42 U.S.C. 7401
Fish and Wildlife Service, Interior.
Proposed rule; reopening of the comment period.
We, the U.S. Fish and Wildlife Service (Service), announce a 6-month extension of the final determination of whether to list the
The comment period for the proposed rule that published September 15, 2016, at 81 FR 63454 is reopened. We will accept comments received or postmarked on or before August 18, 2017. If you comment using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
Stephen P. Henry, Field Supervisor, U.S. Fish and Wildlife Service, Ventura Fish and Wildlife Office, 2493 Portola Road, Ventura, CA 93003; telephone 805-644-5763; facsimile 805-644-3958. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service at 800-877-8339.
On September 15, 2016, we published a proposed rule (81 FR 63454) to list
Section 4(b)(6) of the Act and its implementing regulations at 50 CFR 424.17(a) require that we take one of three actions within 1 year of a proposed listing: (1) Finalize the proposed rule; (2) withdraw the proposed rule; or (3) extend the final determination by not more than 6 months, if there is substantial disagreement regarding the sufficiency or accuracy of the available data relevant to the determination.
Since the publication of the September 15, 2016, proposed listing rule (81 FR 63454), there has been substantial disagreement among peer reviewers regarding the potential impact of the invasion of Argentine ants (
We find that there is substantial scientific uncertainty and disagreement about certain data relevant to our listing determination. Therefore, in consideration of these disagreements, we have determined that a 6-month extension of the final determination for this rulemaking is necessary, and we are hereby extending the final determination for 6 months in order to solicit and consider additional information that will help to clarify these issues and to fully analyze data that are relevant to our final listing determination. With this 6-month extension, we will make a final determination on the proposed rule no later than March 15, 2018.
We will accept written comments and information during this reopened comment period on our proposed listing for
In consideration of the scientific disagreements about certain data, we are particularly interested in new information and comments regarding:
(1) How Argentine ant invasion may affect the pollination ecology of
(2) The efficacy of seed introduction for long-term establishment into suitable, unoccupied habitat of
If you previously submitted comments or information on the September 15, 2016, proposed rule (81 FR 63454), please do not resubmit them. We have incorporated previously submitted comments into the public record, and we will fully consider them in the preparation of our final determination. Our final determination concerning the proposed listing will take into consideration all written comments and any additional information we receive.
You may submit your comments and materials concerning the proposed rule
If you submit information via
Comments and materials we receive, as well as supporting documentation we used in preparing the proposed rule, will be available for public inspection on
The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
This action proposes regulations to implement an Omnibus Framework Adjustment to the Mid-Atlantic Fishery Management Council acceptable biological catch setting process. This proposed rule is necessary to provide the public with an opportunity to review and comment on the measures recommended by the Mid-Atlantic Council to the National Marine Fisheries Service for implementation. The intended effect of these measures would help bring stability to quotas while accounting for year-to-year changes in stock size projections, and allow the Mid-Atlantic Council's Fishery Management Plans to automatically incorporate the best available scientific information when calculating acceptable biological catches. This action also proposes to revise regulatory language to clarify the Mid-Atlantic Council's acceptable biological catch control rule assessment level designations.
Comments must be received on or before August 18, 2017.
You may submit comments, identified by NOAA-NMFS-2017-0056, by either of the following methods:
•
•
Copies of the Environmental Assessment and other supporting documents are available from Dr. Christopher M. Moore, Executive Director, Mid-Atlantic Fishery Management Council, Suite 201, 800 N. State Street, Dover, DE 19901. The draft Omnibus Framework Adjustment, as submitted by the Council, is also available via the internet at
Reid Lichwell, Fishery Management Specialist, (978) 281-9112.
The Mid-Atlantic Fishery Management Council (Council) is required to set annual catch limits (ACLs) that do not exceed the acceptable biological catch (ABC) recommendation of its Scientific and Statistical Committee (SSC) to prevent overfishing. ABCs represent an upper limit for the Council to use when setting catch and landing limits. The 2011 ACL Omnibus Amendment implementing rule (76 FR 60606; September 29, 2011), enacted the Council's risk policy that provides guidance to the SSC on how much overfishing risk the Council will accept when the SSC develops ABC recommendations. The policy also outlines risk tolerance for ensuring stocks under rebuilding plans achieve fishing mortality objectives.
The Council's risk policy for setting ABCs states that for a typical species whose stock size is equal to or greater than a biomass target associated with maximum sustainable yield (B
For both typical and atypical species, the Council has specified that as stock size biomass or (B) falls below the target (B
The fishery management plans (FMPs) managed by the Council all have
The proposed action would, when assessment fishing mortality reference points are accepted by the SSC, average the probability of overfishing (or achieving the target fishing mortality for rebuilding stocks) consistent with the existing risk policy requirements. The constant, multi-year ABCs that would result must continue to meet the Council's risk policy goals, with the probability of overfishing not to exceed 50 percent in any given year. For stocks in a rebuilding plan, the probability of achieving the rebuilding fishery mortality must meet the risk policy objectives when constant, multi-year ABCs are recommended by the SSC.
Under the proposed measures, averaged ABCs could be set at a constant level for up to five years for spiny dogfish and up to three years for all other species managed by the Council. As an example, if the application of the risk policy would result in a 40-percent probability of overfishing in any given year of setting annual quotas, the average probability of overfishing resulting from constant multi-year ABCs cannot exceed 40 percent. For any 3-year period, an average ABC would result in slightly less chance of overfishing in some years and slightly more of a chance of overfishing in other years compared to non-averaged ABCs based on year-to-year projections, but could not, as outlined in the example, exceed 40 percent in any given year. This would result in a minimal difference of overfishing likelihood between the yearly ABCs versus a constant ABC over a 3-year period. As previously noted, the probability of overfishing could not exceed 50 percent in any given individual year of constant multi-year ABCs.
The SSC may provide both a standard 3-year recommendation as well as a constant 3-year recommendation based on the average overfishing probability approach for the Council to consider. The SSC would continue to review fishery performance each year during multi-year specifications, regardless of which multi-year approach is used to determine ABCs. The multi-year averaging of ABCs would not apply to stocks that do not have a quantitative assessment to derive ABCs and could not be used for stocks with an assessment that cannot provide information on the risk of overfishing.
The proposed action would revise some of the regulatory language describing the Council's ABC control rule assessment level designations. These revisions were recommended by the Council to clarify the operation of the Council's ABC control rules, these revisions are merely clarifications and do not create any regulatory changes in practice.
We are also providing notice of the administrative process the Council will use for incorporating the best scientific information available in the development of ABCs for the Atlantic Bluefish, Golden Tilefish, and Atlantic Mackerel, Squid, and Butterfish FMPs. The best available science requirements have dictated that accepted assessment information be utilized by the SSC in setting quotas under National Standard 2. The Council's SSC will utilize peer-reviewed biological reference points (overfishing level, biomass thresholds, etc.) and periodic updates to stock status determination criteria (
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has made a preliminary determination that this proposed rule is consistent with all the Mid-Atlantic Fishery Management Council's FMPs, provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.
This proposed rule has been determined to be not significant for purposes of Executive Order 12866.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The Small Business Administration defines a small business in the shellfish, finfish or other marine fishing sectors as a firm that is independently owned and operated with receipts of less than $11 million annually (see NMFS final rule revising the small business standard for commercial fishing, 80 FR 81194, December 29, 2015). The measures proposed in this action apply to the vessels that hold permits for Council-managed fisheries because all species have ABCs set by the SSC. According to permit data at the end of 2014, there were 4,712 vessels with at least one active Northeast Federal fishing permit, either commercial or party/charter (some vessels have both commercial and party/charter permits and most vessels have more than one permit).
This proposed action would make it consistent with the Council's risk policy for the SSC to specify constant multi-year ABCs for all the Council's FMPs, provided the average of each year's probability of overfishing adhere to the appropriate overfishing probability goal. This change would help bring stability to fishing quotas while accounting for year-to-year changes in stock size projections and prevent overfishing. Given the inherent uncertainty involved in assessments, the differences are not expected to be meaningful from a biological perspective.
In addition, the proposed action would add regulatory language clarifying the assessment level designations for the Council's ABC control rule. These changes to the regulations were recommended by the Council to merely clarify the ABC control rule and do not change its function or operation.
This action also provides notice that the Atlantic Bluefish, Golden Tilefish, and Atlantic Mackerel, Squid, and Butterfish FMPs will automatically incorporate the best available scientific information in calculating ABCs. This means the SSC would utilize peer-
These measures are administrative and pertain to how the Council establishes catch limits. There is no reason to believe small entities will be negatively affected by the proposed action given the administrative nature of the changes. The resulting actions to set catch using these new procedures may have an indirect effect on small entities; however, catch setting will occur in separate subsequent actions that will include, as needed, analyses under the Regulatory Flexibility Act. As a result, an initial regulatory flexibility analysis is not required and none has been prepared.
Fisheries, Fishing, Recordkeeping and Reporting requirements.
For the reasons set out in the preamble, NMFS proposes to amend 50 CFR 648 as follows:
16 U.S.C. 1801
The SSC shall review the following criteria, and any additional relevant information, to assign managed stocks to one of four types of control rules based on the species' assessments and its treatment of uncertainty when developing ABC recommendations. The SSC shall review the ABC control rule assignment for stocks each time an ABC is recommended. ABCs may be recommended for up to 3 years for all stocks, with the exception of 5 years for spiny dogfish. The SCC may specify constant, multi-year ABCs, derived from the average of ABCs (or average risk of overfishing) if the average probability of overfishing remains between zero and 40 percent, and does not exceed a 50-percent probability in any given year. The average ABCs may remain constant for up to 3 years for all stocks, with the exception of 5 years for spiny dogfish. The SSC may deviate from the control rule methods and recommend an ABC that differs from the result of the ABC control rule application; however, any such deviation must include the following: A description of why the deviation is warranted; description of the methods used to derive the alternative ABC; and an explanation of how the deviation is consistent with National Standard 2. The four types of ABC control rules are described below.
(a) ABC control rule for a stock with an OFL probability distribution that is analytically-derived and accepted by the SSC.
(1) The SSC determines that the assessment OFL and the assessment's treatment of uncertainty are acceptable, based on the following:
(i) All important sources of scientific uncertainty are captured in the stock assessment model;
(ii) The probability distribution of the OFL is calculated within the stock assessment and adequately describes the OFL uncertainty;
(iii) The stock assessment model structure and treatment of the data prior to use in the model includes relevant details of the biology of the stock, fisheries that exploit the stock, and data collection methods;
(iv) The stock assessment provides the following estimates: Fishing mortality rate (F) at MSY or an acceptable proxy maximum fishing mortality threshold (MFMT) to define OFL, biomass, biological reference points, stock status, OFL, and the respective uncertainties associated with each value; and
(v) No substantial retrospective patterns exist in the stock assessment estimates of fishing mortality, biomass, and recruitment.
(2) An
(b) ABC control rule for a stock with an OFL probability distribution that is modified by the assessment team and accepted by the SSC.
(1) The SSC determines the assessment OFL is acceptable and the SSC accepts the assessment team's modifications to the analytically-derived OFL probability distribution, based on the following:
(i) Key features of the stock biology, the fisheries that exploit it, and/or the data collection methods for stock information are missing from, or poorly estimated in, the stock assessment;
(ii) The stock assessment provides reference points (which may be proxies), stock status, and uncertainties associated with each; however, the uncertainty is not fully promulgated through the stock assessment model and/or some important sources of uncertainty may be lacking;
(iii) The stock assessment provides estimates of the precision of biomass, fishing mortality, and reference points;
(iv) The accuracy of the minimum fishing mortality threshold and projected future biomass is estimated in the stock assessment using ad hoc methods; and
(v) The modified OFL probability distribution provided by the assessment team acceptably addresses the uncertainty of the assessment.
(2) An
(c) ABC control rule for a stock with an OFL probability distribution that is modified by the SSC.
(1) The SSC determines the assessment OFL is acceptable but the SSC derives the appropriate uncertainty for OFL based on meta-analysis and other considerations. This requires the SSC to determine that the stock assessment does not contain an estimated probability distribution of OFL or the OFL probability distribution in the stock assessment is judged by the SSC to not adequately reflect uncertainty in the OFL estimate.
(2) An
(ii) If the SSC cannot develop an OFL probability distribution, a default
(d) ABC control rule for when an OFL cannot be specified.
(1) The SSC determines that the OFL cannot be specified given the available information.
(2) An
Agricultural Marketing Service, USDA.
Notice; request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the U. S. Department of Agriculture (USDA) Agricultural Marketing Service's (AMS) intent to request approval from the Office of Management and Budget (OMB) for an extension of the currently approved information collection used to compile and generate the Federally Inspected Estimated Daily Slaughter Report (OMB 0581-0050).
Comments must be received by September 18, 2017.
Comments should be submitted electronically at
Sam Jones-Ellard, Assistant to the Director, Livestock, Poultry, and Grain Market News Division, AMS, USDA, by telephone at (202) 720-6231, or via email at
The USDA issues a Market News report estimating daily livestock slaughter under Federal inspection. This report is compiled by AMS on a voluntary basis in cooperation with the livestock and meat industry. Market News reporting must be timely, accurate, and continuous if it is to be useful to producers, processors, and the trade in general. The daily livestock slaughter estimates are provided at the request of industry and are used to make production and marketing decisions.
The Estimated Daily Livestock Slaughter Under Federal Inspection Report is used by a wide range of industry contacts, including packers, processors, producers, brokers, and retailers of meat and meat products. The livestock and meat industry requested that USDA issue slaughter estimates (daily and weekly), by species, for cattle, calves, hogs, and sheep to assist them in making immediate production and marketing decisions and as a guide to the volume of meat in the marketing channel. The information requested from respondents includes their estimation of the current day's slaughter at their plant(s) and the actual slaughter for the previous day. Also, the Government is a large purchaser of meat and related products and this report assists other Government agencies in providing timely information on the quantity of meat entering the processing channels.
The information must be collected, compiled, and disseminated by an impartial third-party, in a manner which protects the confidentiality of the reporting entity. AMS is in the best position to provide this service.
Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of AMS, including whether the information will have practical utility; (2) the accuracy of AMS estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
All responses to this notice will be summarized and included in the request for OMB approval. All comments will become a matter of public record.
Farm Service Agency, USDA.
Notice of information collection; request for comment.
In accordance with the Paperwork Burden Act of 1995, the Farm Service Agency (FSA) is requesting comments from all interested individuals and organizations for a revision with an extension of a currently approved Information Collection Request that supports the Certified State Mediation Program. The information collection is necessary to ensure that the grant program is administered properly. The collection of information is used to determine whether participants meet the eligibility requirements to be a recipient of grant funds. Lack of adequate information to make the determination could result in the improper administration of Federal grant funds.
We will consider comments we receive by September 18, 2017.
We invite you to submit comments on this notice. In your comment, include volume, date, and page number of this issue of the
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You may also send comments to the Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503. Copies of the information collection may be requested by contacting Tracy Jones at the above address.
For specific questions related to collection activities, Tracy Jones (202) 720-6771.
To effectively administer the Program, FSA requires an application for recertification, which includes submission of a letter from the State, a letter from the grantee, SF-424, SF-424A, SF-424B, and SF-425. Approved grantees provide a mid-year report as well as an annual report that includes information on mediation services provided during the preceding Federal fiscal year, assessment of the performance and effectiveness of the State's Program, and any other matters related to the Program as the State elects to include. In addition, approved grantees complete SF-270 to request either advance funding or reimbursement of expenses already paid. The information requested is necessary for FSA to determine the grantee's eligibility and administer the Program effectively.
The number of state-certified mediation programs has increased over the past several years. The increase in burden hours reflects this change.
For the following estimated total annual burden on respondents, the formula used to calculate the total burden hours is the estimated average time per response multiplied by the estimated total annual responses.
We are requesting comments on all aspects of this information collection to help FSA:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of burden of the collection of information including the validity of the methodology and assumptions used;
(3) Evaluate the quality, ability and clarity of the information technology; and
(4) Minimize the burden of the information collection on those who respond through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
All comments received in response to this notice, including names and addresses when provided, will be made a matter of public record. Comments will be summarized and included in the submission for Office of Management and Budget approval.
Forest Service, USDA.
Notice to extend the public comment period for the Ringo Draft Environmental Impact Statement for a proposed Forest Plan amendment.
The Deschutes National Forest is issuing this notice to advise the public of a 45-day extension to the public comment period on the project-specific Forest Plan amendment proposed in the Ringo Project Draft Environmental Impact Statement (DEIS). This extended 45-day comment period is for the amendment, which includes the substantive provisions and relevant analysis.
The comment period ends September 5, 2017. All relevant comments received during the extended public comment period related to the proposed amendment, including the substantive provisions, will be considered in the preparation of the Final Environmental Impact Statement (FEIS).
Comments may be submitted by any one of the following methods:
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This opportunity for comment applies
Joseph Bowles, Project Team Leader, Crescent Ranger District, Deschutes National Forest, (541) 433-3200, or via email at
The original Notice of Availability published in the
As identified in the DEIS, the Ringo Project would be exempt from the following Standard and Guideline of the 1990 Deschutes Land and Resource Management Plan (LRMP):
Scenic Views, Foreground (M9-90; LRMP p. 4-131),
Substantive provisions of 36 CFR 219.8 through 219.11 that apply to the proposed amendment for Ringo DEIS Purpose and Need are:
The following two provisions would be applicable to the effects from implementing this Forest Plan Amendment.
National Agricultural Statistics Service, USDA.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995 this notice announces the intention of the National Agricultural Statistics Service (NASS) to request revision to the currently approved information collection, the Bee and Honey survey docket (0535-0153). In addition NASS plans to merge this docket with the currently approved Colony Loss survey docket (0535-0255). Revision to burden hours will be needed due to a changes in the size of the target population, sample design, and the inclusion of the Colony Loss surveys.
Comments on this notice must be received by September 18, 2017 to be assured of consideration.
You may submit comments, identified by docket number 0535-0153, by any of the following methods:
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R. Renee Picanso, Associate Administrator, National Agricultural Statistics Service, U.S. Department of Agriculture, (202) 720-4333. Copies of this information collection and related instructions can be obtained without charge from David Hancock, NASS—OMB Clearance Officer, at (202) 690-2388 or at
In this request for renewal of the Bee and Honey (0535-0153) docket, NASS will incorporate the two surveys (operations with fewer than 5 colonies and operations with 5 or more colonies) conducted under the Colony Loss (0535-0255) docket with the honey production surveys included in this docket. The operations with 5 or more colonies will continue to receive quarterly loss questionnaires and an annual honey production survey. The
The title of this revised docket will now be Honey and Honey Bee Surveys. As pollinators, honey bees are vital to the agricultural industry for producing food for the world's population. USDA, NASS has found that during 2015, colonies losses by quarter ranged from 12 to 18 percent. Overall, from January 1, 2015 to January 1, 2016, the total number of colonies in the United States decreased by 8 percent.
Additional data is needed to accurately describe the costs associated with pest/disease control, wintering fees, and replacement worker and queen bees. USDA and the Environmental Protection Agency (EPA), in consultation with other relevant Federal partners, are scaling up efforts to address the decline of honey bee health with a goal of ensuring the recovery of this critical subset of pollinators. NASS supports the Pollinator Research Action Plan, published May 19, 2015, which emphasizes the importance of coordinated action to identify the extent and causal factors in honey bee mortality.
All responses to this notice will become a matter of public record and be summarized in the request for OMB approval.
U.S. Census Bureau, Commerce.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
To ensure consideration, written comments must be submitted on or before September 18, 2017.
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Chris Savage, U.S. Census Bureau, Economy Wide-Statistics Division, Room 8K045, 4600 Silver Hill Road, Washington, DC 20233-6500, (301) 763-4834, (or via Email at
The Annual Retail Trade Survey (ARTS) covers employer firms with establishments located in the United States and classified in the Retail Trade sector as defined by the 2012 North American Industry Classification System (NAICS).
The Census Bureau selects firms for this survey from the Business Register (BR) using a stratified random sample where strata are defined by industry and annual sales. The BR is the Census Bureau's master business list and contains basic economic information for more than 7.4 million employer business and over 22.5 million non-employer businesses. The BR contains information collected through direct data collections as well as administrative record information from other federal agencies. The Census Bureau updates the ARTS sample quarterly to reflect employer business “births” and “deaths.” The births reflect new employer businesses identified in the Business and Professional Classification Survey; deaths involve deleting firms and subunits of firms identified by their Employer Identification Numbers (EINs) when it is determined they are no longer active.
Through the ARTS survey, the Census Bureau asks firms to provide annual sales, annual e-commerce sales, year-end inventories held inside and outside the United States, sales taxes, total operating expenses, purchases, accounts receivables, and, for selected industries, sales by merchandise line. These data are used to satisfy a variety of public and business needs such as conducting economic market analyses, assessing company performance, and forecasting future demands. The Census Bureau publishes national data from the survey for selected retail trade industries approximately fifteen months after the end of the reference year.
Effective in survey year 2016 (collected in 2017), ARTS no longer includes firms in the accommodation and food services industries. These industries are now part of the Service Annual Survey (SAS). Also effective in survey year 2016, ARTS introduced a new sample and requested that firms provide two years of data in order to link the old and new samples. Linking the samples helps ensure that published estimates continue to be reliable and accurate. In survey year 2017 and subsequent years, ARTS will request only one year of data until a new sample is selected again in five years.
Every five years, in survey years ending in 2 and 7, ARTS requests data on detailed operating expenses from firms. During the survey year 2016 ARTS collection, detailed operating expenses are not collected. The last time ARTS collected detailed operating expenses was in 2013 for the 2012 survey year. The plan is to reinstate these questions in 2018 as part of the 2017 survey year ARTS data collection.
In an effort to reduce burden and meet the changing needs of data users, as of the 2016 survey year the Census Bureau is no longer requesting that department stores provide data regarding sales collected from leased departments.
The ARTS data is only collected electronically using the Census Bureau's secure online reporting instrument (Centurion). This electronic system of reporting is designed to allow respondents easier access, convenience and flexibility. Data is automatically stored and results are available immediately. In rare cases where the company has no access to the Internet, the Census Bureau can arrange for the company to provide data to an analyst via telephone.
The Census Bureau collects this information via the Internet but in rare cases when respondents have no access to the Internet, it is collected by telephone.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
Bureau of the Census, Commerce.
Notice of final change.
The Bureau of the Census (U.S. Census Bureau) publishes this notice to announce the upcoming change in the classification of limited-access highways in the Census Bureau's Master Address File/Topologically Integrated Referencing and Encoding (MAF/TIGER) System. The change assigns all limited-access highways a MAF/TIGER Feature Classification Code (MTFCC) of S1100 (Primary Roads). Previously, the classification code for limited-access highways was either S1100 (Primary Roads) or S1200 (Secondary Roads).
This notice will be effective on August 18, 2017.
David Cackowski, (301) 763-5423, or at
MAF/TIGER System is an abbreviation for the Master Address File/Topologically Integrated Geographic Encoding and Referencing System. It is a digital (computer-readable) geographic database that automates the mapping and related geographic activities required to support the Census Bureau's census and survey programs. The Census Bureau developed TIGER to automate the geographic support processes needed to meet the major geographic needs of the 1990 census: Producing cartographic products to support data collection and map presentations, providing geographic structure for tabulation and dissemination of the collected statistical data, assigning residential and employer addresses to the correct geographic location and relating those locations to the geographic entities used for data tabulation, and so forth. During the 1990s, the Census Bureau developed an independent Master Address File (MAF) to support field operations and allocation of housing units for tabulations. After Census 2000, both the address-based MAF and geographic TIGER databases merged to form the MAF/TIGER System. The contents of the MAF/TIGER System undergo continuous updating and are made available to the public through a variety of TIGER products such as shapefiles, geodatabases, and web map services.
The Census Bureau issued in the
The Census Bureau publishes this notice to announce the upcoming change in the classification of limited-access highways in the MAF/TIGER System. Generally, only interstate highways are currently in the S1100
Primary roads are limited-access highways that connect to other roads only at interchanges and not at at-grade intersections. This category includes interstate highways, as well as all other highways with limited access (some of which are toll roads). Limited-access highways with only one lane in each direction, as well as those that are undivided, are also included under S1100.
The final description makes clear that secondary roads are not limited-access highways. The final description of Secondary Roads (S1200) is:
Secondary roads are main arteries that are not limited access, usually in the U.S. highway, state highway, or county highway systems. These roads have one or more lanes of traffic in each direction, may or may not be divided, and usually have at-grade intersections with many other roads and driveways. They often have both a local name and a route number.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) determines that emulsion styrene-butadiene rubber (ESB rubber) from the Republic of Korea (Korea) is being, or is likely to be, sold in the United States at less than fair value (LTFV).
July 19, 2017.
Carrie Bethea or Kabir Archuletta, AD/CVD Operations, Office V, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-1491 or (202) 482-2593, respectively.
On February 24, 2017, the Department of Commerce published the
The product covered by this investigation is ESB rubber from Korea. For a complete description of the scope of this investigation,
No interested party commented on the scope of the investigation as it appeared in the
As provided in section 782(i) of the Act, in April and June 2017, the Department conducted verification of the information reported by a mandatory respondent, LG Chem, Ltd. (LG Chem), and its U.S. affiliate, LG Chem America, Ltd., for use in the Department's final determination. The Department used standard verification procedures, including an examination of relevant accounting and production records and original source documents provided by the respondent.
Because Daewoo International Corporation (Daewoo) and Kumho Petrochemical Co, Ltd (Kumho), mandatory respondents in this investigation, did not provide information requested by the Department, and the Department preliminarily determined Daewoo and Kumho to have been uncooperative, the Department did not verify their books and records and facilities.
All issues raised in the case and rebuttal briefs that were submitted by parties in this investigation are addressed in the Issues and Decision Memorandum. A list of these issues is attached to this notice as Appendix II. Based on our analysis of the comments received and our findings at verification, we made certain changes to the margin calculation for LG Chem, and also the all-others rate.
The Department found in the
Section 735(c)(5)(A) of the Act provides that in the final determination the Department shall determine an estimated all-others rate for all exporters
For the final determination, the Department assigned a rate based entirely on facts available to Daewoo and Kumho. Therefore, the only rate that is not zero,
The Department determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(e) of the Act, the Department preliminarily found critical circumstances exist with respect to Daewoo and Kumho and do not exist with respect to LG Chem and the non-individually examined companies receiving the “All-Others” rate in this investigation. The Department did not receive comments concerning the preliminary affirmative determination of critical circumstances. For the final determination, the Department continues to find that, in accordance with 735(a)(3) of the Act, critical circumstances exist for Daewoo and Kumho. A discussion of the determination can be found in the “Critical Circumstances” section of the Issues and Decision Memarandum.
In accordance with section 735(c)(1)(B) of the Act, the Department will instruct U.S. Customs and Border Protection (CBP) to continue to suspend liquidation of all appropriate entries of ESB rubber from Korea as described in Appendix I of this notice, which were entered, or withdrawn from warehouse, for consumption on or after, February 24, 2017, the date of publication of the
Because of the Department's affirmative determination of critical circumstances for Daewoo and Kumho, in accordance with section 735(a)(3) and (c)(4)(A) of the Act, suspension of liquidation of ESB rubber from Korea, shall continue to apply, for Daewoo and Kumho, to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the date which is 90 days before the publication of the
The Department intends to disclose to interested parties its calculations and analysis performed in this final determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
In accordance with section 735(d) of the Act, the Department will notify the International Trade Commission (ITC) of its final determination. Because the final determination in this proceeding is affirmative, in accordance with section 735(b)(2) of the Act, the ITC will make its final determination as to whether the domestic industry in the United States is materially injured, or threatened with material injury, by reason of imports of ESB rubber from Korea no later than 45 days after the Department's final determination. If the ITC determines that material injury or threat of material injury does not exist, the proceeding will be terminated and all securities posted will be refunded or canceled. If the ITC determines that such injury does exist, the Department will issue an antidumping duty order directing CBP to assess, upon further instruction by the Department, antidumping duties on appropriate imports of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of the suspension of liquidation.
This notice serves as a reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and the terms of an APO is a violation subject to sanction.
This determination and this notice are issued and published pursuant to sections 735(d) and 777(i)(1) of the Act and 19 CFR 351.210(c).
For purposes of this investigation, the product covered is cold-polymerized emulsion styrene-butadiene rubber (ESB rubber). The scope of the investigation includes, but is not limited to, ESB rubber in primary forms, bales, granules, crumbs, pellets, powders, plates, sheets, strip,
ESB rubber is produced and sold in accordance with a generally accepted set of product specifications issued by the International Institute of Synthetic Rubber Producers (IISRP). The scope of the investigation covers grades of ESB rubber included in the IISRP 1500 and 1700 series of synthetic rubbers. The 1500 grades are light in color and are often described as “Clear” or “White Rubber.” The 1700 grades are oil-extended and thus darker in color, and are often called “Brown Rubber.”
Specifically excluded from the scope of this investigation are products which are manufactured by blending ESB rubber with
The products subject to this investigation are currently classifiable under subheadings 4002.19.0015 and 4002.19.0019 of the Harmonized Tariff Schedule of the United States (HTSUS). ESB rubber is described by Chemical Abstract Services (CAS) Registry No. 9003-55-8. This CAS number also refers to other types of styrene butadiene rubber. Although the HTSUS subheadings and CAS registry number are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
On May 26, 2017, the Court of International Trade (the CIT) sustained the Department of Commerce's (the Department) final remand results pertaining to the new shipper review of the antidumping duty order on fresh garlic from the People's Republic of China (PRC) for Shijiazhuang Goodman Trading Co., Ltd. (Goodman). The Department is notifying the public that the final judgment in this case is not in harmony with the final rescission of the new shipper review and that the Department has found Goodman eligible for a new shipper review resulting in an individually-determined dumping margin of $0.08/kg.
Applicable June 5, 2017.
Chien-Min Yang, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-5484.
Goodman is a Chinese producer/exporter of fresh garlic and requested a new shipper review on November 27, 2012, and amended that request on December 6, 2012.
On April 21, 2014, the Department issued the
On March 22, 2016, the CIT remanded for the Department to reconsider its decision.
Per the Court's instructions, the Department reconsidered its previous analysis and determined, under protest, Goodman's U.S. sales to be
On May 26, 2017, the CIT sustained the Department's Final Redetermination in full.
In its decision in
Because there is now a final court decision, we are amending the
In the event that the CIT's ruling is not appealed or, if appealed, is upheld by a final and conclusive court decision, the Department will instruct Customs and Border Protection (CBP) to assess antidumping duties on unliquidated entries of subject merchandise based on the revised dumping margin listed above.
Since the
This notice is issued and published in accordance with section 516A(e)(1), 751(a)(1), and 777(i)(1) of the Act.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Department) determines that emulsion styrene-butadiene rubber (ESB rubber) from Brazil is being, or is likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is July 1, 2015, through June 30, 2016.
July 19, 2017.
Drew Jackson, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-4406.
On February 24, 2017, the Department published the
The product covered by this investigation is ESB rubber from Brazil. For a complete description of the scope of this investigation,
No interested party commented on the scope of the investigation as it appeared in the
As provided in section 782(i) of the Act, in February and March 2017, the Department conducted verification of the information reported by the mandatory respondent ARLANXEO Brasil S.A. (ARLANXEO Brasil) and its U.S. affiliate, ARLANXEO U.S.A. LLC, for use in the Department's final determination.
All issues raised in the case and rebuttal briefs that were submitted by parties in this investigation are addressed in the Issues and Decision Memorandum. A list of these issues is attached to this notice as Appendix II. Based on our analysis of the comments received and our findings at verifications, we made certain changes to the margin calculation for ARLANXEO Brasil, and also the all-others rate.
Section 735(c)(5)(A) of the Act provides that in the final determination the Department shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
The Department determines that the following estimated weighted-average dumping margins exist:
On January 25, 2017, the petitioners
In accordance with section 735(c)(1)(B) of the Act, the Department will instruct U.S. Customs and Border Protection (CBP) to continue to suspend liquidation of all appropriate entries of ESB rubber from Brazil as described in Appendix I of this notice, which were entered, or withdrawn from warehouse, for consumption on or after February 24, 2017, the date of publication of the
The Department intends to disclose to interested parties its calculations and analysis performed in this final determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
In accordance with section 735(d) of the Act, the Department will notify the International Trade Commission (ITC) of its final affirmative determination. Because the final determination in this proceeding is affirmative, in accordance with section 735(b)(2) of the Act, the ITC will make its final determination as to whether the domestic industry in the United States is materially injured, or threatened with material injury, by reason of imports of ESB rubber from Brazil no later than 45 days after the Department's final determination. If the ITC determines that material injury or threat of material injury does not exist, the proceeding will be terminated and all securities posted will be refunded or canceled. If the ITC determines that such injury does exist, the Department will issue an antidumping duty order directing CBP to assess, upon further instruction by the Department, antidumping duties on appropriate imports of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of the suspension of liquidation.
This notice serves as a reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and the terms of an APO is a violation subject to sanction.
This determination and this notice are issued and published pursuant to sections 735(d) and 777(i)(1) of the Act and 19 CFR 351.210(c).
For purposes of this investigation, the product covered is cold-polymerized emulsion styrene-butadiene rubber (ESB rubber). The scope of the investigation includes, but is not limited to, ESB rubber in primary forms, bales, granules, crumbs, pellets, powders, plates, sheets, strip,
ESB rubber is produced and sold in accordance with a generally accepted set of product specifications issued by the International Institute of Synthetic Rubber Producers (IISRP). The scope of the investigation covers grades of ESB rubber included in the IISRP 1500 and 1700 series of synthetic rubbers. The 1500 grades are light in color and are often described as “Clear” or “White Rubber.” The 1700 grades are oil-extended and thus darker in color, and are often called “Brown Rubber.”
Specifically excluded from the scope of this investigation are products which are manufactured by blending ESB rubber with other polymers, high styrene resin master batch, carbon black master batch (
The products subject to this investigation are currently classifiable under subheadings 4002.19.0015 and 4002.19.0019 of the Harmonized Tariff Schedule of the United States (HTSUS). ESB rubber is described by Chemical Abstract Services (CAS) Registry No. 9003-55-8. This CAS number also refers to other types of styrene butadiene rubber. Although the HTSUS subheadings and CAS registry number are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.
United States Section, NAFTA Secretariat, International Trade Administration, Department of Commerce
Notice.
A Request for Panel Review was filed on behalf of Maquilacero S.A. de C.V. with the United States Section
Paul E. Morris, United States Secretary, NAFTA Secretariat, Room 2061, 1401 Constitution Avenue NW., Washington, DC 20230, (202) 482-5438.
Chapter 19 of Article 1904 of NAFTA provides a dispute settlement mechanism involving trade remedy determinations issued by the Government of the United States, the Government of Canada, and the Government of Mexico. Following a Request for Panel Review, a Binational Panel is composed to review the trade remedy determination being challenged and issue a binding Panel Decision. There are established NAFTA Rules of Procedure for Article 1904 Binational Panel Reviews, which were adopted by the three governments for panels requested pursuant to Article 1904(2) of NAFTA which requires Requests for Panel Review to be published in accordance with Rule 35. For the complete Rules, please see
The Rules provide that:
(a) A Party or interested person may challenge the final determination in whole or in part by filing a Complaint in accordance with Rule 39 within 30 days after the filing of the first Request for Panel Review (the deadline for filing a Complaint is August 11, 2017);
(b) A Party, investigating authority or interested person that does not file a Complaint but that intends to appear in support of any reviewable portion of the final determination may participate in the panel review by filing a Notice of Appearance in accordance with Rule 40 within 45 days after the filing of the first Request for Panel Review (the deadline for filing a Notice of Appearance is August 28, 2017); and
(c) The panel review shall be limited to the allegations of error of fact or law, including challenges to the jurisdiction of the investigating authority, that are set out in the Complaints filed in the panel review and to the procedural and substantive defenses raised in the panel review.
Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce
Applicable July 12, 2017.
Jennifer Shore at (202) 482-2778, AD/CVD Operations, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230.
On June 22, 2017,
On June 23, 2017, June 27, 2017, and June 28, 2017, the Department requested additional information and clarification of certain aspects of the Petition.
In accordance with section 702(b)(1) of the Tariff Act of 1930, as amended (the Act), the petitioner alleges that the GOS and the European Union are providing countervailable subsidies within the meaning of sections 701 and 771(5) of the Act, to manufacturers, producers, or exporters of ripe olives from Spain, and that imports of such ripe olives are materially injuring, or threatening material injury to, an industry in the United States. Additionally, consistent with section 702(b)(1) of the Act, the Petition is accompanied by information reasonably available to the petitioner supporting its allegations of subsidy programs in Spain on which we are initiating a CVD investigation.
The Department finds that the petitioner filed the Petition on behalf of the domestic industry because the petitioner is an interested party, as
Because the Petition was filed on June 22, 2017, the period of investigation (POI), the period for which we are measuring subsidies, is January 1, 2016, through December 31, 2016.
The products covered by this Petition are certain processed olives, usually referred to as “ripe olives,” from Spain. For a full description of the scope of this investigation,
During our review of the Petition, the Department issued questions to, and received responses from, the petitioner pertaining to the proposed scope to ensure that the scope language in the Petition accurately reflected the products for which the domestic industry is seeking relief.
As discussed in the preamble to the Department's regulations,
The Department requests that any factual information the parties consider relevant to the scope of the investigations be submitted during this time period. However, if a party subsequently finds that additional factual information pertaining to the scope may be relevant, the party may contact the Department and request permission to submit the additional information. All such comments and information must be filed on the records of each of the concurrent AD and CVD investigations.
All submissions to the Department must be filed electronically using Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS).
Pursuant to section 702(b)(4)(A) of the Act, the Department notified representatives of the GOS and the EU of its receipt of the Petition and provided them with the opportunity for consultations regarding the CVD allegations.
Section 702(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 702(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (i) At least 25 percent of the total production of the domestic like product; and (ii) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 702(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall: (i) Poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A); or (ii) determine industry support using a statistically valid sampling method to poll the “industry.”
Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The ITC, which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product,
Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation”
With regard to the domestic like product, the petitioner does not offer a definition of the domestic like product distinct from the scope of the investigation. Based on our analysis of the information submitted on the record, we have determined that ripe olives, as defined in the scope, constitutes a single domestic like product and we have analyzed industry support in terms of that domestic like product.
In determining whether the petitioner has standing under section 702(c)(4)(A) of the Act, we considered the industry support data contained in the Petition with reference to the domestic like product as defined in the “Scope of the Investigation,” in the Appendix to this notice. The petitioner provided the 2016 production of the domestic like product by its members.
On July 5, 2017, we received comments on industry support from ASEMESA.
Our review of the data provided in the Petition, supplemental responses, and other information readily available to the Department indicates that the petitioner has established industry support for the Petition.
The Department finds that the petitioner filed the Petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(G) of the Act and it has demonstrated sufficient industry support with respect to the CVD investigation that it is requesting that the Department initiate.
Because Spain is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, section 701(a)(2) of the Act applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from Spain materially injure, or threaten material injury to, a U.S. industry.
The petitioner alleges that imports of the subject merchandise are benefitting from countervailable subsidies and that such imports are causing, or threaten to cause, material injury to the U.S. industry producing the domestic like product. The petitioner alleges that subject imports exceed the negligibility threshold provided for under section 771(24)(A) of the Act.
The petitioner contends that the industry's injured condition is illustrated by reduced market share, underselling and price suppression or depression, lost sales and revenues, adverse impact on the domestic industry, including financial performance, production, and capacity utilization, and reduction in olive acreage under cultivation.
Section 702(b)(1) of the Act requires the Department to initiate a CVD investigation whenever an interested party files a CVD petition on behalf of an industry that (1) alleges the elements necessary for the imposition of a duty under section 701(a) of the Act and (2) is accompanied by information reasonably available to the petitioner supporting the allegations.
The petitioner alleges that producers/exporters of ripe olives in Spain benefited from countervailable subsidies bestowed by the GOS and the EU. The Department examined the Petition and finds that it complies with the requirements of section 702(b)(1) of the Act. Therefore, in accordance with section 702(b)(1) of the Act, we are initiating a CVD investigation to determine whether manufacturers, producers, and/or exporters of ripe olives from Spain receive countervailable subsidies from the GOS and/or the EU, as alleged by the petitioner.
The Trade Preferences Extension Act of 2015 (TPEA) made numerous
Based on our review of the Petition, we find that there is sufficient information to initiate a CVD investigation on the six alleged programs. For a full discussion of the basis for our decision to initiate on each program,
In accordance with section 703(b)(1) of the Act and 19 CFR 351.205(b)(1), unless postponed, we will make our preliminary determination in this investigation no later than 65 days after the date of initiation.
The petitioner named numerous companies as producers/exporters of ripe olives from Spain.
On July 6, 2017, the Department released CBP data under Administrative Protective Order (APO) to all parties with access to information protected by APO and indicated that interested parties wishing to comment regarding the CBP data must do so within three business days of the announcement of the initiation of the CVD investigation.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305(b). Instructions for filing such applications may be found on the Department's Web site at
Comments for this investigation must be filed electronically using ACCESS. An electronically-filed document must be received successfully in its entirety by the Department's electronic records system, ACCESS, by 5:00 p.m. EST, by the dates noted above. We intend to finalize our decision regarding respondent selection within 20 days of publication of this notice.
In accordance with section 702(b)(4)(A)(i) of the Act and 19 CFR 351.202(f), a copy of the public version of the Petition has been provided to the GOS and the European Commission via ACCESS. Because of the particularly large number of producers/exporters identified in the Petition,
We will notify the ITC of our initiation, as required by section 702(d) of the Act.
The ITC will preliminarily determine, within 45 days of the date on which the Petition was filed, whether there is a reasonable indication that imports of ripe olives in Spain are materially injuring, or threatening material injury to, a U.S. industry.
Factual information is defined in 19 CFR 351.102(b)(21) as: (i) Evidence submitted in response to questionnaires; (ii) evidence submitted in support of allegations; (iii) publicly available information to value factors under 19 CFR 351.408(c) or to measure the adequacy of remuneration under 19 CFR 351.511(a)(2); (iv) evidence placed on the record by the Department; and (v) evidence other than factual information described in (i) through (iv). The regulation requires any party, when submitting factual information, to specify under which subsection of 19 CFR 351.102(b)(21) the information is being submitted and, if the information is submitted to rebut, clarify, or correct factual information already on the record, to provide an explanation identifying the information already on the record that the factual information seeks to rebut, clarify, or correct. Time limits for the submission of factual information are addressed in 19 CFR 351.301, which provides specific time limits based on the type of factual information being submitted. Interested parties should review the regulations prior to submitting factual information in this investigation.
Parties may request an extension of time limits before the expiration of a time limit established under Part 351, or as otherwise specified by the Secretary. In general, an extension request will be considered untimely if it is filed after the expiration of the time limit. For submissions that are due from multiple parties simultaneously, an extension request will be considered untimely if it is filed after 10:00 a.m. ET on the due date. Under certain circumstances, we may elect to specify a different deadline after which extension requests will be considered untimely for submissions that are due from multiple parties simultaneously. In such a case, we will inform parties in the letter or memorandum setting forth the deadline (including a specified time) by which extension requests must be filed to be considered timely. An extension request must be made in a separate, stand-alone submission; under limited circumstances we will grant untimely-filed requests for the extension of time limits. Review
Any party submitting factual information in an AD or CVD proceeding must certify the accuracy and completeness of that information.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305. On January 22, 2008, the Department published
This notice is issued and published pursuant to sections 702 and 777(i) of the Act.
The products covered by this Petition are certain processed olives, usually referred to as “ripe olives.” The subject merchandise includes all colors of olives; all shapes and sizes of olives, whether pitted or not pitted, and whether whole, sliced, chopped, minced, wedged, broken, or otherwise reduced in size; all types of packaging, whether for consumer (retail) or institutional (food service) sale, and whether canned or packaged in glass, metal, plastic, multi-layered airtight containers (including pouches), or otherwise; and all manners of preparation and preservation, whether low acid or acidified, stuffed or not stuffed, with or without flavoring and/or saline solution, and including in ambient, refrigerated, or frozen conditions.
Included are all ripe olives grown, processed in whole or in part, or packaged in Spain. Subject merchandise includes ripe olives that have been further processed in Spain or a third country, including but not limited to curing, fermenting, rinsing, oxidizing, pitting, slicing, chopping, segmenting, wedging, stuffing, packaging, or heat treating, or any other processing that would not otherwise remove the merchandise from the scope of the investigation if performed in Spain.
Excluded from the scope are: (1) Specialty olives
“Spanish-style” green olives. Spanish-style green olives have a mildly salty, slightly bitter taste, and are usually pitted and stuffed. This style of olive is primarily produced in Spain and can be made from various olive varieties. Most are stuffed with pimento; other popular stuffings are jalapeno, garlic, and cheese. The raw olives that are used to produce Spanish-style green olives are picked while they are unripe, after which they are submerged in an alkaline solution for typically less than a day to partially remove their bitterness, rinsed, and fermented in a strong salt brine, giving them their characteristic flavor.
“Sicilian-style” green olives. Sicilian-style olives are large, firm green olives with a natural bitter and savory flavor. This style of olive is produced in small quantities in the United States using a Sevillano variety of olive and harvested green with a firm texture. Sicilian-style olives are processed using a brine-cured method, and undergo a full fermentation in a salt and lactic acid brine for 4 to 9 months. These olives may be sold whole unpitted, pitted, or stuffed.
“Kalamata” olives: Kalamata olives are slightly curved in shape, tender in texture, and purple in color, and have a rich natural tangy and savory flavor. This style of olive is produced in Greece using a Kalamata variety olive. The olives are harvested after they are fully ripened on the tree, and typically use a brine-cured fermentation method over 4 to 9 months in a salt brine.
Other specialty olives in a full range of colors, sizes, and origins, typically fermented in a salt brine for 3 months or more.
The merchandise subject to this petition is currently classifiable under subheadings 005.70.0230, 2005.70.0260, 2005.70.0430, 2005.70.0460, 2005.70.5030, 2005.70.5060, 2005.70.6020, 2005.70.6030, 2005.70.6050, 2005.70.6060, 2005.70.6070, 2005.70.7000, 2005.70.7510, 2005.70.7515, 2005.70.7520, and 2005.70.7525 HTSUS. Subject merchandise may also be imported under subheadings 2005.70.0600, 2005.70.0800, 2005.70.1200, 2005.70.1600, 2005.70.1800, 2005.70.2300, 2005.70.2510, 2005.70.2520, 2005.70.2530, 2005.70.2540, 2005.70.2550, 2005.70.2560, 2005.70.9100, 2005.70.9300, and 2005.70.9700. Although HTSUS subheadings are provided for convenience and US Customs purposes, they do not define the scope of the petition; rather, the written description of the subject merchandise is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Applicable July 12, 2017.
Catherine Cartsos at (202) 482-1757, or Peter Zukowski at (202) 482-0189, AD/CVD Operations, Enforcement and Compliance, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230.
On June 22, 2017,
On June 23, 2017, June 27, 2017, and June 28, 2017, the Department requested additional information and clarification of certain aspects of the Petition.
In accordance with section 732(b) of the Tariff Act of 1930, as amended (the Act), the petitioner alleges that imports of ripe olives from Spain are being, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act, and that such imports are materially injuring, or threatening material injury to, an industry in the United States. Additionally, consistent with section 732(b)(1) of the Act, the Petition is accompanied by information reasonably available to the petitioner supporting its allegations.
The Department finds that the petitioner filed this Petition on behalf of the domestic industry because the petitioner is an interested party as defined in section 771(9)(G) of the Act. As discussed in the “Determination of Industry Support for the Petition” section, below, the Department also finds that the petitioner demonstrated sufficient industry support with respect to initiation of the requested AD investigation.
Because the Petition was filed on June 22, 2017, the period of investigation (POI) is April 1, 2016, through March 31, 2017.
The products covered by this investigation are certain processed olives, usually referred to as “ripe olives,” from Spain. For a full description of the scope of this investigation,
During our review of the Petition, the Department issued questions to, and received responses from, the petitioner pertaining to the proposed scope to ensure that the scope language in the Petition accurately reflected the products for which the domestic industry is seeking relief.
As discussed in the preamble to the Department's regulations,
The Department requests that any factual information the parties consider relevant to the scope of the investigation be submitted during this time period. However, if a party subsequently finds that additional factual information pertaining to the scope of the investigation may be relevant, the party may contact the Department and request permission to submit the additional information. All such comments and information must be filed on the records of each of the concurrent AD and CVD investigations.
All submissions to the Department must be filed electronically using Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS).
The Department will provide interested parties an opportunity to comment on the appropriate physical characteristics of ripe olives to be reported in response to the Department's AD questionnaire. This information will be used to identify the key physical characteristics of the merchandise under consideration in order to report the relevant costs of production accurately, as well as to develop appropriate product-comparison criteria.
Interested parties may provide any information or comments that they feel are relevant to the development of an accurate list of physical characteristics. Specifically, they may provide comments as to which characteristics are appropriate to use as: (1) General product characteristics; and (2) product-comparison criteria. We note that it is not always appropriate to use all product characteristics as product-comparison criteria. We base product-comparison criteria on meaningful commercial differences among products. In other words, although there may be some physical product characteristics utilized by manufacturers to describe ripe olives, it may be that only a select few product characteristics take into account commercially meaningful physical characteristics. In addition, interested parties may comment on the order in which the physical characteristics should be used in matching products. Generally, the Department attempts to list the most important physical characteristics first
In order to consider the suggestions of interested parties in developing and issuing the AD questionnaire, all product characteristic comments must be filed by 5:00 p.m. ET on August 1, 2017, which is 20 calendar days from the signature date of this notice. Any rebuttal comments, must be filed by 5:00 p.m. ET on August 11, 2017. All comments and submissions to the Department must be filed electronically using ACCESS, as explained above.
Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (i) At least 25 percent of the total production of the domestic like product; and (ii) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 732(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall: (i) Poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A); or (ii) determine industry support using a statistically valid sampling method to poll the “industry.”
Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The ITC, which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product,
Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation” (
With regard to the domestic like product, the petitioner does not offer a definition of the domestic like product distinct from the scope of the investigation. Based on our analysis of the information submitted on the record, we have determined that ripe olives, as defined in the scope, constitutes a single domestic like product and we have analyzed industry support in terms of that domestic like product.
In determining whether the petitioner has standing under section 732(c)(4)(A) of the Act, we considered the industry support data contained in the Petition with reference to the domestic like product as defined in the “Scope of the Investigation,” in the Appendix to this notice. The petitioner provided the 2016 production of the domestic like product by its members.
On July 5, 2017, we received comments on industry support from ASEMESA.
Our review of the data provided in the Petition, supplemental responses, and other information readily available to the Department indicates that the petitioner has established industry support for the Petition.
The Department finds that the petitioner filed the Petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(G) of the Act and it has demonstrated sufficient industry support with respect to the AD
The petitioner alleges that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the imports of the subject merchandise sold at less than normal value (NV). In addition, the petitioner alleges that subject imports exceed the negligibility threshold provided for under section 771(24)(A) of the Act.
The petitioner contends that the industry's injured condition is illustrated by reduced market share; underselling and price suppression or depression; lost sales and revenues; adverse impact on the domestic industry, including financial performance, production, and capacity utilization; reduction in olive acreage under cultivation; and magnitude of the alleged margins of dumping.
The following is a description of the allegation of sales at less than fair value upon which the Department based its decision to initiate an AD investigation of imports of ripe olives from Spain. The sources of data for the deductions and adjustments relating to U.S. price and NV are discussed in greater detail in the AD Initiation Checklist.
The petitioner based U.S. price on export price (EP) using average unit values of publicly available import data.
The petitioner was unable to obtain home market or third country prices for ripe olives and calculated NV based on constructed value (CV).
As noted above, the petitioner was unable to obtain home market or third country prices; accordingly, the petitioner based NV on CV.
Based on the data provided by the petitioner, there is reason to believe that imports of ripe olives from Spain are being, or are likely to be, sold in the United States at less than fair value. Based on comparisons of EP to NV in accordance with sections 772 and 773 of the Act, the estimated dumping margins for ripe olives form Spain are 78.00 and 223.00 percent.
Based upon the examination of the AD Petition, we find that the Petition meets the requirements of section 732 of the Act. Therefore, we are initiating an AD investigation to determine whether imports of ripe olives from Spain are being, or are likely to be, sold in the United States at less than fair value. In accordance with section 733(b)(1)(A) of the Act and 19 CFR 351.205(b)(1), unless postponed, we will make our preliminary determination no later than 140 days after the date of this initiation.
The Trade Preferences Extension Act of 2015 (TPEA) made numerous amendments to the AD and CVD laws.
The petitioner identified numerous companies in Spain as producers/exporters of ripe olives.
We intend to release CBP data under Administrative Protective Order (APO) to all parties with access to information protected by APO within five business days of the announcement of the initiation of this investigation.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305(b). Instructions for filing such applications
Comments for this investigation must be filed electronically using ACCESS. An electronically-filed document must be received successfully in its entirety by the Department's electronic records system, ACCESS, by 5:00 p.m. EST, by the dates noted above. We intend to finalize our decision regarding respondent selection within 20 days of publication of this notice.
In accordance with section 732(b)(3)(A)(i) of the Act and 19 CFR 351.202(f), a copy of the public version of the Petition has been provided to the Government of Spain (GOS) and the European Commission via ACCESS. Because of the particularly large number of producers/exporters identified in the Petition, the Department considers the service of the public version of the Petition to the foreign producers/exporters satisfied by delivery of the public version to the GOS consistent with 19 CFR 351.203(c)(2).
We will notify the ITC of our initiation, as required by section 732(d) of the Act.
The ITC will preliminarily determine, within 45 days after the date on which the Petition was filed, whether there is a reasonable indication that imports of ripe olives from Spain are materially injuring or threatening material injury to a U.S. industry.
Factual information is defined in 19 CFR 351.102(b)(21) as: (i) Evidence submitted in response to questionnaires; (ii) evidence submitted in support of allegations; (iii) publicly available information to value factors under 19 CFR 351.408(c) or to measure the adequacy of remuneration under 19 CFR 351.511(a)(2); (iv) evidence placed on the record by the Department; and (v) evidence other than factual information described in (i) through (iv). The regulation requires any party, when submitting factual information, to specify under which subsection of 19 CFR 351.102(b)(21) the information is being submitted and, if the information is submitted to rebut, clarify, or correct factual information already on the record, to provide an explanation identifying the information already on the record that the factual information seeks to rebut, clarify, or correct. Time limits for the submission of factual information are addressed in 19 CFR 351.301, which provides specific time limits based on the type of factual information being submitted. Interested parties should review the regulations prior to submitting factual information in this investigation.
Parties may request an extension of time limits before the expiration of a time limit established under Part 351, or as otherwise specified by the Secretary. In general, an extension request will be considered untimely if it is filed after the expiration of the time limit. For submissions that are due from multiple parties simultaneously, an extension request will be considered untimely if it is filed after 10:00 a.m. ET on the due date. Under certain circumstances, we may elect to specify a different deadline after which extension requests will be considered untimely for submissions that are due from multiple parties simultaneously. In such a case, we will inform parties in the letter or memorandum setting forth the deadline (including a specified time) by which extension requests must be filed to be considered timely. An extension request must be made in a separate, stand-alone submission; under limited circumstances we will grant untimely-filed requests for the extension of time limits. Review
Any party submitting factual information in an AD or CVD proceeding must certify to the accuracy and completeness of that information.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305. On January 22, 2008, the Department published
This notice is issued and published pursuant to sections 732(c)(2) and 777(i) of the Act, and 19 CFR 351.203(c).
The products covered by this investigation are certain processed olives, usually referred to as “ripe olives.” The subject merchandise includes all colors of olives; all shapes and sizes of olives, whether pitted or not pitted, and whether whole, sliced, chopped, minced, wedged, broken, or otherwise reduced in size; all types of packaging, whether for consumer (retail) or institutional (food service) sale, and whether canned or packaged in glass, metal, plastic, multi-layered airtight containers (including pouches), or otherwise; and all manners of preparation and preservation, whether low acid or acidified, stuffed or not stuffed, with or without flavoring and/or saline solution, and including in ambient, refrigerated, or frozen conditions.
Included are all ripe olives grown, processed in whole or in part, or packaged in Spain. Subject merchandise includes ripe olives that have been further processed in Spain or a third country, including but not limited to curing, fermenting, rinsing, oxidizing, pitting, slicing, chopping, segmenting, wedging, stuffing, packaging, or heat treating, or any other processing that would not otherwise remove the merchandise from the scope of the investigation if performed in Spain.
Excluded from the scope are: (1) Specialty olives
“Spanish-style” green olives. Spanish-style green olives have a mildly salty, slightly bitter taste, and are usually pitted and stuffed. This style of olive is primarily produced in Spain and can be made from various olive varieties. Most are stuffed with pimento; other popular stuffings are jalapeno, garlic, and cheese. The raw olives that are used to produce Spanish-style green olives are picked while they are unripe, after which they are submerged in an alkaline solution for typically less than a day to partially remove their bitterness, rinsed, and fermented in a strong salt brine, giving them their characteristic flavor.
“Sicilian-style” green olives. Sicilian-style olives are large, firm green olives with a natural bitter and savory flavor. This style of olive is produced in small quantities in the United States using a Sevillano variety of olive and harvested green with a firm texture. Sicilian-style olives are processed using a brine-cured method, and undergo a full fermentation in a salt and lactic acid brine for 4 to 9 months. These olives may be sold whole unpitted, pitted, or stuffed.
“Kalamata” olives: Kalamata olives are slightly curved in shape, tender in texture, and purple in color, and have a rich natural tangy and savory flavor. This style of olive is produced in Greece using a Kalamata variety olive. The olives are harvested after they are fully ripened on the tree, and typically use a brine-cured fermentation method over 4 to 9 months in a salt brine.
Other specialty olives in a full range of colors, sizes, and origins, typically fermented in a salt brine for 3 months or more.
The merchandise subject to this investigation is currently classifiable under subheadings 2005.70.0230, 2005.70.0260, 2005.70.0430, 2005.70.0460, 2005.70.5030, 2005.70.5060, 2005.70.6020, 2005.70.6030, 2005.70.6050, 2005.70.6060, 2005.70.6070, 2005.70.7000, 2005.70.7510, 2005.70.7515, 2005.70.7520, and 2005.70.7525 HTSUS. Subject merchandise may also be imported under subheadings 2005.70.0600, 2005.70.0800, 2005.70.1200, 2005.70.1600, 2005.70.1800, 2005.70.2300, 2005.70.2510, 2005.70.2520, 2005.70.2530, 2005.70.2540, 2005.70.2550, 2005.70.2560, 2005.70.9100, 2005.70.9300, and 2005.70.9700. Although HTSUS subheadings are provided for convenience and US Customs purposes, they do not define the scope of the investigation; rather, the written description of the subject merchandise is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Department) is conducting an administrative review of the antidumping duty order on narrow woven ribbons with woven selvedge (woven ribbons) from the People's Republic of China (PRC) for the period of review (POR) September 1, 2015 through August 31, 2016. This review covers two PRC companies: Huzhou Kingdom Coating Industry Co., Ltd. (Huzhou Kingdom) and Huzhou Unifull Label Fabric Co., Ltd. (Huzhou Unifull). The Department preliminarily finds that neither Huzhou Unifull nor Huzhou Kingdom established eligibility for a separate rate, as Huzhou Unifull had no entries of subject merchandise during the POR and Huzhou Kingdom failed to participate in the proceeding. Furthermore, the Department is rescinding administrative review with respect to Huzhou BeiHeng Textile Co., Ltd. (Huzhou BeiHeng) and Huzhou Siny Label Material Co., Ltd. (Huzhou Siny). Interested parties are invited to comment on these preliminary results.
Applicable July 19, 2017.
Aleksandras Nakutis, AD/CVD Operations, Office IV, Enforcement & Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-3147.
On September 17, 2010, the Department published in the
The products covered by the order are narrow woven ribbons with woven selvedge. The merchandise subject to the
The Department is conducting this review in accordance with section 751(a)(1)(B) of the Tariff Act of 1930, as amended (the Act). For a full description of the methodology underlying our conclusions,
The Department preliminarily finds that both Huzhou Kingdom and Huzhou Unifull have failed to demonstrate eligibility for a separate rate and, therefore, they are considered part of the PRC-wide entity. The Department finds that Huzhou Kingdom did not submit a certification of no sales, a separate rate application, or a separate rate certification. With respect to Huzhou Unifull, the Department preliminary finds there are no reviewable entries during the POR and, thus, Huzhou Unifull has failed to demonstrate eligibility for a separate rate. Both Avery Dennison and Huzhou Unifull submitted the same CBP Form 7501 to indicate an entry of subject merchandise by Huzhou Unifull. However, after examination, the Department determines that the CBP Form 7501 does not correspond to a sale by Huzhou Unifull and as such, found there are no reviewable entries of subject merchandise during the POR.
Pursuant to 19 CFR 351.213(d)(1), the Department will rescind an administrative review, in whole or in part, if a party that requested the review withdraws its request within 90 days of the date of publication of the notice of initiation of the requested review. Huzhou BeiHeng and Huzhou Siny withdrew their respective requests for an administrative review within 90 days of the date of publication of
Interested parties are invited to comment on the preliminary results and may submit case briefs and/or written comments, filed electronically using ACCESS, within 30 days of the date of publication of this notice, pursuant to 19 CFR 351.309(c)(1)(ii). Rebuttal briefs, limited to issues raised in the case briefs, will be due five days after the due date for case briefs, pursuant to 19 CFR 351.309(d). Parties who submit case or rebuttal briefs in this proceeding are requested to submit with each argument a statement of the issue, a summary of the argument not to exceed five pages, and a table of statutes, regulations, and cases cited, in accordance with 19 CFR 351.309(c)(2) and (d)(2).
Pursuant to 19 CFR 351.310(c), interested parties, who wish to request a hearing, or to participate in a hearing if one is requested, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, filed electronically using ACCESS. Electronically filed case briefs/written comments and hearing requests must be received successfully in their entirety by the Department's electronic records system, ACCESS, by 5:00 p.m. Eastern Standard Time, within 30 days after the date of publication of this notice.
Upon issuance of the final results, the Department will determine, and U.S. Customs and Border Protection (CBP) shall assess, antidumping duties on all appropriate entries covered by this review.
The following cash deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of review, as provided by section 751(a)(2)(C) of the Act: (1) For exports of merchandise exported by Huzhou Kingdom, the cash deposit rate is the PRC-wide rate of 247.26 percent; (2) for exports of merchandise exported by Huzhou Unifull, the cash deposit rate is the PRC-wide rate of 247.26; (3) for previously investigated or reviewed PRC and non-PRC exporters which are not under review in this segment of the proceeding but which have separate rates, the cash deposit rate will continue to be the exporter-specific rate published for the most recent period; (4) for all PRC exporters of subject merchandise that
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Department's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
We are issuing and publishing these results in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) determines that emulsion styrene-butadiene rubber (ESB rubber) from Poland is being, or is likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is July 1, 2015, through June 30, 2016.
July 19, 2017.
Stephen Bailey, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-0193.
On February 24, 2017, the Department published the
The product covered by this investigation is ESB rubber from Poland. For a complete description of the scope of this investigation,
No interested party commented on the scope of the investigation as it appeared in the
As provided in section 782(i) of the Act, in February, March, and April 2017, the Department conducted verification of the information reported by the mandatory respondent Synthos Dwory (Synthos), for use in the Department's final determination. The Department used standard verification procedures, including an examination of relevant accounting and production records, and original source documents provided by the respondent.
The issues raised in the case brief that was submitted by petitioners
Section 735(c)(5)(A) of the Act provides that in the final determination the Department shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted-average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
For the final determination, the Department calculated an individual estimated weighted-average dumping margin for Synthos, the only individually examined exporter/producer in this investigation. Because the only individually calculated dumping margin is not zero,
The final weighted-average dumping margins are as follows:
In accordance with section 735(c)(1)(B) of the Act, the Department will instruct U.S. Customs and Border Protection (CBP) to continue to suspend liquidation of all appropriate entries of ESB rubber from Poland as described in Appendix I of this notice, which were entered, or withdrawn from warehouse, for consumption on or after February 24, 2017, the date of publication of the
The Department intends to disclose to interested parties its calculations and analysis performed in this final determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
In accordance with section 735(d) of the Act, the Department will notify the International Trade Commission (ITC) of its final determination. Because the final determination in this proceeding is affirmative, in accordance with section 735(b)(2) of the Act, the ITC will make its final determination as to whether the domestic industry in the United States is materially injured, or threatened with material injury, by reason of imports of ESB rubber from Poland no later than 45 days after the Department's final determination. If the ITC determines that material injury or threat of material injury does not exist, the proceeding will be terminated and all securities posted will be refunded or canceled. If the ITC determines that such injury does exist, the Department will issue an antidumping duty order directing CBP to assess, upon further instruction by the Department, antidumping duties on appropriate imports of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of the suspension of liquidation.
This notice serves as a reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and the terms of an APO is a violation subject to sanction.
This determination and this notice are issued and published pursuant to sections 735(d) and 777(i)(1) of the Act.
For purposes of this investigation, the product covered is cold-polymerized emulsion styrene-butadiene rubber (ESB rubber). The scope of the investigation includes, but is not limited to, ESB rubber in primary forms, bales, granules, crumbs, pellets, powders, plates, sheets, strip,
ESB rubber is produced and sold in accordance with a generally accepted set of product specifications issued by the International Institute of Synthetic Rubber Producers (IISRP). The scope of the investigation covers grades of ESB rubber included in the IISRP 1500 and 1700 series of synthetic rubbers. The 1500 grades are light in color and are often described as “Clear” or “White Rubber.” The 1700 grades are oil-extended and thus darker in color, and are often called “Brown Rubber.”
Specifically excluded from the scope of this investigation are products which are manufactured by blending ESB rubber with other polymers, high styrene resin master batch, carbon black master batch (
The products subject to this investigation are currently classifiable under subheadings 4002.19.0015 and 4002.19.0019 of the Harmonized Tariff Schedule of the United States (HTSUS). ESB rubber is described by Chemical Abstract Services (CAS) Registry No. 9003-55-8. This CAS number also refers to other types of styrene butadiene rubber. Although the HTSUS subheadings and CAS registry number are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce
The Department of Commerce (Department) determines that emulsion styrene-butadiene rubber (ESB rubber) from Mexico is being, or is likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is July 1, 2015, through June 30, 2016.
July 19, 2017.
Julia Hancock or Javier Barrientos, AD/CVD
On February 24, 2017, the Department of Commerce (Department) published the
The product covered by this investigation is ESB rubber from Mexico. For a complete description of the scope of this investigation,
No interested party commented on the scope of the investigation as it appeared in the
As provided in section 782(i) of the Act, in March and April 2017, the Department conducted verification of the information reported by the mandatory respondent Industrias Negromex S.A. de C.V.—Planta Altamira (Negromex) for use in the Department's final determination. The Department used standard verification procedures, including an examination of relevant accounting and production records and original source documents provided by the respondent.
All issues raised in the case and rebuttal briefs that were submitted by parties in this investigation are addressed in the Issues and Decision Memorandum. A list of these issues is attached to this notice as Appendix II. Based on our analysis of the comments received and our findings at verification, we made certain changes to the margin calculation for Negromex, and also the all-others rate.
Section 735(c)(5)(A) of the Act provides that in the final determination the Department shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
For the final determination, the Department calculated an individual estimated weighted-average dumping margin for Negromex, the only individually examined exporter/producer in this investigation. Because the only individually calculated dumping margin is not zero,
The Department determines that the following estimated weighted-average dumping margins exist:
In accordance with section 735(c)(1)(B) of the Act, the Department will instruct U.S. Customs and Border Protection (CBP) to continue to suspend liquidation of all appropriate entries of ESB rubber from Mexico as described in Appendix I of this notice, which were entered, or withdrawn from warehouse, for consumption on or after February 24, 2017, the date of publication of the
The Department intends to disclose to interested parties its calculations and analysis performed in this final determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
In accordance with section 735(d) of the Act, the Department will notify the International Trade Commission (ITC) of its final determination. Because the final determination in this proceeding is affirmative, in accordance with section 735(b)(2) of the Act, the ITC will make its final determination as to whether the domestic industry in the United States
This notice serves as a reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and the terms of an APO is a violation subject to sanction.
This determination and this notice are issued and published pursuant to sections 735(d) and 777(i)(1) of the Act.
For purposes of this investigation, the product covered is cold-polymerized emulsion styrene-butadiene rubber (ESB rubber). The scope of the investigation includes, but is not limited to, ESB rubber in primary forms, bales, granules, crumbs, pellets, powders, plates, sheets, strip, etc. ESB rubber consists of non-pigmented rubbers and oil-extended non-pigmented rubbers, both of which contain at least one percent of organic acids from the emulsion polymerization process.
ESB rubber is produced and sold in accordance with a generally accepted set of product specifications issued by the International Institute of Synthetic Rubber Producers (IISRP). The scope of the investigation covers grades of ESB rubber included in the IISRP 1500 and 1700 series of synthetic rubbers. The 1500 grades are light in color and are often described as “Clear” or “White Rubber.” The 1700 grades are oil-extended and thus darker in color, and are often called “Brown Rubber.”
Specifically excluded from the scope of this investigation are products which are manufactured by blending ESB rubber with other polymers, high styrene resin master batch, carbon black master batch (
The products subject to this investigation are currently classifiable under subheadings 4002.19.0015 and 4002.19.0019 of the Harmonized Tariff Schedule of the United States (HTSUS). ESB rubber is described by Chemical Abstract Services (CAS) Registry No. 9003-55-8. This CAS number also refers to other types of styrene butadiene rubber. Although the HTSUS subheadings and CAS registry number are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of 90-day petition finding.
We, NMFS, announce a 90-Day finding on a petition to list the winter-run Puget Sound chum salmon (
Electronic copies of the petition and other materials are available on the NMFS West Coast Region Web site at
Gary Rule, NMFS West Coast Region, at
On June 29, 2015, we received a petition from Mr. Sam Wright (Olympia, Washington) to list the winter-run Puget Sound chum salmon (
Section 4(b)(3)(A) of the ESA of 1973, as amended (16 U.S.C. 1531
Under the ESA, a listing determination may address a species, which is defined to also include subspecies and, for any vertebrate species, any distinct population segment (DPS) that interbreeds when mature (16 U.S.C. 1532(16)). To identify the proper taxonomic unit for consideration in a salmon listing determination, we apply our Policy on Applying the Definition of Species under the ESA to Pacific Salmon (ESU Policy) (56 FR 58612; November 20, 1991). Under this policy, populations of salmon substantially reproductively isolated from other conspecific populations and representing an important component in the evolutionary legacy of the biological species are considered to be an ESU. In our listing determinations for Pacific salmon under the ESA, we have treated an ESU as constituting a DPS, and hence a “species,” under the ESA. A species, subspecies, or ESU is “endangered” if it is in danger of extinction throughout all or a significant portion of its range, and “threatened” if it is likely to become endangered within the foreseeable future throughout all or a significant portion of its range (ESA sections 3(6) and 3(20), respectively, 16 U.S.C. 1532(6) and (20)). Pursuant to the ESA and our implementing regulations, we determine whether species are threatened or endangered based on any one or a combination of the following five section 4(a)(1) factors: The present or threatened destruction, modification, or curtailment of habitat or range; overutilization for commercial, recreational, scientific, or educational purposes; disease or predation; inadequacy of existing regulatory mechanisms; and any other natural or manmade factors affecting the species' existence (16 U.S.C. 1533(a)(1), 50 CFR 424.11(c)).
At the 90-day finding stage, we evaluate the petitioners' request based upon the information in the petition including its references and the information readily available in our files. We do not conduct additional research, and we do not solicit information from parties outside the agency to help us in evaluating the petition. We will accept the petitioners' sources and characterizations of the information presented if they appear to be based on accepted scientific principles, unless we have specific information in our files that indicates the petition's information is incorrect, unreliable, obsolete, or otherwise irrelevant to the requested action. Information that is susceptible to more than one interpretation or that is contradicted by other available information will not be dismissed at the 90-day finding stage, so long as it is reliable and a reasonable person would conclude it supports the petitioners' assertions. In other words, conclusive information indicating the species may meet the ESA's requirements for listing is not required to make a positive 90-day finding. We will not conclude that a lack of specific information alone necessitates a negative 90-day finding if a reasonable person would conclude that the unknown information itself suggests the species may be at risk of extinction presently or within the foreseeable future.
To make a 90-day finding on a petition to list a species, we evaluate whether the petition presents substantial scientific or commercial information indicating the subject species may be either threatened or endangered, as defined by the ESA. ESA-implementing regulations issued jointly by NMFS and U.S. Fish and Wildlife Service (50 CFR 424.14(i)) define “substantial information” in the context of reviewing a petition to list, delist, or reclassify a species as credible scientific information in support of the petition's claims such that a reasonable person conducting an impartial scientific review would conclude that the revision proposed in the petition may be warranted. Conclusions drawn in the petition without the support of credible scientific information will not be considered “substantial information.” The “substantial scientific or commercial information” standard must be applied in light of any prior reviews or findings we have made on the listing status of the species that is the subject of the petition. Where we have already conducted a finding on, or review of, the listing status of that species (whether in response to a petition or on our own initiative), we will evaluate any petition received thereafter seeking to list, delist, or reclassify that species to determine whether a reasonable person conducting an impartial scientific review would conclude that the action proposed in the petition may be warranted despite the previous review or finding. Where the prior review resulted in a final agency action, a petitioned action generally would not be considered to present substantial scientific and commercial information indicating that the action may be warranted unless the petition provides new information not previously considered.
In evaluating the petition, we first evaluate whether the information presented in the petition, along with the information readily available in our files, indicates that the petitioned entity constitutes a “species” eligible for listing under the ESA. Next, we evaluate whether the information indicates that the species faces an extinction risk that is cause for concern; this may be indicated in information expressly discussing the species' status and
Information presented on impacts or threats should be specific to the species and should reasonably suggest that one or more of these factors may be operative threats that act or have acted on the species to the point that it may warrant protection under the ESA. Broad statements about generalized threats to the species, or identification of factors that could negatively impact a species, do not constitute substantial information indicating that listing may be warranted. We look for information indicating that not only is the particular species exposed to a factor, but that the species may be responding in a negative fashion; then we assess the potential significance of that negative response.
Many petitions identify risk classifications made by nongovernmental organizations, such as the International Union on the Conservation of Nature (IUCN), the American Fisheries Society, or NatureServe, as evidence of extinction risk for a species. Risk classifications by such organizations or made under other Federal or state statutes may be informative, but such classification alone will not alone provide sufficient basis for a positive 90-day finding under the ESA. For example, as explained by NatureServe, their assessments of a species' conservation status do “not constitute a recommendation by NatureServe for listing under the U.S. Endangered Species Act” because NatureServe assessments “have different criteria, evidence requirements, purposes and taxonomic coverage than government lists of endangered and threatened species, and therefore these two types of lists should not be expected to coincide” (
On March 14, 1994, NMFS was petitioned by the Professional Resources Organization—Salmon (PRO—Salmon) to list Washington's Hood Canal, Discovery Bay, and Sequim Bay summer-run chum salmon (
As mentioned above, in analyzing the request of the petitioner, we first evaluate whether the information presented in the petition, along with information readily available in our files, indicates that the petitioned entity constitutes a “species” eligible for listing under the ESA. Because the petition specifically requests listing of an ESU, we evaluate whether the information indicates that the petitioned entities, the winter-run Puget Sound chum salmon in the Nisqually River system and Chambers Creek, constitute an ESU pursuant to our ESU Policy.
When identifying an ESU, our ESU Policy (56 FR 58612; November 20, 1991) stipulates two elements that must be considered: (1) It must be substantially reproductively isolated from other nonspecific population units, and (2) it must represent an important component in the evolutionary legacy of the species. In terms of reproductive isolation, the ESU Policy states that reproductive isolation does not have to be absolute, but it must be strong enough to permit evolutionarily important differences to accrue in different population units. Insights into the extent of reproductive isolation can be provided by movements of tagged fish, recolonization rates of other populations, measurements of genetic differences between population, and evaluations of the efficacy of natural barriers. In terms of evolutionary legacy of the species, that criterion would be met if the population contributed substantially to the ecological/genetic diversity of the species as a whole. To make that determination, the following questions are relevant: Is the population genetically distinct from other conspecific populations (genetic component)? Does the population occupy unusual or distinctive habitat (ecological component)? Does the population show evidence of unusual or distinctive adaptation to its environment (life-history component)?
In evaluating this petition, we looked for information to suggest that the
The petitioner asserts that (1) the designation of these two winter-run chum salmon populations as an ESU is justified because they are the only known winter-run chum salmon populations in the world, (2) a diverging trend in abundance between the Chambers Creek population and the fall-run chum salmon populations in southern Puget Sound renders the Nisqually River population as the only viable winter-run population and justifies an ESA listing of the petitioner's proposed ESU as threatened or endangered, and (3) Johnson
As stated previously, NMFS received three petitions in 1994 to list several populations of chum salmon in Puget Sound. In response to these petitions and to address general concerns about the species, NMFS assembled a BRT to conduct a status review of chum salmon to identify the ESUs and determine their statuses throughout the Pacific Northwest. The findings were published as Johnson et al. (1997). Based upon genetic, ecological, and life-history components, the BRT was able to analyze and group West Coast chum salmon populations into four different chum salmon ESUs. For these ESUs, the BRT analyzed the following available information.
For the genetic component, the BRT analyzed the genetic variability at 39 polymorphic loci in 153 samples collected from 105 locations in southern British Columbia, Washington, and Oregon (Phelps et al. 1994; Johnson et al. 1997). Seventy-two of those 105 locations were from Puget Sound including the Chambers Creek and Nisqually River winter-run populations. From that analysis, the Hood Canal and Strait of Juan de Fuca summer-run chum salmon were determined to be genetically distinct from the other Puget Sound populations and were described as the Hood Canal summer-run ESU. Genetically, the remaining Puget Sound and Hood Canal locations were clustered together with the winter-run chum salmon as genetic outliers most closely related to the fall-run Hood Canal and northern Puget Sound populations. Additional samples and analysis (Phelps 1995) resulted in three distinct clusters of samples: (1) Summer-run chum salmon of Hood Canal and Strait of Juan de Fuca; (2) Puget Sound fall-run and southern Puget Sound winter- and summer-run chum salmon; and (3) Strait of Juan de Fuca, coastal Washington, and Oregon fall-run chum salmon (Johnson et al. 1997). Recently, Waples (2015) analyzed genetic diversity and population structure from 174 chum salmon individuals at 10 Puget Sound/Strait of Georgia locations—including one Hood Canal summer-run ESU location (Hamma Hamma River), the Nisqually River winter-run location, and eight other Puget Sound/Strait of Georgia locations. In a F
In examining the ecological component, neither the Nisqually River nor Chambers Creek watersheds are isolated geographically or reproductively from other chum salmon populations in southern Puget Sound; therefore, it does not qualify as an ESU. While there is no need to determine whether this cluster represents an important component in the evolutionary legacy of the species (2nd criterion of the ESU Policy), we include this information in order to be thorough. Both the Nisqually River and Chambers Creek watersheds have supported both summer- and fall-run chum salmon in the past, along with winter-run chum salmon (Johnson et al. 1997), so there is nothing unique preventing these watersheds from supporting multiple chum salmon runs. No additional ecological information was provided by the petitioner nor found in our files.
For the life history component, Johnson et al. (1997) stated that “the distinctiveness of the winter-run populations was not sufficient to designate these populations as a separate ESU. Rather, the team concluded that these populations, along with the summer-run populations in southern Puget Sound, reflect patterns of diversity within a relatively large and complex ESU.” No additional life history information was provided by the petitioner nor found in our files; therefore, we find the conclusions in Johnson et al. (1997) remain valid. We conclude that the winter-run cluster does not represent an important component in the evolutionary legacy of the species.
After reviewing the genetic, ecological, and life history components of these two winter-run chum salmon populations, we have concluded that these populations are not distinct from the other populations within the Puget Sound/Strait of Georgia ESU and do not meet our criteria for identification as a separate ESU. Therefore, based upon the information from the petitioner and the data found in our files, we conclude that these populations are not a separate ESU and do not qualify for listing under the ESA.
The petitioner also provided additional information on abundance for the two winter-run chum salmon populations and climate change. Since we determined that these two winter-run chum salmon populations do not qualify as an ESU, these two items were not analyzed.
After reviewing the information contained in the petition, as well as information readily available in our files, and based on the above analysis, we conclude that the petition does not present substantial scientific or commercial information indicating that the petitioned action of identifying the winter-run Puget Sound chum salmon (
The complete citations for the references used in this document can be obtained by contacting NMFS (See
The authority for this action is the Endangered Species Act of 1973, as amended (16. U.S.C. 1531
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The Pacific Fishery Management Council's (Pacific Council) Groundfish Management Team (GMT) will hold two webinars that are open to the public.
The GMT webinars will be held Wednesday, August 2, 2017 from 10 a.m. until 12 p.m. and Wednesday, September 6, 2017, from 8 a.m. to 12 p.m. Webinar end times are estimates, meetings will adjourn when business for each day is completed.
The following login instructions will work for any of the webinars in this series. To attend the webinar (1) join the meeting by visiting this link
Ms. Kelly Ames, Pacific Council, 503-820-2426.
The primary purpose of the GMT webinars are to prepare for the September 2017 Pacific Council meeting. A detailed agenda for each webinar will be available on the Pacific Council's Web site prior to the meeting. The GMT may also address other assignments relating to groundfish management. No management actions will be decided by the GMT. The GMT's task will be to develop recommendations for consideration by the Pacific Council at its meetings in 2017.
Although nonemergency issues not contained in the meeting agenda may be discussed, those issues may not be the subject of formal action during these meetings. Action will be restricted to those issues specifically listed in this document and any issues arising after publication of this document that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
The public listening station is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Mr. Kris Kleinschmidt at 503-820-2411 at least ten business days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The Gulf of Mexico Fishery Management Council will hold a one-day meeting of its Outreach and Education Technical Committee.
The meeting will convene on Tuesday, August 1, 2017, 9 a.m.-4 p.m., EDT.
The meeting will be held at the Gulf Council Office.
Emily Muehlstein, Public Information Officer, Gulf of Mexico Fishery Management Council;
The committee will begin with introductions and adoption of agenda, approval of the June 2016 meeting summary, and discuss the use of proxy attendees. The committee will review and discuss agency efforts and identify the agency point person for Fish Measurement (triggerfish) Outreach, Barotrauma and Use of Venting and Descending Tools Outreach, Lionfish
The committee will review the Fisherman's Conservation Best Practices Web page; and discuss any other business.
The meeting will be broadcast via webinar. You may listen in by registering for Outreach & Education Technical Committee on Tuesday, August 1, 2017 at:
The Agenda is subject to change, and the latest version along with other meeting materials will be posted on the Council's file server. To access the file server, the URL is
Although other non-emergency issues not on the agenda may come before the Technical Committee for discussion, in accordance with the Magnuson-Stevens Fishery Conservation and Management Act, those issues may not be the subject of formal action during this meeting. Actions of the Technical Committee will be restricted to those issues specifically identified in the agenda and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the Council's intent to take action to address the emergency.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Kathy Pereira at the Gulf Council Office (see
16 U.S.C. 1801
Commodity Futures Trading Commission.
Notice of review.
In compliance with the Paperwork Reduction Act of 1995 (PRA), this notice announces that the Information Collection Request (ICR) abstracted below has been forwarded to the Office of Management and Budget (OMB) for review and comment. The ICR describes the nature of the information collection and its expected costs and burden.
Comments must be submitted on or before August 18, 2017.
Comments regarding the burden estimated or any other aspect of the information collection, including suggestions for reducing the burden, may be submitted directly to the Office of Information and Regulatory Affairs (OIRA) in OMB, within 30 days of the notice's publication, by email at
A copy of the supporting statements for the collection of information discussed above may be obtained by visiting
Richard Mo, Special Counsel, Division of Market Oversight, at 202-418-7637 or
• Pursuant to § 17.01(a), futures commission merchants (“FCMs”), clearing members, and foreign brokers shall identify new special accounts to the Commission on Form 102A;
• pursuant to § 17.01(b), clearing members shall identify volume threshold accounts to the Commission on Form 102B; and
• pursuant to § 17.01(c), omnibus volume threshold account originators and omnibus reportable sub-account originators shall identify reportable sub-accounts to the Commission on Form 71 when requested via a special call by the Commission or its designee.
Additional reporting requirements arise from § 18.04, which results in the collection of information via Form 40 from and regarding traders who own, hold, or control reportable positions; volume threshold account controllers; persons who own volume threshold accounts; reportable sub-account controllers; and persons who own reportable sub-accounts.
Reporting requirements also arise from § 20.5(a), which requires 102S reporting entities to submit Form 102S for swap counterparty or customer consolidated accounts with reportable positions. In addition, § 20.5(b) requires every person subject to books or records under current § 20.6 to complete a 40S filing after a special call upon such person by the Commission.
In addition to the reporting requirements summarized above, § 18.05 imposes recordkeeping requirements upon: (1) Traders who own, hold, or control a reportable futures or options on futures position; (2) volume threshold account
A 60-day notice of intent to renew collection 3038-0103 (the “60-Day Notice”) was published in the
44 U.S.C. 3501
Bureau of Consumer Financial Protection.
Notice and request for comment.
In accordance with the Paperwork Reduction Act of 1995 (PRA), the Bureau of Consumer Financial Protection (Bureau) is requesting to renew the Office of Management and Budget (OMB) approval for an existing information collection titled, “CFPB's Consumer Response Intake Form.”
Written comments are encouraged and must be received on or before September 18, 2017 to be assured of consideration.
You may submit comments, identified by the title of the information collection, OMB Control Number (see below), and docket number (see above), by any of the following methods:
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Documentation prepared in support of this information collection request is available at
Bureau of Consumer Financial Protection.
Notice and request for comment.
In accordance with the Paperwork Reduction Act of 1995 (PRA), the Bureau of Consumer Financial Protection (Bureau) is requesting to renew the Office of Management and Budget (OMB) approval for an existing information collection titled, “Generic Information Collection Plan for Consumer Complaint and Information Collection System (Testing and Feedback).”
Written comments are encouraged and must be received on or before September 18, 2017 to be assured of consideration.
You may submit comments, identified by the title of the information collection, OMB Control Number (see below), and docket number (see above), by any of the following methods:
•
•
•
Documentation prepared in support of this information collection request is available at
This is a routine request for OMB to renew its approval of the collections of information currently approved under this OMB control number. The Bureau is not proposing any new or revised collections of information pursuant to this request.
Corporation for National and Community Service.
Notice.
In accordance with the Paperwork Reduction Act of 1995, CNCS is proposing to renew an information collection.
Written comments must be submitted to the individual and office listed in the
To access and review all the documents related to information collection listed in this notice, please use
(1)
(2) By hand delivery or by courier to the CNCS mailroom at Room 8100 at the mail address given in paragraph (1) above, between 9:00 a.m. and 4:00 p.m. Eastern Time, Monday through Friday, except Federal holidays.
(3) Electronically through
Individuals who use a telecommunications device for the deaf (TTY-TDD) may call 1-800-833-3722 between 8:00 a.m. and 8:00 p.m. Eastern Time, Monday through Friday.
Douglas Godesky, Senior Grants Officer, 202-606-6967 or by email at
CNCS is particularly interested in comments that:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of CNCS, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are expected to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology (
Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they will also become a matter of public record.
Organizations that are receiving CNCS grant funds for the first time complete the form. It can be completed and submitted via email. The survey requests some existing organizational documents, such as an IRS Form 990 and audited financial statements. Organizations can provide those documents electronically or submit them on paper. CNCS seeks to renew the current information collection. The renewed information collection includes the correction of minor administrative and typographical errors and simplifies the submission instructions. The information collection will otherwise be used in the same manner as the existing application. CNCS also seeks to continue using the current application until the revised application is approved by OMB. The current application is due to expire on September 30, 2017.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification.
Kathy Valadez, (703) 697-9217 or Pamela Young, (703) 697-9107; DSCA/DSA-RAN.
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 16-73 with attached Policy Justification and Sensitivity of Technology.
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* As defined in Section 47(6) of the Arms Export Control Act.
TECRO requested a possible sale of fifty-six (56) AGM-154C JSOW Air-to-Ground Missiles. This request also includes: JSOW integration, captive flight vehicles, dummy training missiles, missile containers, spare and repair parts, support and test equipment, Joint Mission Planning System updates, publications and technical documentation, personnel training and training equipment, U.S. Government and contractor engineering, technical and logistics support services, and other related elements of logistical and program support. The total estimated program cost is $185.5 million.
This proposed sale is consistent with U.S. law and policy as expressed in Public Law 96-8.
This proposed sale serves U.S. national, economic, and security interests by supporting the recipient's continuing efforts to modernize its armed forces and to maintain a credible defensive capability. The proposed sale will help improve the security of the recipient and assist in maintaining political stability, military balance, and economic progress in the region.
The proposed sale will improve the recipient's capability in current and future defensive efforts. The recipient will use the enhanced capability as a deterrent to regional threats and to strengthen homeland defense. The recipient will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
Currently, market research is being conducted to determine the viability of a qualified contractor in accordance with Federal Acquisition Regulations. The purchaser typically requests offsets, but any offsets will be determined between the purchaser and the contractor.
Implementation of this proposed sale will not require the assignment of any additional U.S. Government or contractor representatives outside the United States.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
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1. The AGM-154C Joint Standoff Weapon (JSOW) is a low observable, 1,000 lb. class, inertial navigation and global positioning satellite guided family of air-to-ground glide weapons. JSOW consists of a common airframe and avionics that provides for a modular payload assembly to attack stationary and moving massed flight-armored and armored vehicle columns, surface-to-air, soft to hard, relocatable, and fixed targets. JSOW provides combat forces with an all-weather, day/night/multiple kills per pass, launch and leave, and standoff capability.
2. The highest classification of the hardware to be exported is SECRET. The highest classification of the technical documentation to be exported is SECRET, but no radar cross section and infrared signature data nor U.S.-only tactics or tactical doctrine will be disclosed. The highest classification of the software to be exported is SECRET; however, no software source code will be disclosed. All reprogramming of missile microprocessor memories must be accomplished by U.S. Government personnel or U.S. Government approved contractors.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification. Moreover, the benefits to be derived from this sale, as outlined in the Policy Justification, outweigh the potential damage that could result if the sensitive technology were revealed to unauthorized persons.
5. All defense articles and services listed in this transmittal are authorized for release and export to the Taipei Economic and Cultural Representative Office (TECRO) in the United States.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of an arms sales notification.
Kathy Valadez, (703) 697-9217 or Pamela Young, (703) 697-9107; DSCA/DSA-RAN.
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 16-67 with attached Policy Justification and Sensitivity of Technology.
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*as defined in Section 47(6) of the Arms Export Control Act.
TECRO has requested a possible sale of sixteen (16) Standard Missile-2 (SM-2) Block IIIA All Up Rounds (AUR), forty-seven (47) MK 93 MOD 1 SM-2 Block IIIA Guidance Sections (GSs), and five (5) MK 45 MOD 14 SM-2 Block IIIA Target Detecting Devices (TDDs) Shrouds. This request also includes Seventeen (17) MK 11 MOD6 SM-2 Block IIIA Autopilot Battery Units (APBUs) maneuverability upgrades on the GSs, sixty-nine (69) section containers and sixteen (16) AUR containers, operator manuals and technical documentation, U.S. Government and contractor engineering, technical and logistics support services. The total estimated program cost is $125 million.
This proposed sale is consistent with United States law and policy, as expressed in Public Law 96-8.
This proposed sale serves U.S. national, economic and security interests by supporting the recipient's continuing efforts to modernize its armed forces and enhance its defensive capabilities. The proposed sale will help improve the security of the recipient and assist in maintaining political stability, military balance and economic progress in the region.
The proposed sale will improve the recipient's capability in current and future defensive efforts. The recipient will use the enhanced capability as a deterrent to regional threats and to strengthen homeland defense. The SM-2 Block IIIA missiles and components proposed in this purchase will be used to supplement existing inventories of SM-2 Block IIIAs to be used for self-defense against air and cruise missile threats onboard their destroyer-class surface ships. The recipient will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the military balance in the region.
The prime contractor will be Raytheon Missiles Systems Company of Tucson, Arizona. There are no known offset agreements proposed in connection with this potential sale.
It is estimated that during implementation of this proposed sale, a number of U.S. Government and contractor representatives will be assigned to the recipient or travel there intermittently during the program.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
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1. A completely assembled STANDARD Missile-2 (SM-2) Block IIIA with or without a conventional warhead, whether a tactical or inert (training) configuration, is classified CONFIDENTIAL. Missile component hardware includes: Guidance Section (classified CONFIDENTIAL), Target Detection Device (classified CONFIDENTIAL), Warhead (UNCLASSIFIED), Rocket Motor (UNCLASSIFIED), Steering Control Section (UNCLASSIFIED), Safe and Arming Device (UNCLASSIFIED), and Autopilot Battery Unit (classified CONFIDENTIAL).
2. SM-2 operator and maintenance documentation is considered CONFIDENTIAL. Shipboard operation/firing guidance is considered CONFIDENTIAL. Pre-firing missile assembly/pedigree information is UNCLASSIFIED.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. A determination has been made that recipient can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
5. All defense articles and services listed in this transmittal have been authorized for release and export to the Taipei Economic and Cultural Representative Office (TECRO) in the United States.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification.
Kathy Valadez, (703) 697-9217 or Pamela Young, (703) 697-9107; DSCA/DSA-RAN.
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 16-68 with attached Policy Justification.
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* as defined in Section 47(6) of the Arms Export Control Act.
TECRO has requested a possible sale of MK-54 Lightweight Torpedo (LWT) Conversion Kits. This request provides the recipient with MK-54 LWTs in support of their LWT program. This sale will include LWT containers, torpedo support, torpedo spare parts, publications, training, weapon system support, engineering and technical assistance for the upgrade and conversion of one hundred sixty eight (168) MK-46 Mod 5 Torpedoes to the MK-54 Lightweight Torpedo (LWT) configuration. The total estimated program cost is $175 million.
This proposed sale is consistent with United States law and policy, as expressed in Public Law 96-8.
This proposed sale serves U.S. national, economic and security interests by supporting the recipients continuing efforts to modernize its armed forces and enhance its defensive capabilities. The proposed sale will help improve the security of the recipient and assist in maintaining political stability, military balance and economic progress in the region.
The proposed sale will improve the recipient's capability in current and future defensive efforts. The recipient will use the enhance capability as a deterrent to regional threats and to strengthen homeland defense. The recipient will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The will be various contactors involved in this case.
There are no known offset agreements proposed in connection with this potential sale.
It is estimated that during implementation of this proposed sale, a number of U.S. Government and contractor representatives will be assigned to the recipient or travel there intermittently during the program .
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
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1. The MK 54 Lightweight Torpedo (LWT) has been in service in the U.S. Navy (USN) since 2004. The version offered in this sale is the MK54 Mod 0 of the system. The purchaser currently does not have this weapon system in its inventory. The proposed sale consists 168 MK-54 Mod 0 LWT conversion kits, containers, spare and repair parts, weapon system support and integration, personnel training, training equipment, test equipment, U.S. Government and contractor engineering, technical and logistical support services and other related elements of logistical support.
a. Although the MK 54 Mod 0 LWT is considered state-of-the-art-technology, there is no Critical Program Information associated with the MK 54 Mod 0 LWT hardware, technical documentation or software. The highest classification of the hardware to be exported is SECRET. The highest classification of the technical manual that will be exported is CONFIDENTIAL. The technical manual is required for operation of the MK 54 Mod 0 LWT. The highest classification of the software to be exported is SECRET.
2. Loss of hardware, software, publications or other items associated with the proposed sale to a technologically advanced or competent adversary, poses the risk of the destruction of the countermeasures or replication and/or improvements to the adversary's Undersea Weapon Systems, weakening U.S. defense capabilities.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures which might reduce weapon system effectiveness or be used in development of a system with similar or advanced capabilities.
4. A determination has been made that the recipient country can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives in the Policy justification.
5. All defense articles and services listed in this transmittal have been authorized for release and export to the government of Taipei Economic and Cultural Representative Office (TECRO) in the United States.
Deputy Chief Management Officer, Department of Defense.
Notice of Federal Advisory Committee meeting.
The Department of Defense (DoD) is publishing this notice to announce that the following Federal Advisory Committee meeting of the Defense Business Board will take place.
Open to the public Wednesday, August 2, 2017 from 9:30 a.m. to 11:00 a.m.
The address for the open meeting is Room 3E863 in the Pentagon, Washington, DC.
Roma Laster, (703) 695-7563 (Voice), (703) 614-4365 (Facsimile),
This meeting is being held under the provisions of the Federal Advisory
Institute of Education Sciences (IES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing a revision of an existing information collection.
Interested persons are invited to submit comments on or before September 18, 2017.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Lauren Angelo, 202-245-7276.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of petition for waiver and grant of interim waiver, and request for public comment.
This notice announces receipt of and publishes a petition for waiver from ITW Food Equipment Group, LLC (ITW) seeking an exemption from specified portions of the U.S. Department of Energy (DOE) test procedure for determining the energy consumption of commercial refrigeration equipment under the regulations for basic models of their Innopod temperature controlled grocery and general merchandise system (Innopod). ITW requests modifications, as specified in its petition for waiver, to the existing DOE test procedure, which references Air-Conditioning, and Refrigeration Institute (ARI) Standard 1200-2006 and Air-Conditioning, Heating, and Refrigeration Institute (AHRI) Standard 1200 (I-P)-2010 that further references American National Standards Institute/American Society of Heating, Refrigerating and Air-Conditioning Engineers (ANSI/ASHRAE) Standard 72. ITW submitted to DOE an alternate test procedure that allows for testing of specified Innopod basic models. This notice also announces that DOE has granted ITW an interim waiver from the DOE commercial refrigeration equipment test procedures for the specified commercial refrigeration equipment basic models, subject to use of the alternative test procedure as set forth in this notice. DOE solicits comments, data, and information concerning ITW's petition and its suggested alternate test procedure.
DOE will accept comments, data, and information with regard to the ITW petition until August 18, 2017.
You may submit comments, identified by Case No. CR-007, by any of the following methods:
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Mr. Bryan Berringer, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-0371. Email:
Title III, Part C
DOE's regulations set forth at 10 CFR 431.401 contain provisions that allow a person to seek a waiver from the test procedure requirements for a particular basic model of a type of covered equipment when the petitioner's basic model for which the petition for waiver was submitted contains one or more design characteristics that either (1) prevent testing according to the prescribed test procedures; or (2) cause the prescribed test procedures to evaluate the basic model in a manner so unrepresentative of its true energy consumption as to provide materially inaccurate comparative data. 10 CFR 431.401(a)(1). A petitioner must include in its petition any alternate test procedures known to the petitioner to evaluate the basic model in a manner representative of its energy consumption. 10 CFR 431.401(b)(1)(iii).
DOE may grant a waiver subject to conditions, including adherence to alternate test procedures. 10 CFR 431.401(f)(2). As soon as practicable after the granting of any waiver, DOE will publish in the
The waiver process also allows DOE to grant an interim waiver if it appears likely that the petition for waiver will be granted and/or if DOE determines that it would be desirable for public policy reasons to grant immediate relief pending a determination on the petition
On December 20, 2016, ITW submitted a petition for waiver and interim waiver pursuant to 10 CFR 431.401 pertaining to DOE's test procedure at 10 CFR part 431, subpart C, appendix B, for their Innopod temperature controlled grocery and general merchandise system (Innopod) basic models of commercial refrigeration equipment. ITW's initial petition included twenty-two base model configurations. On May 3, 2017, ITW provided DOE with the complete list of 200 basic models covered by the twenty-two base model configurations. ITW petitioned for a waiver and interim waiver from various DOE test procedure requirements.
DOE's current test procedure references Air-Conditioning, and Refrigeration Institute (ARI) Standard 1200-2006 and Air-Conditioning, Heating, and Refrigeration Institute (AHRI) Standard 1200 (I-P)-2010, which further references American National Standards Institute/American Society of Heating, Refrigerating and Air-Conditioning Engineers (ANSI/ASHRAE) Standard 72 (incorporated by reference at 10 CFR 431.63 (c) and (d)). ITW asserts that these current test procedures do not account for the unique operating characteristics of the Innopod basic models. Because the specific design of this product line contains one or more design characteristics noted in the waiver request, including floating suction temperatures for individual compartments, different typical door-opening cycles, and a high-temperature “ambient” compartment, ITW believes that its petition and combined application meets both conditions of 10 CFR 431.401(a)(1) for granting waivers, on the grounds that: (1) The petitioner's basic model contains one or more design characteristics that prevent testing according to the prescribed test procedures; and (2) The prescribed test procedures may evaluate the basic model in a manner so unrepresentative of its true energy consumption as to provide materially inaccurate comparative data. ITW submitted to DOE an alternate test procedure that allows for testing of its Innopod basic models.
ITW's Innopod basic models include multiple thermally separated, temperature controlled compartments supplied with refrigerant from a single condensing unit. ITW's petition proposes an alternate test using an “inverse refrigeration load” test, various calculations to account for refrigeration system and component energy consumption, and adjustments to the door opening requirements based on typical use in the field. ITW's proposed refrigeration system calculations rely on the current calculations and assumptions used for testing remote condensing commercial refrigeration equipment in accordance with the DOE test procedure.
As previously noted, an interim waiver may be granted if it appears likely that the petition for waiver will be granted, and/or if DOE determines that it would be desirable for public policy reasons to grant immediate relief pending a determination of the petition for waiver. See 10 CFR 431.401(e)(2).
DOE understands that absent an interim waiver, the basic models identified by ITW in its petition cannot be tested and rated for energy consumption on a basis representative of their true energy consumption characteristics. DOE has reviewed the alternate procedure suggested by ITW and concludes that it will allow for the accurate measurement of the energy use of these equipment, while alleviating the testing problems associated with ITW's implementation of DOE's applicable commercial refrigeration equipment test procedure for the specified Innopod models. However, DOE has clarified how ITW should determine basic models, as discussed in section III of this notice, and adjusted certain aspects of the requested alternate test procedure regarding ambient test conditions, referenced industry standards, and calculations, as discussed in section IV of this notice. Thus, DOE has determined that ITW's petition for waiver will likely be granted and has decided that it is desirable for public policy reasons to grant ITW immediate relief pending a determination on the petition for waiver.
ITW's initial petition for waiver and interim waiver, submitted on December 20, 2016, included a list of twenty-two “base model configurations” of its Innopod equipment. However, based on the descriptions of the compartment configurations provided for each base model configuration, DOE expects that the list does not provide each basic model to which the waiver and interim waiver would apply.
Specifically, DOE noted that many of the base model configurations include compartments that are convertible between the freezer and refrigerator temperature operating ranges. With respect to multi-mode operation, DOE has taken the position in the most recent commercial refrigeration equipment test procedure final rule that self-contained equipment or remote condensing equipment with thermostats capable of operating at temperatures that span multiple equipment categories must be certified and comply with DOE's regulations for each applicable equipment category. 79 FR 22291 (April 21, 2014).
Additionally, DOE notes that its current regulations allow for the use of alternative efficiency determination methods (AEDMs), which allow manufacturers to simulate the energy use of untested basic models once a manufacturer has a validated AEDM and could be used to simulate results at other rating temperatures. 10 CFR 429.70.
Under DOE's definition of a basic model as “equipment manufactured by one manufacturer within a single equipment class, having the same primary energy source, and that have essentially identical electrical, physical, and functional characteristics that affect energy consumption” (10 CFR 431.62), the base model configurations in ITW's initial petition would represent multiple basic models depending on the set point of the convertible compartments. DOE requested that ITW provide an updated list of basic models, consistent with DOE's definition of basic model, that would be covered by the petition for waiver and request for interim waiver. ITW provided DOE with the updated list of basic model numbers on May 3, 2017.
ITW's petition also describes compartments that are convertible between refrigerator and ambient temperature ranges. These compartments would only be considered refrigerator compartments under DOE's definitions (compartments capable of operating at or above 32 °F
For the reasons stated in section II of this notice, DOE has granted ITW's application for interim waiver from testing for its specified commercial refrigeration equipment basic models, with minor modifications to the proposed approach. The substance of the interim waiver is summarized below.
ITW is required to test and rate the specified ITW commercial refrigeration equipment Innopod basic models
In addition, DOE is requiring that ITW test compartments in all relevant equipment configurations, as required by the current test procedure. Any compartments that are convertible between the refrigerator and freezer operating temperature ranges must be tested and rated under both test settings; however, the compartments in the ITW equipment that are convertible between ambient and refrigerator temperature ranges must be tested only at the refrigerator standardized compartment temperature of 38 °F, as described in section III of this notice.
ITW must make representations about the energy use of these basic models for compliance, marketing, or other purposes only to the extent that such equipment have been tested in accordance with the provisions set forth in the alternate test procedure and such representations fairly disclose the results of such testing in accordance with 10 CFR part 429, subpart B.
DOE makes decisions on waivers and interim waivers for only those basic models specifically set out in the petition, not future models that may be manufactured by the petitioner. ITW may request that DOE extend the scope of a waiver or an interim waiver to include additional basic models employing the same technology as the basic models set forth in the original petition consistent with 10 CFR 431.401(g). In addition, DOE notes that granting of an interim waiver or waiver does not release a petitioner from the certification requirements set forth at 10 CFR part 429. See also 10 CFR 431.401(a) and (i).
The interim waiver shall remain in effect consistent with 10 CFR 431.401(h). Furthermore, this interim waiver is conditioned upon the presumed validity of statements, representations, and documents provided by the petitioner. DOE may rescind or modify a waiver or interim waiver at any time upon a determination that the factual basis underlying the petition for waiver or interim waiver is incorrect, or upon a determination that the results from the alternate test procedure are unrepresentative of the basic model's true energy consumption characteristics. See 10 CFR 431.401(k).
EPCA requires that manufacturers use DOE test procedures when making representations about the energy consumption and energy consumption costs of equipment covered by the statute. (42 U.S.C. 6293(c); 6314(d)) Consistent representations about the energy efficiency of covered equipment are important for consumers evaluating equipment when making purchasing decisions and for manufacturers to demonstrate compliance with applicable DOE energy conservation standards. Pursuant to its regulations applicable to waivers and interim waivers from applicable test procedures at 10 CFR 431.401, and after considering public comments on the petition, DOE will announce its decision as to an alternate test procedure for ITW in a subsequent Decision and Order.
During the period of the interim waiver granted in this notice, ITW shall test the basic models listed in section IV according to the test procedure for commercial refrigeration equipment prescribed by DOE at 10 CFR part 431, subpart C, appendix B, with some of the modifications to the existing DOE test requirements as specified in ITW's petition. However, DOE is requiring that ITW test its Innopod basic models according to the ambient test conditions as outlined in AHRI Standard 1200 (I-P)-2010 section 4.1.2, which requires a wet-bulb test room temperature of 64.4 °F ± 1.8 °F, rather than the conditions
For the purpose of testing and rating, the Ambient (75 °F) compartment is treated as a Medium (Refrigerator at 75 °F) compartment. All volume and energy consumption calculations will be included within the Medium (Refrigerator 38 °F) category and summed with other Medium (Refrigerator 38 °F) compartment calculation(s). Compartments that are convertible between ambient and refrigerator temperature ranges shall be tested at the refrigerator temperature (38 °F). Compartments that are convertible between refrigerator and freezer (0 °F) temperature ranges shall be tested at both temperatures.
Through this notice, DOE announces receipt of ITW's petition for waiver from the DOE test procedure for certain basic models of ITW commercial refrigeration equipment, and announces DOE's decision to grant ITW an interim waiver from the test procedure for the specified basic models of commercial refrigeration equipment. DOE is publishing ITW's petition for waiver in redacted form, pursuant to 10 CFR 431.401(b)(1)(iv). The petition contains confidential information. The petition includes a suggested alternate test procedure to determine the energy consumption of specific basic models of commercial refrigeration equipment. DOE may consider including this alternate procedure in a subsequent Decision and Order based on comments from interested parties. However, DOE has tentatively determined that the alternate procedure proposed by ITW is not entirely acceptable and has provided a modified alternate test procedure as a part of its grant of an interim waiver. DOE will consider public comments on the petition in issuing its Decision and Order.
DOE solicits comments from interested parties on all aspects of the petition, including the suggested alternate test procedure and calculation methodology. Pursuant to 10 CFR 431.401(d), any person submitting written comments to DOE must also send a copy of such comments to the petitioner. The contact information for the petitioner's representative is Ms. Mary Dane, Agency Approval Engineer, ITW Food Equipment Group, LLC, North American Refrigeration, 4401 Blue Mound Rd., Fort Worth, TX 76106. All comment submissions must include the agency name and Case No. CR-007 for this proceeding. Submit electronic comments in WordPerfect, Microsoft Word, Portable Document Format (PDF), or text (American Standard Code for Information Interchange (ASCII)) file format and avoid the use of special characters or any form of encryption. Wherever possible, include the electronic signature of the author. DOE does not accept telefacsimiles (faxes).
Pursuant to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies to DOE: One copy of the document marked “confidential” with all of the information believed to be confidential included, and one copy of the document marked “non-confidential” with all of the information believed to be confidential deleted. DOE will make its own determination about the confidential status of the information and treat it according to its determination.
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of petition for waiver and request for public comments.
This notice announces receipt of and publishes a petition for waiver from New Shunxiang Electrical Appliance Co., Ltd. (“New Shunxiang”), seeking an exemption from specified portions of the U.S. Department of Energy (“DOE”) test procedure for determining the energy consumption of refrigerators and refrigerator-freezers under the regulations. New Shunxiang contends that the DOE test procedure does not clearly address its basic model JG50-2D1, which combines a compartment intended for storing wine (a cooler compartment) with a beverage cooler (a refrigerator compartment), and has petitioned for a waiver from appendix A. Although New Shunxiang did not propose an alternate test approach for its basic model, DOE has granted waivers for similar products. Therefore, DOE is considering whether to permit New Shunxiang to test and rate its basic model of combination cooler-refrigerator in a manner similar to that which DOE has permitted for other manufacturers with similar products. DOE also solicits comments, data, and information concerning New Shunxiang's petition and on the alternate test procedure detailed in this document.
DOE will accept comments, data, and information with regard to the New Shunxiang petition until August 18, 2017.
You may submit comments, identified by Case Number RF-044, by any of the following methods:
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Mr. Bryan Berringer, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-0371. Email:
Mr. Michael Kido, U.S. Department of Energy, Office of the General Counsel, Mail Stop GC-33, Forrestal Building, 1000 Independence Avenue SW., Washington, DC 20585-0103. Telephone: (202) 586-8145. Email:
Title III, Part B of the Energy Policy and Conservation Act of 1975 (“EPCA”) (42 U.S.C. 6291-6309) established the Energy Conservation Program for Consumer Products Other Than Automobiles, a program that includes consumer refrigerators and refrigerator-freezers.
The regulations set forth in 10 CFR 430.27 contain provisions that allow a person to seek a waiver from the test procedure requirements for a particular basic model of a type of covered product when the petitioner's basic model for which the petition for waiver was submitted contains one or more design characteristics that: (1) Prevent testing according to the prescribed test procedure, or (2) cause the prescribed test procedures to evaluate the basic model in a manner so unrepresentative of its true energy consumption characteristics as to provide materially inaccurate comparative data. 10 CFR 430.27(a)(1). A petitioner must include
DOE recently published standards for miscellaneous refrigeration products (“MREFs”). See 81 FR 75194 (Oct. 28, 2016). Testing to demonstrate compliance with those standards will require manufacturers to use the MREF test procedure established in a final rule published in July 2016. See 81 FR 46768 (July 18, 2016) (MREF coverage determination and test procedure final rule) and 81 FR 49868 (July 29, 2016) (MREF test procedure final rule correction notice). Under these rules, DOE has determined that products such as those that are at issue here fall into the MREF category. Accordingly, consistent with these MREF-specific provisions, these products will be evaluated under prescribed procedures and against specified standards that are tailored to account for their particular characteristics.
By email with attachment sent to DOE on October 14, 2015, New Shunxiang submitted a petition for waiver for its combination cooler-refrigerator basic model JG50-2D1. In its petition, New Shunxiang stated that it was unclear how this product would be classified under DOE regulations. As indicated in New Shunxiang's submitted data, the product includes both a cooler (with temperatures down to 40.2 °F) and a refrigerator (with temperatures down to 35 °F). Such a basic model is subject to the existing refrigerator energy conservation standards for the product class that would apply if the model did not include a cooler compartment.
Although New Shunxiang did not include an alternate test procedure for its basic model, DOE is considering whether to allow New Shunxiang to test and rate its combination cooler-refrigerator basic model as detailed in section III of this document.
DOE granted a similar waiver to Panasonic Appliances Refrigeration Systems Corporation of America (“PAPRSA”) in 2012 (under PAPRSA's previous corporate name, Sanyo E&E Corporation) (Case No. RF-022, 77 FR 49443 (August 16, 2012)), in 2013 (Case No. RF-031, 78 FR 57139 (Sept. 17, 2013)), and 2014 (Case No. RF-041, 79 FR 55769 (September 17, 2014)). On October 4, 2012, DOE issued a notice of correction to its Decision and Order in Case No. RF-022 by incorporating a K-factor (correction factor) value of 0.85 when calculating the energy consumption of the affected models. 77 FR 60688. On January 26, 2016, due to issues with the equations detailed in the prior waiver decisions, DOE issued a proposed modification of its prior waivers and granted PAPRSA with an interim waiver (81 FR 4270) under Case No. RF-043 to correct these known issues. DOE also previously granted a similar waiver to Sub-Zero Group Inc. through an interim waiver (79 FR 55772 (September 17, 2014)) and a subsequent Decision and Order (80 FR 7854 (February 12, 2015)) under Case No. RF-040. More recently, DOE granted a similar waiver to AGA Marvel through an interim waiver (81 FR 41531 (Jun 27, 2016)) and a subsequent Decision and Order (82 FR 21211 (May 5, 2017)) under Case No. RF-045. DOE also granted the PAPRSA waiver through a Decision and Order on May 5, 2017 (82 FR 21209).
DOE's recently granted waivers to PAPRSA and AGA Marvel address refrigeration products similar to those identified in New Shunxiang's petition for wavier—products combining a high-temperature compartment (a cooler) with a refrigerator. The waivers granted to PAPRSA and AGA Marvel require that the manufacturers test the cooler compartment of these products at a standardized compartment temperature of 55 °F instead of the prescribed 39 °F. This temperature is consistent with the standardized compartment temperature for coolers established in the MREF test procedure final rule. See 81 FR 75194. The PAPRSA and AGA Marvel waivers also require that the manufacturers apply a correction factor of 0.85 rather than the 0.55 established in the MREF test procedure for determining compliance with refrigerator standards.
DOE, therefore, is considering permitting New Shunxiang to test its product using the alternate test approach detailed in section III of this document. This approach is consistent with that detailed in the recent waiver decisions cited earlier and would require the basic model JG50-2D1 to be tested under the alternate approach.
Although New Shunxiang did not provide an alternate test procedure for its basic model for DOE to consider (or request an interim waiver), DOE is considering whether to allow New Shunxiang to test and rate its combination cooler-refrigerator basic model JG50-2D1 on the basis of the current test procedure contained in 10 CFR part 430, subpart B, appendix A, with the exception that it must calculate energy consumption using a correction factor (“K-factor”) of 0.85.
Therefore, under this approach, the energy consumption would be defined in the following manner:
If compartment temperatures are below their respective standardized temperatures for both test settings (according to 10 CFR part 430, subpart B, appendix A, section 6.2.4.1):
If compartment temperatures are not below their respective standardized temperatures for both test settings, the higher of the two values calculated by the following two formulas (according to 10 CFR part 430, subpart B, appendix A, section 6.2.4.2):
Energy consumption of the “cooler compartment”:
Energy consumption of the “fresh food compartment”:
The following basic model is included in New Shunxiang's petition: JG50-2D1.
This document announces New Shunxiang's petition for waiver from appendix A for its basic model of a combination cooler-refrigerator and seeks comment on whether the
DOE solicits comments from interested parties on all aspects of the petition, including the alternate calculation methodology under consideration. New Shunxiang's cover email and attachment's text are both reproduced verbatim and are available in the docket identified in the
According to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies: one copy of the document including all the information believed to be confidential, and one copy of the document with the information believed to be confidential deleted. DOE will make its own determination about the confidential status of the information and treat it according to its determination.
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
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The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
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m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
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Federal Energy Regulatory Commission.
Comment request.
In compliance with the requirements of the Paperwork Reduction Act of 1995, the Federal Energy Regulatory Commission (Commission or FERC) is submitting its information collection [FERC-510 (Application for Surrender of a Hydropower License), FERC-520 (Application for Authority to Hold Interlocking Directorate Positions), FERC-561 (Annual Report of Interlocking Positions), and FERC-583 (Annual Kilowatt Generating Report (Annual Charges))] to the Office of Management and Budget (OMB) for review of the information collection requirements. Any interested person may file comments directly with OMB and should address a copy of those comments to the Commission as explained below. The Commission previously issued a Notice in the
Comments on the collection of information are due by August 18, 2017.
Comments filed with OMB, identified by the OMB Control No. 1902-0068 (FERC-510), 1902-0083 (FERC-520), 1902-0099 (FERC-561), or 1902-0136 (FERC-583) should be sent via email to the Office of Information and Regulatory Affairs:
A copy of the comments should also be sent to the Commission, in Docket No. IC17-9-000, by either of the following methods:
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Ellen Brown may be reached by email at
FERC-510 is the application for the surrender of a hydropower license. The information is used by Commission staff to determine the broad impact of such surrender. The Commission will issue a notice soliciting comments from the public and other agencies and conduct a careful review of the application before issuing an order for Surrender of a License. The order is the result of an analysis of the information produced (
FERC-520 is divided into two types of applications: Full and informational. The full application, as specified in 18 CFR 45.8, implements the FPA requirement under section 305(b) that it is unlawful for any person to concurrently hold the positions of officer or director of more than one public utility; or a public utility and a financial institution that is authorized to underwrite or participate in the marketing of public utility securities; or a public utility and an electrical equipment supplier to that public utility, unless authorized by order of the Commission. In order to obtain authorization, an applicant must demonstrate that neither public nor private interests will be adversely affected by the holding of the position. The full application provides the Commission with information about any interlocking position for which the applicant seeks authorization including, but not limited to, a description of duties and the estimated time devoted to the position.
An informational application, specified in 18 CFR 45.9, allows an applicant to receive automatic authorization for an interlocked position upon receipt of the filing by the Commission. The informational application applies only to those individuals who seek authorization as: (1) An officer or director of two or more
Pursuant to 18 CFR 45.5, in the event that an applicant resigns or withdraws from Commission-authorized interlocked positions or is not re-elected or re-appointed to such interlocked positions, the Commission requires that the applicant submit a notice of change within 30 days from the date of the change.
The Commission uses the information required by 18 CFR 131.31 and collected by the Form 561 to implement the FPA requirement that those who are authorized to hold interlocked directorates annually disclose all the interlocked positions held within the prior year. The Form 561 data identifies persons holding interlocking positions between public utilities and other entities, allows the Commission to review these interlocking positions, and allows identification of possible conflicts of interest.
This is a supplemental notice in the above-referenced proceeding of Great Bay Solar 1, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is August 2, 2017.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Environmental Protection Agency (EPA).
Notice of charter renewal.
Notice is hereby given that the Environmental Protection Agency (EPA) has determined that, in accordance with the provisions of the Federal Advisory Committee Act (FACA), 5 U.S.C. App. 2, the Environmental Laboratory Advisory Board (ELAB) is in the public interest and is necessary in connection with the performance of EPA's duties. Accordingly, ELAB will be renewed for an additional two-year period. The purpose of the ELAB is to provide advice and recommendations to the Administrator of EPA on issues associated with enhancing EPA's measurement programs and the systems and standards of environmental accreditation. Inquiries may be directed to Lara P. Phelps, Senior Advisor, U.S. Environmental Protection Agency, Office of the Science Advisor, 109 T W Alexander Drive (E243-05), Research Triangle Park, NC 27709 or by email:
Environmental Protection Agency (EPA).
Notice; recertification decision.
With this notice, the Environmental Protection Agency (EPA or the Agency) recertifies that the U.S. Department of Energy's (DOE) Waste Isolation Pilot Plant (WIPP) continues to comply with the “Environmental Standards for the Management and Disposal of Spent Nuclear Fuel, High-Level and Transuranic (TRU) Radioactive Waste.”
This action represents the Agency's third periodic evaluation of the WIPP's continued compliance with the disposal regulations and WIPP Compliance Criteria. The WIPP Compliance Criteria implement and interpret the disposal regulations specifically for the WIPP. As directed by Congress in the WIPP Land Withdrawal Act (WIPP LWA), this “recertification” process is required every five years following the WIPP's initial receipt of TRU waste on March 26, 1999 (
This recertification decision is based on a thorough review of information submitted by the DOE, independent technical analyses, and public comments. The Agency has determined that the DOE continues to meet all applicable requirements of the WIPP Compliance Criteria, and with this action, recertifies the WIPP facility. This recertification decision does not otherwise amend or affect the EPA's radioactive waste disposal regulations or the WIPP Compliance Criteria. In addition, recertification is not subject to rulemaking or judicial review, nor is it linked to the resumption of disposal activities at the WIPP facility. The EPA has also identified areas in which the DOE's technical analyses and justifications could be improved for the next recertification application.
Ray Lee, Radiation Protection Division, Mail Code 6608T, U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue Washington, DC 20460; telephone number: (202) 343-9463; fax number: (202) 343-2305; email address:
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The Waste Isolation Pilot Plant (WIPP) is a disposal system for defense-related transuranic (TRU) radioactive waste. The WIPP Land Withdrawal Act (WIPP LWA) of 1992 defines TRU waste as materials containing alpha-emitting radioisotopes, with half-lives greater than twenty years, in concentrations greater than 100 nanocuries per gram (nCi/g), except for (A) high-level radioactive waste; (B) waste that the Secretary has determined, with the concurrence of the Administrator, does not need the degree of isolation required by the disposal regulations; or (C) waste that the Nuclear Regulatory Commission has approved for disposal on a case-by-case basis in accordance with part 61 of title 10, Code of Federal Regulations (CFR). Developed by the U.S. Department of Energy (DOE), the WIPP is located near Carlsbad in southeastern New Mexico. At the WIPP, the DOE disposes of radioactive waste 655 meters (2,150 feet) underground in an ancient salt layer which will eventually creep and encapsulate the waste. The WIPP has a total capacity to dispose of 6.2 million cubic feet of waste.
Congress initially authorized the development and construction of the WIPP in 1980 “for the express purpose of providing a research and development facility to demonstrate the safe disposal of radioactive wastes resulting from the defense activities and programs of the United States.”
Most TRU waste proposed for disposal at the WIPP consists of items that have become contaminated as a result of activities associated with the production of nuclear weapons or with the clean-up of weapons production facilities,
The WIPP LWA provides the EPA the authority to oversee and regulate the WIPP. The WIPP LWA requires the EPA to conduct three main tasks, to be completed sequentially, to reach an initial compliance certification decision. First, the WIPP LWA requires the EPA to finalize general regulations for the disposal of highly-radioactive waste.
Second, the WIPP LWA requires the EPA to develop criteria, via rulemaking, to interpret and implement the general radioactive waste disposal regulations specifically as they apply to the WIPP. In 1996, the Agency issued the WIPP Compliance Criteria (40 CFR part 194).
Third, the WIPP LWA requires the EPA to review the information submitted by the DOE every five years to demonstrate continued compliance with the disposal regulations and determine whether or not the WIPP continues to be in compliance.
Since the EPA's initial certification, operation of the WIPP proceeded without substantial interruption until 2014. However, two events took place at the WIPP in February 2014 that led the DOE to suspend emplacement of additional waste in the facility for nearly three years. On February 5, a salt haul truck caught fire. Workers were evacuated, and the underground portion of the WIPP was shut down. On February 14, a second event occurred when a continuous air monitor alarmed during the night shift, signaling a detection of radiation. The continuous air monitor was measuring exhaust from waste panel 7, where waste emplacement had recently begun. Radiological contamination of the underground caused an indefinite suspension of waste handling activities.
After implementing numerous corrective actions, the DOE resumed limited waste emplacement on January 4, 2017, and also resumed limited shipments from waste generator sites. Resumption of waste emplacement at the WIPP is unrelated to the EPA's recertification decision, which is primarily concerned with compliance with the EPA's long-term disposal requirements. However, the DOE has acknowledged that recovery from the radiological release will result in design changes to the repository, which will need to be considered from that longer-term perspective. These changes include installation of a new ventilation shaft and modification of the waste panel layout to accommodate the premature closure of planned waste emplacement capacity in panel 9. The DOE is still reviewing options and has not provided any specific plans to the EPA. The EPA will review these changes as more information becomes available and they are incorporated into future recertification applications. The EPA recognizes that the current recertification decision is based on a repository design that is likely to change, but the current application contains the information necessary to reach a decision without knowing the details of the future changes. It is not unprecedented for the EPA to conduct a recertification review with the knowledge that the DOE will submit a request to change an aspect of the disposal system design.
The EPA expects that any issues associated with repository design changes will be appropriately addressed in responding to change requests from the DOE and in subsequent recertification applications. However, because these design changes are likely to be substantial, the EPA believes it is necessary for the DOE to ensure that future compliance recertification applications are as robust and technically defensible as possible. To that end, the EPA discusses in Section VI.D specific aspects of future compliance recertification applications that the Agency believes would benefit from independent technical review, or otherwise from thorough consideration of more recent scientific information and understanding of chemical processes anticipated to take place within the repository. The EPA strongly believes that incorporating such reviews and information into future applications will increase public confidence in the DOE's compliance demonstrations and facilitate the Agency's review.
The WIPP LWA, as amended, required the EPA to evaluate whether the WIPP complied with the EPA's standards for the disposal of radioactive waste. On May 18, 1998 (63 FR 27354-27406), the EPA determined that the WIPP met the standards for radioactive waste disposal. This decision allowed the DOE to begin placing radioactive waste in the WIPP, provided that all other applicable health and safety standards, and other legal requirements, were met. The WIPP received the first shipment of TRU waste on March 26, 1999. The complete record and basis for the EPA's 1998 certification decision can be found in Air Docket A-93-02.
Although the EPA determined that the DOE met all of the applicable requirements of the WIPP Compliance Criteria in the original certification decision, the EPA also found that it was necessary for the DOE to take additional steps to ensure that the measures actually implemented at the WIPP (and thus the circumstances expected to exist there) were consistent with the DOE's compliance certification application and with the basis for the EPA's compliance certification. As a result, the EPA included four explicit conditions in the WIPP certification of compliance (see 40 CFR part 194, Appendix A; WIPP Recertification Background Document in Docket No. EPA-HQ-OAR-2014-0609). These conditions are discussed in Section V.C of this document.
The first recertification process, which occurred in 2004-2006, included an EPA review of all changes made at the WIPP facility since the original 1998 certification decision. The Agency received the DOE's first compliance recertification application on March 26, 2004. The EPA issued the completeness determination
Following receipt of the DOE's second compliance recertification application on March 24, 2009, the EPA requested additional information from the DOE and the DOE responded with the requested supplemental information. All pertinent 2009 Compliance Recertification Application correspondence was placed in the docket (Docket ID No. OAR-2009-0330 on
The WIPP must comply with the EPA's radioactive waste disposal regulations, located at subparts B and C of 40 CFR part 191. These regulations limit the amount of radioactive material which may escape from a disposal facility, and protect individuals and ground water resources from dangerous levels of radioactive contamination. In addition, the compliance recertification application and other information submitted by the DOE must meet the requirements of the WIPP Compliance Criteria at 40 CFR part 194. The WIPP Compliance Criteria implement and interpret the general disposal regulations specifically for the WIPP, and clarify the basis on which the EPA makes the certification decision.
In addition to the EPA's radioactive waste disposal regulations, the WIPP must also comply with a number of other federal laws and regulations pertaining to public health and safety or the environment, including, for example, the Solid Waste Disposal Act (also known as the Resource Conservation and Recovery Act (RCRA)) (42 U.S.C. 6901
The EPA monitors and ensures continuing compliance with the EPA regulations through a variety of activities, including the following: review and evaluation of the DOE's annual change reports, monitoring of
The DOE must timely report any planned or unplanned changes in activities or conditions pertaining to the disposal system that differ significantly from the most recent compliance application and, at least annually, report any other changes in disposal system conditions or activities (40 CFR 194.4(b)(3), (4)). The Department must also report any releases of radioactive material from the disposal system (40 CFR 194.4(b)(3)(iii)). In addition, the EPA may request additional information from the DOE at any time (§ 194.4(b)(2)). These requirements assist the EPA with monitoring the performance of the disposal system and evaluating whether the certification should be modified, suspended or revoked.
In addition to reporting significant changes to the WIPP disposal system, the DOE is required to report at least annually other changes to the conditions or activities concerning the WIPP disposal system (40 CFR 194.4(b)(4)). The DOE submitted the first annual change report in November 1998.
The DOE's annual change reports reflect the progress of quality assurance and waste characterization inspections, minor changes to the DOE documents, information on monitoring activities and any additional EPA approvals for changes in activities. All correspondence and approvals regarding the annual change reports can be found in hard copy in the Air Docket A-98-49, Categories II-B2 and II-B3.
1. Panel Closure Rulemaking. Waste panel closure systems are required by the State of New Mexico during the WIPP's operational phase. Since they are a feature of the disposal system design, the EPA requires panel closures to be included in the long-term modeling of the repository. The panel closures impact long-term disposal system performance because they can impede brine and gas flow between waste panels. As originally promulgated, the WIPP Certification Condition 1 required the DOE to implement the Option D panel closure system at the WIPP, using Salado mass concrete.
2. Quality Assurance. Certification Condition 2 requires each TRU generator site to establish and execute a quality assurance program for waste characterization activities. Section 194.22 establishes quality assurance requirements for the WIPP. The DOE must adhere to a quality assurance program that implements the requirements of ASME NQA-1-1989 edition, ASME NQA-2a-1990 addenda, part 2.7, to ASME NQA-2-1989 edition, and ASME NQA-3-1989 edition (excluding Section 2.1 (b) and (c), and Section 17.1).The EPA determined that the 2014 Compliance Recertification Application provides adequate information to verify the establishment and implementation of each of the applicable elements of the ASME NQA-1-1989.The EPA has also verified the continued proper implementation of the Nuclear Quality Assurance Program through periodic audits conducted in accordance with § 194.22(e).
The EPA's determination of compliance with 40 CFR 194.22 can be found in Table 1 of the 2014 Compliance Recertification Application CARD 22. Between March 2008 and April 2012, the EPA conducted several quality assurance audits and found the site-specific quality assurance programs to be adequate. The EPA conducted quality assurance audits at several waste generator sites and entities supporting the WIPP Performance Assessment activities at Los Alamos and Sandia Laboratories. The EPA also audited the quality assurance program of the Carlsbad Field Office.
3. Waste Characterization. Certification Condition 3 requires TRU waste generator sites to have waste characterization systems approved by the EPA. The Agency has conducted numerous audits and inspections at waste generator sites in order to implement Condition 3 and the relevant provisions of 40 CFR part 194, including § 194.8. The EPA inspected site-specific TRU waste characterization programs implemented to (a) characterize physical and radiological components in individual waste containers and (b) demonstrate compliance with the WIPP waste disposal requirements at 40 CFR 194.24.
To support the 2014 Compliance Recertification Application, the DOE reported the EPA's waste characterization inspections and approvals between January 2007 and December 2012 (see Table 1 in CARD 8). The EPA evaluated previously approved site-specific waste characterization program for continued compliance in accordance with 40 CFR 194.24, as well as changes to the systems of controls approved as part of the baseline (initial) approvals, and concluded them to be technically adequate. The TRU waste sites approved by the EPA to ship contact-handled TRU waste to the WIPP facility in accordance with the requirements of § 194.8 since the 2009 Compliance Recertification Application are as follows: Advanced Mixed Waste Treatment Project, Hanford's Richland Laboratory, Idaho National Laboratory, Los Alamos National Laboratory, Oak Ridge National Laboratory and Savannah River Site. Since the 2009 Compliance Recertification Application, the TRU waste sites approved by the EPA to ship remote-handled TRU waste to the WIPP facility in accordance with the requirements of § 194.8 are Argonne National Laboratory, Bettis Atomic Power Laboratory, General Electric Vallecitos Nuclear Center, Idaho National Laboratory, Oak Ridge National Laboratory and Savannah River Site. Since the 2009 Compliance
During the period covered by the 2014 Compliance Recertification Application, all site-specific waste characterization systems of controls at active TRU waste generator sites had necessary baseline approvals. Over the years, when warranted, the EPA approved modification to waste characterization program components. Notices announcing the EPA inspections or audits are routinely published in the
Records of the EPA's quality assurance correspondences and waste characterization approvals can be found in Air Docket A-98-49, Categories II-A1 and II-A4, respectively, as well as online in Docket ID No. EPA-HQ-OAR-2001-0012 on
4. Passive Institutional Controls. Certification Condition 4 requires the DOE to submit a schedule and plan for implementing passive institutional controls, including markers and other measures indicating the presence of the repository. The standards under the WIPP Certification Condition 4 do not require the submission of any reports until the final compliance recertification application prior to closure of the WIPP. The EPA has not received any submissions from the DOE during the period addressed by the 2014 Compliance Recertification Application and has not taken any actions relating to Condition 4. The EPA anticipates that it will evaluate the DOE's compliance with Condition 4 of the certification when the DOE submits a revised schedule and additional documentation regarding the implementation of passive institutional controls. Once received, the information will be placed in the EPA's public dockets, and the Agency will evaluate the adequacy of the documentation. After receiving Condition 4 submissions from the DOE, and during the operational period when waste is being emplaced in the WIPP (and before the site has been sealed and decommissioned), the EPA will verify that specific actions identified by the DOE in the compliance certification application, and supplementary information (and in any additional documentation submitted in accordance with Condition 4) are being taken to test and implement passive institutional controls.
The WIPP Compliance Criteria provide the EPA the authority to conduct inspections of activities at the WIPP and at off-site facilities which provide information relevant to compliance applications (40 CFR 194.21). The Agency has conducted periodic inspections to verify the adequacy of information relevant to certification applications. The EPA has conducted annual inspections at the WIPP site to review and ensure that the monitoring program meets the requirements of § 194.42. The EPA has also inspected the emplacement and tracking of waste in the repository. The Agency's inspection reports can be found in Air Docket A-98-49, Categories II-A1 and II-A4, as well as online at
The EPA determines, in accordance with WIPP LWA § 8(f)(2), that the WIPP facility is in compliance with the final disposal regulations, subparts B and C of 40 CFR part 191. Compliance recertification ensures that accurate and up-to-date information is considered in the determination that WIPP remains in compliance with these radioactive waste disposal regulations. The EPA makes this recertification and determination of continued compliance following the “Criteria for the Certification and Recertification of the WIPP's Compliance with the 40 CFR part 191 Disposal Regulations” (WIPP Compliance Criteria, 40 CFR part 194), including the WIPP certification conditions (40 CFR part 194, Appendix A).
The disposal regulations at 40 CFR part 191 include requirements for containment of radionuclides. The containment requirements at 40 CFR 191.13 specify that releases of radionuclides to the accessible environment
The disposal regulations provide that there must be a reasonable expectation that cumulative releases of radionuclides from the WIPP and into the environment over 10,000 years will not exceed specified quantities of these radionuclides (40 CFR 191.13 and Appendix A). A reasonable expectation standard is used because of the long time period involved and the nature of the events and processes at radioactive waste disposal facilities leads to uncertainties about future performance. The DOE's probabilistic performance assessments assess the likelihood of environmental radionuclide release so that future uncertainties are accounted for in the calculations through the use of alternative scenarios and variations in values of uncertain parameters via probability distributions.
The containment requirements in 40 CFR 191.13 are expressed in terms of “normalized releases.” At the WIPP, the specific release limits are based on the estimated amount of waste in the repository at the time of closure, and the projected releases are “normalized” against these limits (§ 194.31). Normalized releases are expressed as “EPA units”. The EPA units are calculated by dividing all the combined projected releases by the total combined radioactivity of all the waste in the repository.
The DOE must demonstrate, in each 5-year compliance recertification application, that the total average of combined releases are below two compliance criteria at a higher probability of occurrence and a lower probability of occurrence. These compliance points are as follows:
1. For a probability of 0.1 (a 1 in 10 chance) in 10,000 years, releases to the accessible environment will not exceed 1 EPA unit, and
2. For a probability of 0.001 (a 1 in 1,000 chance) in 10,000 years, releases to the accessible environment will not exceed 10 EPA units.
DOE evaluates four release mechanisms in the WIPP performance assessment modeling:
The DOE estimates the potential releases from these release mechanisms,
After reviewing the DOE's documentation and additional studies that the DOE conducted at EPA's request, the aspects of the performance assessment of most interest to EPA are those that affect the direct brine release mechanism, by which actinides
The key issues involving these aspects of the repository are: (1) The actinide solubility, which is addressed through changes to the geochemical database, colloid contribution updates and the determination of the actinide solubility uncertainty; (2) the probability of hitting a brine pocket under the repository; (3) the steel corrosion rate and steel's interactions with hydrogen sulfide and magnesium oxide (affecting the gas pressure); and (4) the overall modeling of direct brine releases that involve the interactions of items 1-3 plus the conditions of the repository (
The following information describes the EPA's compliance evaluation related to the disposal regulations and Compliance Criteria.
In general, compliance applications must include information relevant to demonstrating compliance with each of the individual sections of 40 CFR part 194 to determine if the WIPP will comply with the Agency's radioactive waste disposal regulations at 40 CFR part 191, subparts B and C. The EPA begins the compliance recertification evaluation once the EPA receives a complete compliance recertification application (40 CFR 194.11).
To make this decision, the EPA evaluated basic information about the WIPP site and disposal system design, as well as information which addressed the various compliance criteria. As required by 40 CFR 194.15(a), the DOE's 2014 Compliance Recertification Application updated the previous submission in 2009.
On March 26, 2014, the DOE submitted the compliance recertification application. The EPA began to identify areas of the application where additional information was needed. On October 10, 2014, the EPA gave public notice of the compliance recertification application and opened the official public comment period (79 FR 61268). On January 13, 2017, the EPA sent a letter to the DOE stating that the DOE's recertification application was complete. On March 10, 2017, the EPA issued a
The EPA relied on materials prepared by the Agency or submitted by the DOE in response to the EPA requests. For example, the EPA requested that the DOE conduct specific, additional modeling calculations for the performance assessment, known as sensitivity studies. The purpose of these studies was to evaluate the impact on performance assessment results of changing specific parameter values. The studies aided the EPA in determining how significant the differences in some parameter values were to a demonstration of compliance. The four sensitivity studies and the EPA's evaluation of them are discussed in more detail in Section VI.E.
To determine whether the WIPP facility continues to be in compliance with the final disposal regulations, the EPA engaged in a technical review of the compliance recertification application against the WIPP Compliance Criteria. The Agency focused the review on areas of change identified by the DOE since the 2010 recertification decision.
The Agency produced many documents during the technical review and evaluation of the compliance recertification application. The EPA's Compliance Application Review Documents (CARDs) correspond in number to the sections of 40 CFR part 194 to which the documents primarily relate. Each CARD enumerates all changes made by the DOE relating to a particular section of the rule or certification criterion, and describes the EPA's process and conclusions. The EPA also prepared technical support documents (TSDs) to address specific topics in greater detail. Both the CARDs and the TSDs for this recertification decision can be found in Docket ID No. EPA-HQ-OAR-2014-0609 on
In summary, the EPA's recertification decision is based on the entire record available to the Agency, which is located in the public docket dedicated to this recertification (Docket ID No. EPA-HQ-OAR-2014-0609 on
The DOE's WIPP compliance applications must include, at a minimum, basic information about the WIPP site and disposal system design, including information about the following topics: the geology, hydrology, hydrogeology and geochemistry of the WIPP disposal system and the WIPP vicinity; the WIPP materials of construction; standards applied to design and construction; background radiation in air, soil and water; and past and current climatological and meteorological conditions (40 CFR 194.14). Section 194.15 states that the DOE's recertification applications shall update this information to provide sufficient information for the EPA to determine whether or not the WIPP facility continues to be in compliance with the disposal regulations.
Before determining that the compliance recertification application was complete, the EPA raised numerous technical questions with the DOE, as described below. For each topic, a brief summary is provided of how the DOE addressed the issue in the 2014 application, followed by the EPA's perspective on the change, including any follow-up analyses requested. The DOE also updated the waste inventory. This topic is discussed in Section VI.F.1.
Since the initial Compliance Certification performance assessment, the DOE's calculated releases in performance assessments have increased with every performance assessment until the 2014 Compliance Recertification Application performance assessment. The changes the DOE made to the performance assessment in the current application reduce the calculated releases. For example, the calculated release of radionuclides at the low probability compliance point (a likelihood of less than a one in 1,000 chance), was assessed by the DOE in the 2009 Compliance Recertification Application as 0.72 EPA Units, but in the 2014 Compliance Recertification Application, the similar calculated release initially was assessed as 0.261 EPA Units.
Changes that reduce the calculated releases involve the shear strength of the waste, revised steel corrosion rate, incorporating water balance as part of the chemical model implementation as it relates to steel corrosion and interactions with the magnesium oxide engineered barrier, correcting errors associated with brine volume mass balance and calculation of actinide solubility and the change to how the DOE calculates the probability of hitting a brine pocket under the repository. In general, the result of the DOE's methodology changes is to reduce calculated releases by about a factor of two between the 2009 and 2014 Compliance Recertification Applications at both the 0.1 and 0.001 probability compliance points.
The EPA has identified issues with some of these changes, but even with changes the EPA asked the DOE to investigate, projected releases stay well under the numerical release limits. For example, at the 0.001 probability compliance point where the EPA normalized release limit is 10 EPA units, the changes the EPA requested resulted in increased releases from 0.261 EPA units in the DOE's 2014 performance assessment to 0.299 EPA units in sensitivity study SEN3 and 0.541 EPA units in sensitivity study SEN4. The sensitivity studies are discussed in depth in Section VI.E.
The DOE also updated information on the type of plugs installed in exploratory, disposal and resource extraction boreholes. There are three types of borehole plugs used in the Delaware basin. There are boreholes that are continuously plugged through the entire salt section, and the DOE reports a slight increase in the use of this design. There are boreholes plugged with a two-plug configuration (at the Salado/Rustler and the Bell Canyon/Castile Formation interfaces). This two-plug design also slightly increased from that used in the 2009 application. There is also a three-plug configuration (
On September 28, 2011, the DOE provided a change request to the EPA (Docket EPA-HQ-OAR-2013-0684) to modify the panel closure system design specified in Appendix A of 40 CFR part 194 from that of a concrete monolith plug, noted as Option D, to a 100-foot long barrier consisting of run-of-mine salt (EPA 2013; 2014). The panel closure system performance assessment release calculations were well within the numerical limits established in 40 CFR 191.13. The EPA approved the DOE's use of the proposed run-of-mine salt closure design (79 FR 60750, Oct. 8, 2014) (Docket EPA-HQ-OAR-2013-0684-0004 on
The DOE incorporated the run-of-mine salt design for panel closures into the 2014 Compliance Recertification Application. To evaluate this change, the Agency reviewed a broad set of information related to the evolution of salt repository properties, including run-of-mine salt and adjacent disturbed rock zone in the WIPP repository setting (Salt Characteristics TSD
To identify the potential effect of the difference in the repository properties between what the EPA has identified may be applicable and what the DOE modeled, the Agency requested that the DOE analyze the repository performance using parameter values for the run-of-mine salt panel closure system and adjacent disturbed rock zone that simulate complete healing. The DOE did this in the sensitivity study SEN3 discussed in Section VI.E. The calculated releases increased for direct brine releases and spallings releases in SEN3, but overall releases remained well within the numerical limits of 40 CFR 191.13 and the EPA concludes that there is a reasonable expectation that the repository remains in compliance with the numerical limits at 40 CFR 191.13, and 40 CFR part 191, Appendix A.
If the DOE determines, in light of the announced decision to abandon the area previously designated for panel 9, that worker safety considerations preclude installing panel closures in affected areas of the repository, the DOE's treatment of panel closures in performance assessment may be more appropriately addressed in the context of modeling open areas representative of no panel closures. The Agency will review future panel closure modeling in the context of future facility design changes.
The results from the SEN2 studies indicate modeling creep closure and healing of the operations and experimental areas (
If, in the future, there are repository design changes that result in more non-waste drifts mined or left open in the facility, the issue of open areas will need to be re-evaluated in the context of those design changes, as releases could be expected to increase in that circumstance. The DOE's plan to abandon panel 9 would leave large areas of open space in the repository in the panel 9 drifts and possibly no panel closures for multiple panels. Performance assessment modeling should address these expected future repository conditions. The EPA believes that an independent technical review of issues related to salt behavior and modeling of open areas would be of benefit to the DOE as it further develops its plans.
In the 2014 Compliance Recertification Application, the DOE changed the basis it used to develop the probability distribution for parameter PBRINE. The DOE's revision to the estimated probability of a future driller encountering pressurized brine relies heavily on voluntarily reported drilling logs
The EPA has several concerns regarding the DOE's update to the PBRINE parameter,
The Agency's revision to the PBRINE parameter was incorporated into Sensitivity Study SEN4. The study results indicate the modified PBRINE probability distribution contributed to an increase in estimated direct brine releases and increased the total releases at the 0.001 low probability compliance point to roughly double those in the 2014 Compliance Recertification Application performance assessment.
The EPA reviewed the 2014 Compliance Recertification Application model and had concerns with the way the model addressed expected repository carbon dioxide concentrations in the experimental derivation of corrosion rates. The EPA also found that the model did not incorporate hydrogen sulfide induced steel passivation,
In addition, other components of this model, which the DOE considered to be minor, may have more impact. Calculations of the potential lead inventories at the WIPP only include current waste containers without accounting for the maximum potential of future containers.
To address the EPA's concerns about corrosion, part of the DOE's SEN4 sensitivity study involved turning off the hydrogen sulfide corrosion parameter to simulate steel passivation. These changes resulted in a slight increase in gas pressures as well as a decrease in the saturation of the waste area because both hydrogen gas and water were eliminated from the end products. Results from this study indicated that projected releases would remain within the limits of 40 CFR 191.13. Therefore, the EPA accepts the corrosion approach incorporated in the 2014 Compliance Recertification Application. See Section VI.E for more discussion of the SEN4 study.
To ensure that future performance assessments adequately address the mechanisms that affect gas generation in the repository, it would be appropriate for the DOE to update the corrosion model to better address steel passivation and account for radiolysis and address lead corrosion to be consistent with the expected inventory of the repository.
In the 2009 Compliance Recertification Application the lower bound value was 0.05 Pa, while for the 2014 Compliance Recertification Application the lower bound of the distribution was increased to 2.22 Pa (the mean value from the laboratory flume tests). The upper bound of the distribution, 77 Pa, remained the same. The EPA believes the DOE's overall approach of using experimental data to revise the TAUFAIL parameter is reasonable; however, the EPA had concerns with the DOE's lower “bounding” range value derived from the experiments. The Agency was concerned that three of the five low shear-strength tests had highly scattered results. The DOE attributed the scatter to pre-test sample damage and/or a high degree of variability in sample preparation, rather than testing an equivalent suite of samples. As a result, the mean of the low shear strength test results may not be truly representative of low shear strength samples.
In the SEN4 study, the EPA requested the DOE include the lowest shear-strength flume test results (1.6 Pa) as the bounding value, rather than the average (2.22 Pa). The SEN4 results indicate modifying the lower range to include the lowest value as the bounding value insignificantly impacted releases. This is due to the fact that the change from 2.22 Pa to 1.6 Pa (
Previous compliance recertification applications only included anoxic corrosion in water balance calculations. The 2014 Compliance Recertification Application includes an assessment of the microbial degradation of the cellulosic, plastic and rubber material, the anoxic corrosion of iron in the steel waste canisters and reactions of the engineered barrier. The DOE did not change the rates for microbial cellulosic, plastic and rubber material degradation and water production from the 2009 Compliance Recertification Application. As discussed previously, the DOE revised steel corrosion rates. The DOE developed magnesium reaction rates for the compliance recertification application based on previous studies (Chemistry TSD
Although changes to each of these parameters is minor, the reactions will have a cumulative effect. Based on previous exchanges with the DOE (see comment 2-C-5 in Docket ID No. EPA-HQ-OAR-2014-0609) as well as the SEN4 sensitivity study, the water balance updates do not appear to significantly affect the WIPP performance. However, the EPA
In the original Compliance Certification Application, the colloid parameters were based on experimentally derived values examining actinide macromolecules or actinides sorbed onto biomass (
Because of issues with experimental data used to develop the 2014 colloid contributions to actinide solubility, the 2014 performance assessment calculations using those experimental results may underestimate colloidal concentrations, and therefore, actinide solubility. However, the EPA finds that the use of an updated uncertainty distribution for actinide solubility in the SEN4 sensitivity study provides adequate information to determine that an increase in colloid concentrations would not cause releases to exceed the disposal standards. The EPA recommends that additional review of the experimental results would benefit the DOE's treatment of colloid formation mechanisms in future performance assessments. The EPA's review of this topic is provided in the Chemistry TSD. See Section VI.E of this document for discussion of the SEN4 study.
a. Chemical Database. Actinide solubility, or the ability for actinide solids to dissolve in brine, is important in calculating releases. In performance assessment calculations, these radionuclides include americium, curium, neptunium, plutonium, thorium, and uranium. Americium(III) solubility is used to predict plutonium(III) and curium(III) concentrations while thorium(IV) is used to predict plutonium(IV), neptunium(IV) and uranium(IV).
The EPA's review identified that the DOE's update of the chemical assumptions used in the actinide solubility database (DATA0.FM1) did not reflect all data available prior to the DOE's data cut-off date of December 31, 2012.The EPA raised several issues (in Docket ID No. EPA-HQ-OAR-2014-0609-0010) about americium and thorium solubility and speciation and in response, the DOE modified the database to produce DATA0.FM2. However, the EPA identified flaws in the modified database that need to be corrected before it can be considered to be of sufficient quality for use in recertification. The EPA concluded that, even with identified data gaps, the original DATA0.FM1 database was of higher quality and provided sufficient information to support a determination of continued compliance. The DOE's updates of the chemical database for future performance assessments should more comprehensively incorporate recent data.
b. Revised Radionuclide Uncertainty Distribution. The DOE also examined the uncertainty distribution used to model the +III and +IV actinide concentrations in the performance assessment by comparing modeled solubility calculations to experimental data from multiple reports and peer-reviewed studies. These studies include solubility measurements from americium, thorium and their analogues using a specific set of criteria (Chemistry TSD; 2014 Compliance Recertification Application, Appendix SOTERM-2014 Section 5.1.3). During the performance assessment solubility calculations, this uncertainty distribution is sampled and used in calculating dissolved actinides in a release.
After reviewing the actinide solubility uncertainty distribution for the 2014 Compliance Recertification Application, the EPA identified relevant studies that were not considered in developing this distribution, as well as identifying studies that should have been excluded from consideration, based on the DOE's evaluation criteria. Using relevant studies would result in a revised actinide solubility uncertainty distribution with overall higher +III
The EPA recommends that updating the actinide solubility uncertainty distribution should be part of the update to the geochemical database. This would include incorporating new solubility data for thorium and americium under the WIPP repository conditions, and re-evaluating how studies are included in or excluded from the DOE's analyses.
c. Plutonium Oxidation State. Oxidation states refer to an actinide ion's charge. Actinides with a higher charge likely exist in environments with greater oxygen content while actinides with lower charges likely exist where there is less oxygen. Although plutonium has multiple oxidation states including +VI, +V, +IV, and +III, the WIPP model assumes plutonium oxidation state is dominated by the +III or +IV charge in the aqueous phase due to the rapid removal of oxygen in the repository. Identifying the dominant oxidation state is particularly important as plutonium(III) is much more soluble than plutonium(IV). To address this uncertainty, the plutonium oxidation state model does not calculate oxidation state but instead considers plutonium(III) in 50% of the realizations and plutonium(IV) in the other 50%. Since the 2009 Compliance Recertification Application, experiments have verified that the iron metal corrosion of the WIPP waste containers largely mediate the conditions conducive to plutonium(IV) and plutonium(III) oxidation states. While experiments have confirmed the WIPP conditions post-closure, the debate has shifted towards whether plutonium(IV) or plutonium(III) is dominant in the WIPP conditions, or whether they will be present in equal proportions. More recent experimental information leads the EPA to believe that, under the WIPP conditions, aqueous plutonium(III) will be the dominant state of plutonium and will exist in equilibrium with the different solid plutonium phases present. In addition, organic ligands, iron and microbial processes will also increase the likelihood that plutonium(III) will dominate in solutions.
While the sensitivity studies did not directly test the presumption that +III and +IV species would be equally present, the SEN4 study indirectly examined this proposition by including a modified solubility uncertainty distribution that was more heavily weighted toward higher +III solubility (see Section VI.E.2.d). Both the compliance recertification application and the SEN4 study indicate plutonium release levels will be below the compliance points. Combined with the related analysis of the actinide solubility uncertainty distributions, the Agency can accept the DOE's assumption that the plutonium(III) and plutonium(IV) oxidation states will each occur 50% of the time in performance assessment calculations for the current recertification. However, because of the available data that the EPA has identified supporting the presence of plutonium(III) over plutonium(IV), the EPA believes this issue is of sufficient significance to benefit from independent technical review of the available data and the assumption that both plutonium oxidation states will occur equally under the WIPP conditions. The EPA's review of the plutonium oxidation state issue is addressed more thoroughly in the Chemistry TSD.
1. Overview. Section VI.A provided a basic description of the requirements in 40 CFR 191.13 and the performance assessment process required to show compliance with those standards. This section provides additional information on performance assessment and how it is evaluated by the EPA in the compliance recertification application. As described earlier, the DOE must use the performance assessment to demonstrate compliance with the containment requirements in 40 CFR 191.13. The containment requirements are expressed in terms of “normalized releases.” The DOE assembles the results of the performance assessment into complementary cumulative distribution functions, which indicate the probability of exceeding various levels of normalized releases (§ 194.34).
For both of the DOE's 2004 and 2009 Compliance Recertification Applications, the EPA requested that the DOE modify those respective performance assessments to (1) address completeness and technical issues raised during the EPA review process and with these modifications, and (2) assure the disposal regulations were met.
These additional sets of calculations have been termed by the DOE to be performance assessment “baseline calculations” and the EPA has considered these calculations as updated “baselines” for each respective compliance recertification application. The EPA then used these baseline calculations for the comparison performance assessment in each of the DOE's subsequent five-year compliance recertification applications.
In this recertification review process, the Agency proceeded differently than in the past. During the completeness review, the EPA identified issues with parameters or approaches used by the DOE in the calculations. These have been discussed in Section VI.D. The Agency requested that the DOE conduct additional calculations so the EPA could better understand how alternative parameter values would affect repository performance. These calculations, or sensitivity studies as they have been referred to, are summarized below and are the subject of a TSD.
The Agency requested that the DOE conduct four sensitivity studies (labeled as SEN1, SEN2, SEN3 and SEN4) to address technical concerns raised during the EPA's 2014 Compliance Recertification Application review. The EPA has compared these sensitivity results to the DOE's 2014 performance assessment calculations. The purpose of these sensitivity studies is to provide an understanding of how repository
The ability of salt openings and aggregates to quickly compress, consolidate and “heal” within a few hundred years, mostly due to the creep-closure process, is one of the unique properties of bedded salt geologic units that make them potentially suitable to use as nuclear waste repositories. The DOE's 2014 performance assessment parameter values assigned to the non-waste rooms, the panel closure system and the adjacent disturbed rock zone did not reflect the creep-closure and rapid healing of these areas that the EPA expects to occur. That is, the DOE did not use permeability, porosity, residual gas and brine saturations and capillary pressures reflective of in-situ (
Three of the EPA requested sensitivity studies, SEN1, SEN2 and SEN3, focused on modifying parameters to test how assuming complete creep-closure and healing of these areas would impact long-term performance through modifying values related to the permeability, porosity and two-phase flow parameter values for the run-of-mine salt panel closure system, the disturbed rock zone and non-waste areas for the 10,000-year modeled period. The fourth sensitivity study, SEN4, investigated the cumulative effects and impact on repository performance by making changes to five important parameter values as well as using an updated numerical code.
As with the 2014 performance assessment, all of the sensitivity studies had three replicate calculation sets and included the same future scenarios. The four scenarios are briefly described below:
(1) The undisturbed scenario—where the repository is not impacted by human activities,
(2) The E1 Scenario—where one or more boreholes penetrate a Castile brine reservoir and also intersect a repository waste panel,
(3) The E2 Scenario—where one or more boreholes intersect a repository waste panel but not a brine reservoir, and
(4) The E1/E2 Scenario—where there are multiple penetrations of waste panels by boreholes of either the E1 or E2 type, at many possible combinations of intrusion times and locations for either E1 or E2 drilling type of event.
a. The SEN1 Study. The intention of the SEN1 study was to determine the impact on repository performance by modeling the stepped (
This study had to be terminated because the numerical flow code used in these calculations produced non-physical and unrealistic results when these parameters were modified in time-intervals to reflect healing. The Agency accepted termination of this study, in part, because modeling changes in these values for the first 200 years, a relatively short time compared to the 10,000-year regulatory time period, would not be as important to long-term repository performance. The Agency considered that the SEN2 and SEN3 studies described below adequately addressed the issues targeted by the SEN1 study because the latter two studies both modeled the open and disturbed areas as fully healed for the entire 10,000-year regulatory time period, essentially bounding the conditions specified for the SEN1 study.
b. The SEN2 Study. This study tested the impacts on repository performance by modeling the non-waste areas and open drifts as completely creep-closed during the entire 10,000-year regulatory period. In this study, parameter values for all the non-waste areas (
Compared to the 2014 Compliance Recertification Application performance assessment, the SEN2 study waste room pressures generally increased and brine saturations decreased. The most affected primary release mechanism saw an increase in solid waste moving up a borehole (spallings) because this release mechanism increases when waste panel pressure increase. All other release mechanisms remained essentially unchanged from the 2014 performance assessment calculations. Total spallings releases remained small compared with cuttings, cavings and direct brine releases. Spallings releases therefore did not materially contribute to total repository releases in either SEN2 or the 2014 Compliance Recertification Application.
c. The SEN3 Study. For the SEN3 study, the DOE assumed that the panel closure system, the adjacent disturbed rock zone and the non-waste areas and open drifts are healed for the 10,000-year regulatory period. The DOE reduced porosity and permeability in the repository, increasing initial residual brine and gas saturations, and invoking two-phase flow parameters for intact halite. Using these modifications effectively isolated the individual waste panels and the non-waste areas from one another for the entire modeled period due to limited brine and gas flows between areas of the repository.
The modifications made in the SEN3 study caused increases in waste-panel pressures and decreases in waste panel saturations. The dominant releases were from spallings, which are only dependent on a waste panel pressure high enough to force solids to the surface, and direct brine releases, which are dependent on having sufficient brine in the waste panels coupled with high enough pressure to force brine to the surface. The release mechanism that increased the most was for spallings, and the increase was seen at both the low and high probability compliance points. The impact on direct brine release was primarily at low probabilities because this release depends on both high waste panel pressure and high saturation conditions, the combination of which were less likely to occur in this study.
Factoring in all combined releases, the total mean and low-probability (0.001 probability) releases increased by approximately 15% from the initial 2014 Compliance Recertification Application results, although the upper bound of the 95% confidence interval was essentially the same as in the 2014 Compliance Recertification Application (0.384 EPA Units in the 2014 Compliance Recertification Application and 0.387 EPA Units in SEN3). Total releases did not exceed the EPA's WIPP release limits.
The parameter values used in the SEN3 study created a “tight” repository (panel closure system, disturbed rock zone and non-waste rooms) in which brine and gas flow is limited. The study results indicate that such conditions may produce calculated releases higher than the more open and brine- and gas-conducive set of conditions presented by the DOE in the 2014 Compliance Recertification Application.
i. Overview. The fourth sensitivity study was intended to understand the cumulative effects on repository performance by making changes to
• Use the EPA's updated distribution for the probability of intersecting a waste panel and a Castile brine reservoir, denoted as the PBRINE parameter and discussed in Section VI.D.1.d previously.
• Use the revised data set for the plutonium oxidation state uncertainty distribution discussed in Section VI.D.2.c.
• Modify the lower limit for the parameter that predicts waste strength, denoted as the parameter TAUFAIL discussed in Section VI.D.1.f.
• Use the updated version of the computer code DRSPALL that models waste carried up a borehole. After the 2014 performance assessment calculations had been completed and submitted to the EPA, the DOE discovered an error in the computer code, DRSPALL. The DOE corrected this error and reported it to the EPA. For the SEN4 study, the EPA requested that the DOE use the corrected version.
• Eliminate the hydrogen sulfide reaction with iron as discussion in Section VI.D.1.e.
• Use the correct modeled length for north panel closure. The WIPP repository design includes two sets of panel closures emplaced at the north end of the repository. For the 2014 performance assessment calculations, the DOE modeled the “effective” length of only one panel closure rather than two. The EPA requested that the DOE increase the effective length of the modeled north waste panel to be consistent with the facility design.
ii. Cumulative effects of the changes evaluated by release pathway.
aa. Direct Brine Releases. Direct brine releases are a function of actinide solubility, repository pressure and brine saturation. Of these changes, the most significant are the revised solubility uncertainty distributions that increase the concentration of the more soluble plutonium(III) in repository brine, the increased likelihood of a higher probability of hitting a brine pocket and the iron sulfidation reaction stoichiometric coefficient changes. The combined effects of these changes increased direct brine calculated releases and total mean low probability (0.001) repository releases to about twice those of the 2014 Compliance Recertification Application performance assessment (0.541 EPA Units for SEN4 versus 0.261 EPA Units for 2014 performance assessment).
bb. Spallings Releases. Spallings releases are affected in SEN4 by a combination of corrections using the updated version of the DRSPALL code as well as increases in repository pressure. Repository pressure was generally increased in SEN4 as a result of the updated distribution of the PBRINE parameter, the increased length of the northernmost panel closure and the updated iron sulfidation reaction stoichiometric coefficients. The combined effect of these changes was to increase spallings releases by about half an order of magnitude. However, spallings releases remained low compared to direct brine releases and the effect of this increase in spallings on total mean releases was minimal.
cc. Cuttings and Cavings Releases. Cavings releases were affected by the Agency's requested reduction of the lower bound of the distribution for the TAUFAIL parameter. The small reduction in the lower bound did not have a meaningful effect on total mean releases.
dd. Releases from the Culebra. Releases from lateral flow through the Culebra Dolomite are a function of actinide solubility, repository pressure, and brine saturation. These are affected by the revised solubility uncertainty distributions, the increased likelihood of sampling higher values for the PBRINE parameter, the increased length of the northernmost panel closure and removal of the iron sulfidation reactions. The combined effect of these changes on Culebra releases was too small to have a meaningful effect on total mean repository releases.
ee. Insights from the SEN4 Study. In the SEN4 study, the most significant effects on repository performance were an increase in direct brine releases and, by extension, an increase in total low probability repository releases. The Agency concludes that these increases were primarily the result of updating the solubility uncertainty distributions, updating the distribution of PBRINE and incorporating hydrogen sulfide steel passivation. The remaining changes, updating the TAUFAIL lower bound, using the corrections in the code DRSPALL and correcting the panel closure length, provided important updates and corrections to the performance calculation but had only a negligible effect on total mean releases. As in the previous sensitivity studies, the total mean releases, the upper 95% confidence limit on those means and all individual vectors in the three replicates remained below regulatory limits in SEN4.
3. How the Four Sensitivity Studies Affect the WIPP's Compliance. The results indicate that modifications to the selected parameters reported in these evaluations increased calculated releases. However, the total mean releases, the upper 95% confidence limit on those means, and all individual vectors in the three replicates remained below the EPA's WIPP release limits.
These sensitivity studies were intended to address a subset of the EPA technical issues. These studies do not address all the technical issues identified in the EPA's 2014 Compliance Recertification Application review. The major issues identified in the EPA's review primarily influence the direct brine releases and how the performance assessment addresses those releases. The EPA recommends that, especially with respect to calculating direct brine releases, the DOE re-evaluate the implementation of features, events and processes, along with model assumptions, to ensure their appropriate integration in the 2019 Compliance Recertification Application. The EPA has identified two areas in particular (modeling of open areas and plutonium oxidation states) that the Agency believes would greatly benefit from independent technical review for consideration in the DOE's 2019 Compliance Recertification Application.
This section summarizes the EPA's review as it relates to specific sections of the WIPP Compliance Criteria in 40 CFR part 194 that do not directly involve performance assessment.
Information on continuing compliance activities related to waste characterization (40 CFR 194.8 and 194.24), inspections (§ 194.21) and quality assurance (§ 194.22) may be found in Section V of this document.
The DOE did not conduct any activities during the period covered by the 2014 Compliance Recertification Application related to future state assumptions (§ 194.25), expert judgment (§ 194.26) or assurance requirements (§ 194.41-46). See the corresponding CARDs for more discussion. Information on passive institutional controls, which is an element of the assurance
1. Waste Characterization (Waste Inventory) (§ 194.24). Section 194.24 generally requires the DOE to identify, quantify and track the important chemical, radiological and physical components of the waste destined for disposal at the WIPP. The DOE collects data from generator sites and compiles the waste inventory on an annual basis. The DOE's 2012 Annual Transuranic Waste Inventory Report (ATWIR 2012), which was used for the 2014 Compliance Recertification Application, reflects the disposal intentions of the waste generator sites as of December 31, 2010. The DOE classified the wastes as emplaced, stored or projected (to-be-generated). The DOE used data from the WIPP database to identify the characteristics of the waste that has been emplaced at the WIPP. The projected wastes were categorized similarly to existing waste (
The EPA reviewed the compliance recertification application and supplemental information to determine whether these documents provided a sufficiently complete estimate and description of the chemical, radiological and physical composition of the emplaced, stored and projected wastes proposed for disposal in the WIPP. The Agency also reviewed the DOE's description of the approximate quantities of waste components (for both existing and projected wastes). The EPA found that the radionuclides, cellulosic, plastic and rubber materials, organic ligands, oxyanions and cements in the waste are being appropriately tracked and characterized. In the 2014 Compliance Recertification Application, there is an update on the inventory of curium and neptunium, which remain in concentrations well below their solubility limits even after accounting for decay. The EPA accepts this updated inventory, which is relatively similar to the one used in the 2009 Compliance Recertification Application. See the Baseline Inventory TSD
2. Peer Review (§ 194.27). Section 194.27 of the WIPP Compliance Criteria requires the DOE to conduct peer review evaluations, when warranted, of conceptual models, waste characterization analyses, and a comparative study of engineered barriers. The required peer reviews must be performed in accordance with the Nuclear Regulatory Commission's NUREG-1297, “Peer Review for High-Level Nuclear Waste Repositories,” which establishes guidelines for the conduct of a peer review exercise. The DOE has conducted one peer review since the 2009 Compliance Recertification Application to establish radiological properties for two waste streams, titled the “Savannah River Site Historical Radiochemistry Data Peer Review,” demonstrating its compliance with the requirements of § 194.27.
Based on a review and evaluation of the 2014 Compliance Recertification Application and supplemental information provided by the DOE (Docket ID No. EPA-HQ-OAR-2014-0609-0330), the EPA determines that the DOE continues to comply with the requirements of 40 CFR 194.27.
Sections 194.51 through 194.55 of the WIPP Compliance Criteria implement the individual protection requirements of 40 CFR 191.15 and the groundwater protection requirements of subpart C of 40 CFR part 191. Assessment of the likelihood that the WIPP will meet the individual dose limits and radionuclide concentration limits for ground water is conducted through a process known as compliance assessment. Compliance assessment uses methods similar to those of performance assessment (for the containment requirements in 40 CFR 191.13 and Appendix A) but is required to address only undisturbed performance of the disposal system. That is, compliance assessment does not include human intrusion scenarios (
In the 2014 Compliance Recertification Application, the DOE re-evaluated each of the individual and groundwater requirements. The DOE updated the data for ground water quantity determination to define an underground source of drinking water for purposes of calculating groundwater concentrations and doses. In the 2014 Compliance Recertification Application, the DOE used 2011 (U.S. Bureau of Census 2013) census data to update the number of persons per household.
The updates made by the DOE in the 2014 Compliance Recertification Application did not significantly impact the conclusions regarding the groundwater standard in the Compliance Certification Application. The DOE did not change the criteria for making underground source of drinking water determinations, and for the 2014 Compliance Recertification Application evaluation, the maximum potential dose remains below the Compliance Certification Application value calculated and continued compliance with the individual protection standard is maintained. The DOE states that the conservative bounding analysis used for the 1998 certification decision compliance assessment is still applicable for 2014 Compliance Recertification Application.
The EPA finds the DOE in continued compliance with 40 CFR 194.51-194.55 requirements.
The EPA interacts with the public through various means. The EPA's main mechanism for distributing information is the EPA Web site and email messages via the WIPP-NEWS listserv. The EPA will also occasionally have meetings, in person or via teleconferences or webinars.
Throughout the recertification process, the Agency posted pertinent new information and updates on the EPA WIPP Web site (
Since October 2014, the EPA has sent out numerous announcements regarding the recertification schedule and availability of any WIPP-related documents on the EPA WIPP Web site and the dockets, as well as details for the Agency's June 2015 stakeholder meetings in New Mexico and January 2017 stakeholder webinar (via Adobe Connect).
As discussed in the WIPP LWA, the recertification process is not a rulemaking and public hearings are not required. However, the EPA held a series of stakeholder meetings in June 2015 (Carlsbad and Albuquerque, NM) as well as a stakeholder webinar in January 2017 (via Adobe Connect software, with public hosting locations in Carlsbad and Albuquerque, NM) to provide information and updates about the recertification process. In an effort to make these meetings as informative as possible to all attending parties, the EPA listened to stakeholder input and concerns and tailored the meetings around the public as much as possible. The first meeting was held on June 16, 2015, in Carlsbad, New Mexico and consisted of one three-hour afternoon session. The second public meeting was held on June 17, 2015, in Albuquerque, New Mexico, with afternoon and evening sessions.
The main purpose of these meetings was to discuss the EPA's recertification process and timeline, as well as the DOE's application and important changes at the WIPP since the last recertification in 2010. The meetings featured brief presentations on the aforementioned topics, as well as a facilitated discussion. In response to stakeholder suggestions, the DOE staff members were also on hand to provide information and answer any stakeholder questions. Staff from the New Mexico Environment Department (NMED) were present as observers. Public participants were encouraged to provide comments to the EPA for consideration during review of the DOE's 2014 Compliance Recertification Application.
The EPA also held a stakeholder webinar using the Adobe Connect software on January 12, 2017. The Agency hosted the webinar from Washington, DC, with physical hosting locations set up in both Carlsbad and Albuquerque, NM, to accommodate members of the public as well as the DOE and NMED staff. The main purpose of this webinar was to inform the public of the current recertification schedule and provide updated technical information related to stakeholder questions and comments received at the June 2015 meetings.
All of the issues raised at these meetings have been addressed by the EPA in Section VII.C of this document or in the CARDs under the relevant section and are available in the public docket (
The EPA posted the recertification application on the Web site immediately following receipt. The EPA formally announced receipt of the recertification application in the
For recertification, the EPA sought public comments and input related to changes in the DOE's application that may have a potential impact on the WIPP's ability to remain in compliance with the EPA's disposal regulations.
The comment period for the recertification application closed on April 10, 2017, approximately two years and six months after it initially opened. This closing date was 30 days after the EPA's announcement in the
The EPA received 17 sets of written public comments during the public comment period. The EPA considered significant comments from the written submissions and the stakeholder meetings in the evaluation of continuing compliance. The EPA addresses these comments in CARDs that are relevant to each topic. In addition, a listing of all comments received and responses to each is included in Appendix 15-C of CARD 15. Two specific comments are addressed here.
In a related comment, on February 3, 2017, the DOE, responded to this commenter and stated that the Argonne Lab waste is derived from atomic energy defense activities and did not contain any spent nuclear fuel (see EPA-HQ-OAR-2014-0609-0042). The DOE acknowledged that the WIPP LWA prohibits the disposal at WIPP of spent nuclear fuel and also acknowledged that some of the waste from the Argonne Lab was debris from specimens taken from fuel pins that were originally irradiated in commercial nuclear reactors. However, the DOE commented that the statutory definition of spent nuclear fuel does not speak directly to the issue of whether debris from specimens of commercial fuel rods is spent nuclear fuel. The DOE explained that, here, the debris—although including material that originated from fuel pins that had been irradiated in nuclear reactors—resulted from research and development activities at Argonne. The DOE stated that to try to segregate debris originating from irradiated fuel pins from other waste would be technically infeasible and cost prohibitive and would increase worker exposure. The DOE asserted that resolution of whether the material should be considered spent nuclear fuel was within its discretion and that it was its longstanding practice to classify such debris as waste and not spent nuclear fuel. In response to the DOE's February 3, 2017 comment, the original commenter resubmitted his original comment.
Reasonable contentions may be made that fragments and particulates resulting from research and development activities on specimens from fuel withdrawn from a nuclear reactor following irradiation (“pieces of pieces” of fuel pins) do not meet the statutory definition of spent nuclear fuel. The practical considerations of feasibility, cost, and worker safety associated with attempting to segregate such particulates from other waste shipped to the WIPP bear consideration. It is not essential, however, to the EPA's present recertification decision to attempt to definitively resolve this issue, because the current disposal regulations do not expressly address disposal of spent nuclear fuel.
On an on-going basis, aside from the periodic recertification of the WIPP, the EPA communicates with the DOE concerning the characterization of WIPP waste. The DOE provides the EPA with documentation relating to WIPP waste streams, including but not limited to, waste from the Argonne National Laboratory, and including documentation for both contact handled and remote handled TRU waste streams. The relevant information is confirmed by analyzing individual waste containers using the EPA approved processes, procedures and equipment. These steps allow the DOE to demonstrate that waste containers for WIPP disposal meet the EPA's WIPP waste limits for physical and radiological contents of the waste. So, concerning the waste shipped from Argonne National Laboratory, the EPA evaluated the waste characteristic information prepared for remote handled waste. The DOE provided historical information to document that waste generated from laboratory experiments at Argonne was defense related, and through radiological assay concluded that the waste in question met the definition of TRU waste and was appropriate for disposal at the WIPP. Following this determination, Argonne provided this waste for characterization. Radiological and physical characterization confirmed that the TRU waste in question (a) is remote handled waste; (b) exhibits the characteristics of debris waste; and (c) meets the regulatory limits of the EPA's WIPP waste acceptance requirements at 40 CFR 194.24.
The EPA thoroughly inspects and approves the waste characterization processes in place at all waste characterization sites including Argonne National Laboratory. As part of the waste characterization inspections and approvals, the EPA is responsible for evaluating the adequacy of characterization methods used to identify and measure radiological and physical contents of the TRU waste that affect the long term containment and isolation of waste at the WIPP and for ensuring that the WIPP-bound waste meets the disposal requirements under 40 CFR 194.24.
The CARDs discuss DOE's compliance with each of the individual requirements of the WIPP Compliance Criteria. The CARDs also list the EPA TSDs and any other references used by the EPA in rendering the decision on compliance. All TSDs and references are available in the Agency's dockets, via
For more general information and updates on the EPA's WIPP activities, please visit the WIPP internet homepage at <
In accordance with 40 CFR 194.67, the EPA maintains public dockets via
The EPA's regulatory role at the WIPP does not end with this recertification decision. The Agency's future WIPP activities include additional recertifications every five years (the next being scheduled to be submitted by the DOE in March 2019), review of the DOE reports on conditions and activities at the WIPP, assessment of waste characterization and quality assurance programs at waste generator sites, announced and unannounced inspections of the WIPP and other facilities and, if necessary, modification, revocation or suspension of the certification.
As a result of the February 2014 incidents at the WIPP, the DOE will be making changes to the repository design. The DOE has indicated that it no longer plans to use panel 9 for waste operations due to the worker safety hazards in that location, so an alternative panel will be needed. This decision may also have implications for panel closures in the panels accessed through the panel 9 drifts (
As described in Section VI of this notice, the EPA's review of the 2014 Compliance Recertification Application identified where the DOE's technical basis for the modeling has limitations with assumptions used or with the basis for some parameter values. The EPA concerns with these limitations were generally addressed by the results of the SEN studies. While this approach of using a series of sensitivity studies to examine identified limitations was sufficient in the context of this compliance recertification application, it was to some extent driven by the known upcoming physical changes in the repository. The EPA would prefer to be able to evaluate a complete revised performance assessment in future compliance recertification application reviews. The EPA recommends that the performance assessment technical basis be evaluated for improvement in these areas: (1) Calculations of actinide solubility, (2) modeling the chemical conditions in the repository, and (3) modeling direct brine releases.
Although not required by the Administrative Procedure Act (APA), the WIPP LWA or the WIPP Compliance Criteria, the EPA intends to continue docketing all inspection or audit reports and annual reports and other significant documents on conditions and activities at the WIPP, as well as formal communications between the two agencies.
The EPA plans to conduct future recertification processes using an administrative process generally similar to that described in today's action.
Environmental Protection Agency (EPA).
Notice.
This notice announces EPA's approval of the Territory of U.S. Virgin Islands' request to revise its EPA Administered Permit Programs: The National Pollutant Discharge Elimination System EPA-authorized program to allow electronic reporting.
EPA's approval is effective July 19, 2017.
Karen Seeh, U.S. Environmental Protection Agency, Office of Environmental Information, Mail Stop 2823T, 1200 Pennsylvania Avenue NW., Washington, DC 20460, (202) 566-1175,
On October 13, 2005, the final Cross-Media Electronic Reporting Rule (CROMERR) was published in the
On July 7, 2017, the U.S. Virgin Islands Department of Planning & Natural Resources (VI DPNR) submitted an application titled “NPDES e-Reporting Tool” for revision to its EPA-approved program under title 40 CFR to allow new electronic reporting. EPA reviewed VI DPNR's request to revise its EPA-authorized Part 123—EPA Administered Permit Programs: The National Pollutant Discharge Elimination System program and, based on this review, EPA determined that the application met the standards for approval of authorized program revision/modification set out in 40 CFR part 3, subpart D. In accordance with 40 CFR 3.1000(d), this notice of EPA's decision to approve U.S. Virgin Islands' request to revise its Part 123—EPA Administered Permit Programs: The National Pollutant Discharge Elimination System program to allow electronic reporting under 40 CFR parts 122 and 125 is being published in the
VI DPNR was notified of EPA's determination to approve its application with respect to the authorized program listed above.
Environmental Protection Agency (EPA).
Notice; request for comment.
The Environmental Protection Agency (EPA) Administrator and Region 10 Regional Administrator are requesting public comment on this proposal to withdraw the EPA Region 10 July 2014 Proposed Determination that was issued pursuant of the Clean Water Act, to restrict the use of certain waters in the South Fork Koktuli River, North Fork Koktuli River, and Upper Talarik Creek watersheds in southwest Alaska as disposal sites for dredged or fill material associated with mining the Pebble deposit, a copper-, gold-, and molybdenum-bearing ore body. EPA agreed to initiate this proposed withdrawal process as part of a May 11, 2017 settlement agreement with the Pebble Limited Partnership (PLP), whose subsidiaries own the mineral claims to the Pebble deposit. The Agency is taking today's action to afford the public an opportunity to comment on the rationale for the proposed withdrawal.
Comments must be received on or before October 17, 2017.
To submit your comments, identified by Docket ID No. EPA-R10-OW-2017-0369, refer to section I.C. of the
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On July 21, 2014, EPA Region 10 published in the
The Pebble Limited Partnership (“PLP”), whose subsidiaries own the mineral claims to the Pebble deposit, have not yet filed a CWA Section 404 permit application (“permit application”) with the U.S. Army Corps of Engineers (“Army Corps”). EPA Region 10's initiation of the section 404(c) process did not prohibit PLP from filing a permit application and the Army Corps could have processed such a permit application while a section 404(c) review was ongoing. The Army Corps could not have, however, issued a final decision on a permit application while a section 404(c) process remained open and unresolved. 33 CFR 323.6(b).
In 2014, PLP filed three lawsuits against EPA relating to the Agency's work in the Bristol Bay watershed. As part of one of the lawsuits, PLP obtained a preliminary injunction on November 25, 2014, which halted EPA Region 10's section 404(c) review process until the case was resolved in May of 2017. Prior to the preliminary injunction, the next step in the section 404(c) process would have been for EPA Region 10 to either forward a Recommended Determination to EPA Headquarters or to withdraw the Proposed Determination pursuant to 40 CFR 231.5(a).
The EPA and PLP resolved all outstanding lawsuits in a May 11, 2017 settlement agreement and the court subsequently dissolved the injunction and dismissed the case. Under the settlement agreement, the EPA agreed to “initiate a process to propose to withdraw the Proposed Determination.” Settlement Agreement at page 5,
Pursuant to the settlement agreement and policy direction from EPA's Administrator, EPA is proposing to withdraw the July 2014 Proposed Determination at this time and is taking public comment on this proposal. The proposal reflects the Administrator's decision to provide PLP with additional time to submit a permit application to the Army Corps and potentially allow the Army Corps permitting process to initiate without having an open and unresolved section 404(c) review. While the pendency of a section 404(c) review would not preclude PLP from submitting an application and the Army Corps from reviewing that application, as noted above, the Army Corps could not have issued a permit while a section 404(c) process was ongoing. A withdrawal of the Proposed Determination would remove any uncertainty, real or perceived, about PLP's ability to submit a permit application and have that permit application reviewed. Because the Agency retains the right under the settlement agreement to ultimately exercise the full extent of its discretion under section 404(c), including the discretion to act prior to any potential Army Corps authorization of discharge of dredged or fill material associated with mining the Pebble deposit, the Agency believes that withdrawing the Proposed Determination now, while allowing the factual record regarding any forthcoming permit application to develop, is appropriate at this time for this particular matter.
The Agency is only seeking public comment on whether to withdraw the July 2014 Proposed Determination at this time for the reasons stated above. In light of the basis upon which EPA is considering withdrawal of the Proposed Determination, EPA is not soliciting comment on the proposed restrictions or on science or technical information underlying the Proposed Determination. While EPA's regulations provide for a specified time period for decision making in 40 CFR 231.5(a), EPA has determined that there is good cause to extend this period under 40 CFR 231.8 to allow for this process and full consideration of the comments submitted.
Under EPA's regulations, when a Regional Administrator decides to withdraw a proposed determination, the Regional Administrator is required to notify the Administrator of such decision. The Administrator then has ten days to determine whether to review the withdrawal decision. The regulations also require the Administrator to provide notice to “all persons who commented on the proposed determination or participated at the hearing,” and specifies that “[s]uch persons may submit timely written recommendations concerning review.” 40 CFR 231.5(c). Rather than require parties to comment on today's proposed withdrawal of the Proposed Determination and then to comment again should the Regional Administrator finalize the withdrawal and forward it to the Administrator, the EPA is providing notice through this
Providing the opportunity to make recommendations regarding the potential for Administrator review in today's notice is the most efficient and effective way to provide such an opportunity. The Administrator is actively engaged in this matter because of his involvement with and direction regarding the settlement agreement, and this process enables the Administrator to effectively receive and consider any such recommendations that are submitted. Finally, this approach provides for earlier input by the public in the process (
In summary, the EPA is seeking comments on:
• Whether to withdraw the July 2014 Proposed Determination at this time for the reasons stated above; and
• if a final withdrawal decision is made following this comment period, whether the Administrator should review and reconsider the withdrawal decision.
Following the close of the public comment period, in making the decision whether to withdraw the July 2014 Proposed Determination the EPA will consider the public comments submitted in response to this notice consistent with 40 CFR 231.5.
Please see the section entitled
The record will remain open for comments until October 17, 2017. EPA has received a number of emails and letters regarding the July 2014 Proposed Determination since EPA announced the May 11, 2017 settlement agreement. EPA will enter this correspondence into the docket and all comments, including this correspondence, will be fully considered as the EPA Administrator and Region 10 Regional Administrator decide whether to withdraw the July 2014 Proposed Determination at this time.
Based upon the foregoing, the Receiver has determined that the continued existence of the receivership will serve no useful purpose. Consequently, notice is given that the receivership shall be terminated, to be effective no sooner than thirty days after the date of this Notice. If any person wishes to comment concerning the termination of the receivership, such comment must be made in writing and sent within thirty days of the date of this Notice to: Federal Deposit Insurance Corporation, Division of Resolutions and Receiverships, Attention: Receivership Oversight Department 34.6, 1601 Bryan Street, Dallas, TX 75201.
No comments concerning the termination of this receivership will be considered which are not sent within this time frame.
The Commission hereby gives notice of the filing of the following agreements under the Shipping Act of 1984. Interested parties may submit comments on the agreement to the Secretary, Federal Maritime Commission, Washington, DC 20573, within twelve days of the date this notice appears in the
By Order of the Federal Maritime Commission.
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal
1.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than August 11, 2017.
1.
Section 7A of the Clayton Act, 15 U.S.C. 18a, as added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, requires persons contemplating certain mergers or acquisitions to give the Federal Trade Commission and the Assistant Attorney General advance notice and to wait designated periods before consummation of such plans. Section 7A(b)(2) of the Act permits the agencies, in individual cases, to terminate this waiting period prior to its expiration and requires that notice of this action be published in the
The following transactions were granted early termination—on the dates indicated—of the waiting period provided by law and the premerger notification rules. The listing for each transaction includes the transaction number and the parties to the transaction. The grants were made by the Federal Trade Commission and the Assistant Attorney General for the Antitrust Division of the Department of Justice. Neither agency intends to take any action with respect to these proposed acquisitions during the applicable waiting period.
Theresa Kingsberry, Program Support Specialist, Federal Trade Commission Premerger Notification Office, Bureau of Competition, Room CC-5301, Washington, DC 20024, (202) 326-3100.
By direction of the Commission.
Office of the Integrated Award Environment, General Services Administration (GSA).
Notice of request for public comments regarding an extension to an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act of 1995, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve a renewal of the currently approved information collection requirement regarding FSRS Registration Requirements for Prime Grant Awardees. A notice was published in the
Submit comments on or before August 18, 2017.
Submit comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden to: Office of Information and Regulatory Affairs of OMB, Attention: Desk Officer for GSA, Room 10236, NEOB, Washington, DC 20503. Additionally submit a copy to GSA by any of the following methods:
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John Corro, Procurement Analyst, Office of the Integrated Award Environment, GSA, at telephone number 202-215-9767; or via email at
The Federal Funding Accountability and Transparency Act (P.L.109-282, as amended by section 6202(a) of P.L.110-252), known as FFATA or the Transparency Act, requires information disclosure of entities receiving Federal financial assistance through Federal awards such as Federal contracts, sub-contracts, grants and sub-grants, FFATA 2(a),(2),(i),(ii). The system that collects this information is called the FFATA Sub-award Reporting System (FSRS,
If a prime awardee has already registered in FSRS to report contracts-related Transparency Act financial data, a new log-in will not be required. In addition, if a prime awardee had a user account in the Electronic Subcontract Reporting System (eSRS), a new log-in will not be required.
Office of the Integrated Award Environment, General Services Administration (GSA).
Notice of request for comments regarding an extension to an existing OMB information collection.
Under the provisions of the Paperwork Reduction Act of 1995, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve a renewal of the currently approved information collection requirement regarding FFATA Subaward and Executive Compensation Reporting Requirements.
Submit comments on or before August 18, 2017.
Submit comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden to: Office of Information and Regulatory Affairs of OMB, Attention: Desk Officer for GSA, Room 10236, NEOB, Washington, DC 20503. Additionally submit a copy to GSA by any of the following methods:
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Submit comments via the Federal eRulemaking portal by searching the OMB control number 3090-0292. Select the link “Comment Now” that corresponds with “Information Collection 3090-0292, FFATA Subaward and Executive Compensation Reporting Requirements”. Follow the instructions provided on the screen. Please include your name, company name (if any), and “Information Collection 3090-0292, FFATA Subaward and Executive Compensation Reporting Requirements” on your attached document.
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Dennis Harrison, Procurement Analyst, Office of the Integrated Award Environment, GSA, at telephone number 202-215-9767; or via email at
A notice was published in the
The Federal Funding Accountability and Transparency Act (Pub. L. 109-282, as amended by section 6202(a) of Pub. L. 110-252), known as FFATA or the Transparency Act requires information disclosure of entities receiving Federal financial assistance through Federal awards such as Federal contracts, sub-contracts, grants and sub-grants, FFATA 2(a), (2), (i), (ii). Beginning October 1, 2010, the currently approved Paperwork Reduction Act submission directed compliance with the Transparency Act to report prime and first-tier sub-award data. Specifically, Federal agencies and prime awardees of grants were to ensure disclosure of executive compensation of both prime and subawardees and sub-award data pursuant to the Transparency Act. This information collection requires reporting of only the information enumerated under the Transparency Act.
Public comments are particularly invited on: Whether this collection of information is necessary and whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected.
Office of Government-wide Policy, General Services Administration (GSA).
Meeting notice.
Notice of this meeting and these conference calls is being provided according to the requirements of the Federal Advisory Committee Act. This notice provides the agenda and schedule for the October 24, 2017 meeting of the Green Building Advisory Committee (the Committee) and schedule for a series of conference calls, supplemented by Web meetings, for two task groups of the Committee. The meeting is open to the public and the site is accessible to individuals with disabilities. The conference calls are open for the public to listen in. Interested individuals must register to attend as instructed below under
The
The
Mr. Ken Sandler, Designated Federal Officer, Office of Federal High-Performance Buildings, Office of Government-wide Policy, General Services Administration, 1800 F Street NW., Washington, DC 20405, telephone 202-219-1121 (
Contact Ken Sandler at
The Committee currently has two active task groups. The High Performance Building Adoption task group is pursuing the motion of a committee member to provide recommendations to “accelerate the adoption of high performance [Federal] buildings.” The Health and Wellness task group is pursuing the motion of a committee member to “develop guidelines to integrate health and wellness features into government facilities programs.”
The conference calls will allow the task groups to coordinate the development of consensus recommendations to the full Committee, which will, in turn, decide whether to proceed with formal advice to GSA based upon these recommendations.
Centers for Medicare & Medicaid Services, HHS.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by August 18, 2017.
When commenting on the proposed information collections, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be received by the OMB desk officer via one of the following transmissions: OMB, Office of Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax Number: (202) 395-5806
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William Parham at (410) 786-4669.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
1.
Centers for Medicare & Medicaid Services.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by September 18, 2017.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
2.
Centers for Medicare & Medicaid Services.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by September 18, 2017.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
2.
Office of Refugee Resettlement (ORR), Administration for Children and Families (ACF), U.S. Department of Health and Human Services (HHS).
Notice of Award of five single-source low-cost extension supplement grants under the Unaccompanied Alien Children's (UAC) Program.
ACF, ORR, announces the award of five single-source low-cost extension supplement grants for a total of $20,954,962 under the Unaccompanied Alien Children's (UAC) Program.
Low-cost extension supplement grants will support activities from January 1, 2017 through March 31, 2017.
Jallyn Sualog, Director, Division of Children's Services, Office of Refugee Resettlement, 330 C Street SW., Washington, DC 20201. Phone: 202-401-4997. Email:
The following supplement grants will support the immediate need for additional capacity of shelter services to accommodate the increasing number of UACs referred by DHS into ORR care. The increase in the UAC population necessitates the need for expansion of services to expedite the release of UAC.
ORR has specific requirements for the provision of services. Award recipients must have the infrastructure, licensing, experience, and appropriate level of trained staff to meet those requirements. The expansion of the existing shelter services program through this supplemental award is a key strategy for ORR to be prepared to meet its responsibility of safe and timely release of Unaccompanied Alien Children referred to its care by DHS and so that the US Border Patrol can continue its vital national security mission to prevent illegal migration, trafficking, and protect the borders of the United States.
(A) Section 462 of the Homeland Security Act of 2002, which in March 2003, transferred responsibility for the care and custody of Unaccompanied Alien Children from the Commissioner of the former Immigration and Naturalization Service (INS) to the Director of ORR of the Department of Health and Human Services (HHS).
(B) The Flores Settlement Agreement, Case No. CV85-4544RJK (C. D. Cal. 1996), as well as the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (Pub. L. 110-457), which authorizes post release services under certain conditions to eligible children. All programs must comply with the Flores Settlement Agreement, Case No. CV85-4544-RJK (C.D. Cal. 1996), pertinent regulations and ORR policies and procedures.
Administration for Community Living, HHS.
Notice.
The Administration for Community Living (ACL) is announcing an opportunity for public comment on two proposed collections of certain information by the agency. Under the Paperwork Reduction Act of 1995 (the PRA), Federal agencies are required to publish a notice in the
Submit written or electronic comments on the collection of information by September 18, 2017.
Submit electronic comments on the collection of information to: Jesse E. Moore, Jr. at
Jesse E. Moore, Jr., Aging Services Program Specialist, Administration for Community Living, Washington, DC 20201, 202-795-7578.
Under the PRA (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party.
Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal agencies to provide a 60-day notice in the
The Certification of Maintenance of Effort under Title III and Certification of Long-Term Care Ombudsman (LTCO) Program Expenditures provide statutorily required information regarding each state's contribution to programs funded under the Older Americans Act and compliance with legislative requirements, pertinent Federal regulations, and other applicable instructions and guidelines issued by ACL. This information will be used for Federal oversight of Title III Programs and Title VII Ombudsman Program expenditures.
In addition to renewing OMB approval of these data collection instruments, minor changes are being proposed to the LTCO Expenditures Certification and an accompanying document which provides specific statutory references related to Ombudsman program minimum funding, non-supplanting requirements and state authorization to expend Title III-B funds on Ombudsman activities. Specifically, changes include making the reference to the Fiscal Year at the bottom of the form a fillable field to allow the date to be changed annually; listing the “Administration for Community Living (ACL)” as the intended recipient of the completed form; and updating statutory language references (
ACL estimates the burden of this collection of information as follows: 56 State Agencies on Aging respond annually, and it takes each agency an average of one half (
The proposed data collection tools may be found on the ACL Web site for review at:
Health Resources and Service Administration (HRSA), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, notice is hereby given that a meeting is scheduled for the Advisory Committee on Heritable Disorders in Newborns and Children (ACHDNC). This meeting will be open to the public but advance registration is required. Please register online at
The meeting will be held on August 3, 2017, 9:30 a.m. to 5:00 p.m. ET and August 4, 2017, 9:30 a.m. to 3:00 p.m. ET. Meeting times may be revised; please check the Committee's Web site for updates.
This meeting will be held in-person at 5600 Fishers Lane, 5th Floor Pavilion, Rockville, MD 20857. The meeting will also be accessible via Webcast. Instructions on accessing the meeting via Webcast will be provided upon registration. Please note that 5600 Fishers Lane requires security screening on entry. Visitors must provide a driver's license, passport, or other form of government-issued photo identification to be granted entry into the facility. Non-US citizens planning to attend in person will need to provide additional information to HRSA by July 24, 2017, 12:00 p.m. EDT. Please see contact information below.
Anyone requesting information regarding the ACHDNC should contact Ann Ferrero, Maternal and Child Health Bureau (MCHB), HRSA, in one of three ways: (1) Send a request to the following address: Ann Ferrero, MCHB, HRSA 5600 Fishers Lane, Room 18N100C, Rockville, MD 20857; (2) call 301-443-3999; or (3) send an email to:
The ACHDNC provides advice to the Secretary of HHS on the development of newborn screening activities, technologies, policies, guidelines, and programs for effectively reducing morbidity and mortality in newborns and children having, or at risk for, heritable disorders. In addition, ACHDNC's recommendations regarding inclusion of additional conditions and inherited disorders for screening which have been adopted by the Secretary are then included in the Recommended Uniform Screening Panel (RUSP). Conditions listed on the RUSP constitute part of the comprehensive preventive health guidelines supported by HRSA for infants and children under section 2713 of the Public Health Service Act, codified at 42 U.S.C. 300gg-13. Under this provision, non-grandfathered health plans are required to cover screenings included in the HRSA-supported comprehensive guidelines without charging a co-payment, co-insurance, or deductible for plan years (
The meeting agenda will include: (1) Presentations and discussion on the processes states use to identify and follow up on out of range newborn screening results; (2) a presentation on phase one of the spinal muscular atrophy evidence review; (3) presentations on newborn screening topics such as the clinical and public health impact of Critical Congenital Heart Defects, quality measures in newborn screening, and a review of newborn screening technology; and (4) updates from the Laboratory Standards and Procedures workgroup, Follow-up and Treatment workgroup, and Education and Training workgroup. The Committee will not be voting on a proposed addition of a condition to the RUSP. Agenda items are subject to change. The final meeting agenda will be available 2 days prior to the meeting on the Committee's Web site:
Members of the public will have the opportunity to provide comments. All comments are part of the official Committee record. To submit written comments or request time for an oral comment at the meeting, please register online by 12:00 p.m. on July 28, 2017, at
Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify Ann Ferrero using the address and phone number above at least 10 days prior to the meeting.
Office of the Secretary, HHS
Notice.
Notice is hereby given that the Office of Research Integrity (ORI) has taken final action in the following case:
ORI found that Respondent engaged in research misconduct by knowingly and intentionally: (1) Fabricating the results of the T-maze behavioral experiment for control mice, (2) falsifying the laboratory and vivarium entry logs in an effort to cover up his actions, and (3) reporting the fabricated and falsified data to his laboratory supervisors.
Specifically, ORI found that Respondent knowingly and intentionally:
• Fabricated the results that he recorded for the T-maze behavioral experiment in three of the five TMZ control mice on the laboratory data sheets and white board on fourteen (14) of the sixteen (16) eligible days in June 2016, to make it appear as though he had conducted the experiments;
• Falsified the animal transfer logs on twelve (12) of the sixteen (16) eligible days in June 2016, to make it appear as though he had conducted the experiments;
• Fabricated the times he recorded on the laboratory data sheets on fourteen (14) of the sixteen (16) eligible days in June 2016, to make it appear as though he had conducted the experiments;
• incorporated and recorded the fabricated and falsified data with his previous data in his laboratory notebook and reported the results to his laboratory supervisor and principal investigator, such that the experimental control data (five animals) for experiments conducted from January 2016-June 30, 2016, were not accurately represented.
Mr. Mirchandani has entered into a Voluntary Settlement Agreement with ORI, in which he voluntarily agreed, beginning on June 29, 2017:
(1) That if within two (2) years from the effective date of the Agreement, Respondent receives or applies for U.S. Public Health Service (PHS) support, Respondent agrees to have his research supervised for a period of one (1) year, beginning on the date of his employment in a position in which he receives or applies for PHS support, and agrees to notify his employer(s)/institution(s) of the terms of this supervision. Respondent agrees that prior to the submission of an application for PHS support for a research project on which the Respondent's participation is proposed and prior to Respondent's participation in any capacity on PHS-supported research, Respondent shall ensure that a plan for supervision of Respondent's duties is submitted to ORI for approval. The supervision plan must be designed to ensure the scientific integrity of Respondent's research contribution. Respondent agrees that he shall not participate in any PHS-supported research until such a supervision plan is submitted to and approved by ORI. Respondent agrees to maintain responsibility for compliance with the agreed upon supervision plan.
(2) To exclude himself voluntarily from serving in any advisory capacity to PHS including, but not limited to, service on any PHS advisory committee, board, and/or peer review committee, or as a consultant for a period of one (1) year, beginning with the effective date of the Agreement.
Director, Office of Research Integrity, 1101 Wootton Parkway, Suite 750, Rockville, MD 20852, (240) 453-8200.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Coast Guard, DHS.
Thirty-day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995 the U.S. Coast Guard is forwarding an Information Collection Request (ICR), abstracted below, to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting approval for reinstatement, without change, of the following collection of information: 1625-0093, Facilities Transferring Oil or Hazardous Materials in Bulk—Letter of Intent and Operations Manual. Our ICR describes the information we seek to collect from the public. Review and comments by OIRA ensure we only impose paperwork burdens commensurate with our performance of duties.
Comments must reach the Coast Guard and OIRA on or before August 18, 2017.
You may submit comments identified by Coast Guard docket number [USCG-2016-0915] to the Coast Guard using the Federal eRulemaking Portal at
(1)
(2)
A copy of the ICR is available through the docket on the Internet at
Mr. Anthony Smith, Office of Information Management, telephone 202-475-3532, or fax 202-372-8405, for questions on these documents.
This Notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended. An ICR is an application to OIRA seeking the approval, extension, or renewal of a Coast Guard collection of information (Collection). The ICR contains information describing the Collection's purpose, the Collection's likely burden on the affected public, an explanation of the necessity of the Collection, and other important information describing the Collection. There is one ICR for each Collection.
The Coast Guard invites comments on whether this ICR should be granted based on the Collection being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) The practical utility of the Collection; (2) the accuracy of the estimated burden of the Collection; (3) ways to enhance the quality, utility, and clarity of information subject to the Collection; and (4) ways to minimize the burden of the Collection on respondents, including the use of automated collection techniques or other forms of information technology. These comments will help OIRA determine whether to approve the ICR referred to in this Notice.
We encourage you to respond to this request by submitting comments and related materials. Comments to Coast Guard or OIRA must contain the OMB Control Number of the ICR. They must also contain the docket number of this request, [USCG-2016-0915], and must be received by August 18, 2017.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
OIRA posts its decisions on ICRs online at
This request provides a 30-day comment period required by OIRA. The Coast Guard has published the 60-day notice (81 FR 85990, November 29, 2016) required by 44 U.S.C. 3506(c)(2). That Notice elicited no comments. Accordingly, no changes have been made to the Collections.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended.
Coast Guard, DHS.
Thirty-day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995 the U.S. Coast Guard is forwarding an Information Collection Request (ICR), abstracted below, to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting approval for reinstatement, without change, of the following collection of information: 1625-0087, U.S. Coast Guard International Ice Patrol (IIP) Customer Survey. Our ICR describes the information we seek to collect from the public. Review and comments by OIRA ensure we only impose paperwork burdens commensurate with our performance of duties.
Comments must reach the Coast Guard and OIRA on or before August 18, 2017.
You may submit comments identified by Coast Guard docket number [USCG-2016-0600] to the Coast Guard using the Federal eRulemaking Portal at
(1)
(2)
A copy of the ICR is available through the docket on the Internet at
Mr. Anthony Smith, Office of Information Management, telephone 202-475-3532, or fax 202-372-8405, for questions on these documents.
This Notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended. An ICR is an application to OIRA seeking the approval, extension, or renewal of a Coast Guard collection of information (Collection). The ICR contains information describing the Collection's purpose, the Collection's likely burden on the affected public, an explanation of the necessity of the Collection, and other important information describing the Collection. There is one ICR for each Collection.
The Coast Guard invites comments on whether this ICR should be granted based on the Collection being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) The practical utility of the Collection; (2) the accuracy of the estimated burden of the Collection; (3) ways to enhance the quality, utility, and clarity of information subject to the Collection; and (4) ways to minimize the burden of the Collection on respondents, including the use of automated collection techniques or other forms of information technology. These comments will help OIRA determine whether to approve the ICR referred to in this Notice.
We encourage you to respond to this request by submitting comments and related materials. Comments to Coast Guard or OIRA must contain the OMB Control Number of the ICR. They must also contain the docket number of this request, [USCG-2016-0600], and must be received by August 18, 2017.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
OIRA posts its decisions on ICRs online at
This request provides a 30-day comment period required by OIRA. The Coast Guard has published the 60-day notice (81 FR 85985, November 29, 2016) required by 44 U.S.C. 3506(c)(2). That Notice elicited no comments. Accordingly, no changes have been made to the Collections.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended.
Coast Guard, DHS.
Sixty-day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995, the U.S. Coast Guard intends to submit an Information Collection Request (ICR) to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting approval for the following collection of information: 1625—New,
Comments must reach the Coast Guard on or before September 18, 2017.
You may submit comments identified by Coast Guard docket number [USCG-2017-0129] to the Coast Guard using the Federal eRulemaking Portal at
A copy of the ICR is available through the docket on the Internet at
Mr. Anthony Smith, Office of Information Management, telephone 202-475-3532, or fax 202-372-8405, for questions on these documents.
This Notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended. An ICR is an application to OIRA seeking the approval, extension, or renewal of a Coast Guard collection of information (Collection). The ICR contains information describing the Collection's purpose, the Collection's likely burden on the affected public, an explanation of the necessity of the Collection, and other important information describing the Collection. There is one ICR for each Collection.
The Coast Guard invites comments on whether this ICR should be granted based on the Collection being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) The practical utility of the Collection; (2) the accuracy of the estimated burden of the Collection; (3) ways to enhance the quality, utility, and clarity of information subject to the Collection; and (4) ways to minimize the burden of the Collection on respondents, including the use of automated collection techniques or other forms of information technology. In response to your comments, we may revise this ICR or decide not to seek approval for the Collection. We will consider all comments and material received during the comment period.
We encourage you to respond to this request by submitting comments and related materials. Comments must contain the OMB Control Number of the ICR and the docket number of this request, [USCG-2017-0129], and must be received by September 18, 2017.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended.
Coast Guard, DHS.
Thirty-day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995 the U.S. Coast Guard is forwarding an Information Collection Request (ICR), abstracted below, to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting approval for reinstatement, without change, of the following collection of information: 1625-0084, Audit Reports under the International Safety Management Code. Our ICR describes the information we seek to collect from the public. Review and comments by OIRA ensure we only impose paperwork burdens commensurate with our performance of duties.
Comments must reach the Coast Guard and OIRA on or before August 18, 2017.
You may submit comments identified by Coast Guard docket number [USCG-2016-0896] to the Coast Guard using the Federal eRulemaking Portal at
(1) Email:
(2) Mail: OIRA, 725 17th Street NW., Washington, DC 20503, attention Desk Officer for the Coast Guard.
A copy of the ICR is available through the docket on the Internet at
Mr. Anthony Smith, Office of Information Management, telephone 202-475-3532, or fax 202-372-8405, for questions on these documents.
This Notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended. An ICR is an application to OIRA seeking the approval, extension, or renewal of a Coast Guard collection of information (Collection). The ICR contains information describing the Collection's purpose, the Collection's likely burden on the affected public, an explanation of the necessity of the Collection, and other important information describing the Collection. There is one ICR for each Collection. The Coast Guard invites comments on whether this ICR should be granted based on the Collection being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) The practical utility of the Collection; (2) the accuracy of the estimated burden of the Collection; (3) ways to enhance the quality, utility, and clarity of information subject to the Collection; and (4) ways to minimize the burden of the Collection on respondents, including the use of automated collection techniques or other forms of information technology. These comments will help OIRA determine whether to approve the ICR referred to in this Notice.
We encourage you to respond to this request by submitting comments and related materials. Comments to Coast Guard or OIRA must contain the OMB Control Number of the ICR. They must also contain the docket number of this request, [USCG-2016-0896], and must be received by August 18, 2017.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
OIRA posts its decisions on ICRs online at
This request provides a 30-day comment period required by OIRA. The Coast Guard has published the 60-day notice (81 FR 85991, November 29, 2016) required by 44 U.S.C. 3506(c)(2). That Notice elicited no comments. Accordingly, no changes have been made to the Collections.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended.
U.S. Coast Guard, Department of Homeland Security.
Request for Applicants.
The U.S. Coast Guard seeks applications for membership on the Lower Mississippi River Waterway Safety Advisory Committee. The Lower Mississippi River Waterway Safety Advisory Committee advises and makes recommendations to the Department of Homeland Security on a wide range of matters regarding all facets of navigation safety related to the Lower Mississippi River.
Completed applications should be submitted to the U.S. Coast Guard on or before September 18, 2017.
Applicants should send a cover letter expressing interest in an appointment to the Lower Mississippi River Waterway Safety Advisory Committee that also identifies which membership category the applicant is applying under, along with a resume detailing the applicant's experience via one of the following methods:
•
•
•
Lieutenant Brian Porter, Alternate Designated Federal Officer of the Lower Mississippi River Waterway Safety Advisory Committee; telephone (504) 365-2375 or Email at
The Lower Mississippi River Waterway Safety Advisory Committee is a federal advisory committee established and operating under the authority found in section 19 of the Coast Guard Authorization Act of 1991, (Public Law 102-241) as amended by section 621 of the Coast Guard Authorization Act of 2010 (Public Law 111-281). This Committee operates in accordance with the provisions of the Federal Advisory Committee Act (Title 5, U.S C., Appendix).
The Lower Mississippi River Waterway Safety Advisory Committee advises the U.S. Coast Guard on matters relating to communications, surveillance, traffic management, anchorages, development and operation of the New Orleans Vessel Traffic Service, and other related topics dealing with navigation safety on the Lower Mississippi River as required by the U.S. Coast Guard.
The Committee expects to meet at least two times annually. It may also meet for extraordinary purposes with the approval of the Designated Federal Officer. Each member serves for a term of 2 years. Members serve a maximum of two consecutive terms. All members serve at their own expense and receive no salary or other compensation from the Federal Government; however members may be reimbursed for travel and per diem.
We will consider applications for 25 positions that expire or become vacant on May 23, 2018. To be eligible, you should have experience regarding the transportation, equipment, and techniques that are used to ship cargo and to navigate vessels on the Lower Mississippi River and its connecting navigable waterways, including the Gulf of Mexico. The 25 positions available for application are as follows:
1. Five members representing River Port authorities between Baton Rouge, Louisiana, and the Head of Passes of the Lower Mississippi River, of which one member shall be from the Port of St. Bernard and one member from the Port of Plaquemines.
2. Two members representing vessel owners domiciled in the state of Louisiana.
3. Two members representing organizations which operate harbor tugs or barge fleets in the geographical area covered by the committee.
4. Two members representing companies which transport cargo or passengers on the navigable waterways in the geographical area covered by the Committee.
5. Three members representing State Commissioned Pilot organizations, with one member each representing the New Orleans-Baton Rouge Steamship Pilots Association, the Crescent River Port Pilots Association, and the Associated Branch Pilots Association.
6. Two at-large members who utilize water transportation facilities located in the geographical area covered by the committee.
7. Three members, each of which represents one of three categories: consumers, shippers, and importers-exporters that utilize vessels which utilize the navigable waterways covered by the committee.
8. Two members representing those licensed merchant mariners, other than pilots, who perform shipboard duties on those vessels which utilize navigable waterways covered by the committee.
9. One member representing an organization that serves in a consulting or advisory capacity to the maritime industry.
10. One member representing an environmental organization.
11. One member representing the general public.
12. One member representing the Associated Federal Pilots and Docking Masters of Louisiana.
To be eligible, you should have experience regarding the transportation, equipment, and techniques that are used to ship cargo and navigate waterways, including the Gulf of Mexico.
Registered lobbyists are not eligible to serve on federal advisory committees in an individual capacity. See “Revised Guidance on Appointment of Lobbyists to Federal Advisory Committees, Boards and Commissions” (79 FR 47482, August 13, 2014).
The positions referred to in (1), (2), (3), (4), (5), (7), (8), (9), (10), and (12) are representatives.
The positions referred to in (6), and (11) are designated as a Special Government Employee as defined in Section 202(a), Title 18, U.S.C.
Applicants for appointment as a Special Government Employee are required to complete a Confidential Financial Disclosure Report (OGE Form 450). The U.S. Coast Guard may not release the reports or the information in them to the public except under an order issued by a Federal court or as otherwise provided under the Privacy Act (5 U.S.C. 552a). Applicants can obtain this form by going to the Web site of the Office of Government Ethics (
The Department of Homeland Security does not discriminate in selection of Committee members on the basis of race, color, religion, sex, national origin, political affiliation, sexual orientation, gender identity, marital status, disabilities and genetic information, age, membership in an employee organization, or any other non-merit factor. The Department of Homeland Security strives to achieve a widely diverse candidate pool for all of its recruitment actions.
If you are interested in applying to become a member of the Committee, send your cover letter and resume to Lieutenant Brian Porter, Alternate Designated Federal Officer of the Lower Mississippi River Waterway Safety Advisory Committee via one of the transmittal methods in the
Federal Emergency Management Agency, DHS.
Notice.
This notice amends the notice of a major disaster declaration for the State of Oklahoma (FEMA-4315-DR), dated May 26, 2017, and related determinations.
July 7, 2017.
Dean Webster, Office of Response and Recovery, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-2833.
The notice of a major disaster declaration for the State of Oklahoma is hereby amended to include the following areas among those areas determined to have been adversely affected by the event declared a major disaster by the President in his declaration of May 26, 2017.
Dewey, Pawnee, and Rogers Counties for Public Assistance.
Federal Emergency Management Agency, DHS.
Notice.
This notice lists communities where the addition or modification of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or the regulatory floodway (hereinafter referred to as flood hazard determinations), as shown on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports, prepared by the Federal Emergency Management Agency (FEMA) for each community, is appropriate because of new scientific or technical data. The FIRM, and where applicable, portions of the FIS report, have been revised to reflect these flood hazard determinations through issuance of a Letter of Map Revision (LOMR). The LOMR will be used by insurance agents and others to calculate appropriate flood insurance premium rates for new buildings and the contents of those buildings. For rating purposes, the currently effective community number is shown in the table below and must be used for all new policies and renewals.
These flood hazard determinations will become effective on the dates listed in the table below and revise the FIRM panels and FIS report in effect prior to this determination for the listed communities.
From the date of the second publication of notification of these changes in a newspaper of local circulation, any person has 90 days in which to request through the community that the Deputy Associate Administrator for Insurance and Mitigation reconsider the changes. The flood hazard determination information may be changed during the 90-day period.
The affected communities are listed in the table below. Revised flood hazard information for each community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Submit comments and/or appeals to the Chief Executive Officer of the community as listed in the table below.
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The specific flood hazard determinations are not described for each community in this notice. However, the online location and local community map repository address where the flood hazard determination information is available for inspection is provided.
Any request for reconsideration of flood hazard determinations must be submitted to the Chief Executive Officer of the community as listed in the table below.
The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
These flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. The flood hazard determinations are in accordance with 44 CFR 65.4.
The affected communities are listed in the following table. Flood hazard determination information for each community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Federal Emergency Management Agency, DHS.
Final notice.
New or modified Base (1-percent annual chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) for each of the communities listed in the table below are finalized. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. The flood hazard determinations modified by each LOMR will be used to calculate flood insurance premium rates for new buildings and their contents.
Each LOMR was finalized as in the table below.
Each LOMR is available for inspection at both the respective Community Map Repository address listed in the table below and online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472 (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final flood hazard determinations as shown in the LOMRs for each community listed in the table below. Notice of these modified flood hazard determinations has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
The modified flood hazard determinations are made pursuant to section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.
The new or modified flood hazard information is the basis for the floodplain management measures that the community is required either to adopt or to show evidence of being already in effect in order to remain qualified for participation in the National Flood Insurance Program (NFIP).
This new or modified flood hazard information, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities.
This new or modified flood hazard determinations are used to meet the floodplain management requirements of the NFIP and also are used to calculate the appropriate flood insurance premium rates for new buildings, and for the contents in those buildings. The changes in flood hazard determinations are in accordance with 44 CFR 65.4.
Interested lessees and owners of real property are encouraged to review the final flood hazard information available at the address cited below for each community or online through the FEMA Map Service Center at
Federal Emergency Management Agency, DHS.
Final Notice.
Flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final for the communities listed in the table below.
The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the Federal Emergency Management Agency's (FEMA's) National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report are used by insurance agents and others to calculate appropriate flood insurance premium rates for buildings and the contents of those buildings.
The date of October 5, 2017 has been established for the FIRM and, where applicable, the supporting FIS report showing the new or modified flood hazard information for each community.
The FIRM, and if applicable, the FIS report containing the final flood hazard information for each community is available for inspection at the respective Community Map Repository address listed in the tables below and will be available online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the new or modified flood hazard information for each community listed. Notification of these changes has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
This final notice is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.
Interested lessees and owners of real property are encouraged to review the new or revised FIRM and FIS report available at the address cited below for each community or online through the FEMA Map Service Center at
The flood hazard determinations are made final in the watersheds and/or communities listed in the table below.
Federal Emergency Management Agency, DHS.
Final Notice.
New or modified Base (1-percent annual chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) for each of the communities listed in the table below are finalized. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. The flood hazard determinations modified by each LOMR will be used to calculate flood insurance premium rates for new buildings and their contents.
Each LOMR was finalized as in the table below.
Each LOMR is available for inspection at both the respective Community Map Repository address listed in the table below and online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final flood hazard determinations as shown in the LOMRs for each community listed in the table below. Notice of these modified flood hazard determinations has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
The modified flood hazard determinations are made pursuant to section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.
The new or modified flood hazard information is the basis for the floodplain management measures that the community is required either to adopt or to show evidence of being already in effect in order to remain qualified for participation in the National Flood Insurance Program (NFIP).
This new or modified flood hazard information, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities.
This new or modified flood hazard determinations are used to meet the floodplain management requirements of the NFIP and also are used to calculate the appropriate flood insurance premium rates for new buildings, and for the contents in those buildings. The changes in flood hazard determinations are in accordance with 44 CFR 65.4.
Interested lessees and owners of real property are encouraged to review the final flood hazard information available at the address cited below for each community or online through the FEMA Map Service Center at
Federal Emergency Management Agency, DHS.
Notice.
This is a notice of the Presidential declaration of a major disaster for the State of Nebraska (FEMA-4321-DR), dated June 26, 2017, and related determinations.
The declaration was issued June 26, 2017.
Dean Webster, Office of Response and Recovery, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-2833.
Notice is hereby given that, in a letter dated June 26, 2017, the President issued a major disaster declaration under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121
I have determined that the damage in certain areas of the State of Nebraska resulting from a severe winter storm and straight-line winds during the period of April 29 to May 3, 2017, is of sufficient severity and magnitude to warrant a major disaster declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121
In order to provide Federal assistance, you are hereby authorized to allocate from funds available for these purposes such amounts as you find necessary for Federal disaster assistance and administrative expenses.
You are authorized to provide Public Assistance in the designated areas and Hazard Mitigation throughout the State. Consistent with the requirement that Federal assistance be supplemental, any Federal funds provided under the Stafford Act for Hazard Mitigation will be limited to 75 percent of the total eligible costs. Federal funds provided under the Stafford Act for Public Assistance also will be limited to 75 percent of the total eligible costs, with the exception of projects that meet the eligibility criteria for a higher Federal cost-sharing percentage under the Public Assistance Alternative Procedures Pilot Program for Debris Removal implemented pursuant to section 428 of the Stafford Act.
Further, you are authorized to make changes to this declaration for the approved assistance to the extent allowable under the Stafford Act.
The Federal Emergency Management Agency (FEMA) hereby gives notice that pursuant to the authority vested in the Administrator, under Executive Order 12148, as amended, David G. Samaniego, of FEMA is appointed to act as the Federal Coordinating Officer for this major disaster.
The following areas of the State of Nebraska have been designated as adversely affected by this major disaster:
Blaine, Custer, Furnas, Garfield, Gosper, Holt, Loup, Red Willow, Rock, and Valley Counties for Public Assistance.
All areas within the State of Nebraska are eligible for assistance under the Hazard Mitigation Grant Program.
The following Catalog of Federal Domestic Assistance Numbers (CFDA) are to be used for reporting and drawing funds: 97.030, Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling; 97.033, Disaster Legal Services; 97.034, Disaster Unemployment Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048, Disaster Housing Assistance to Individuals and Households In Presidentially Declared Disaster Areas; 97.049, Presidentially Declared Disaster Assistance—Disaster Housing Operations for Individuals and Households; 97.050, Presidentially Declared Disaster Assistance to Individuals and Households—Other Needs; 97.036, Disaster Grants—Public Assistance (Presidentially Declared Disasters); 97.039, Hazard Mitigation Grant.
Bureau of Land Management, Interior
Notice of Official Filing.
The Bureau of Land Management-Eastern States (BLM-ES) is publishing this Notice to inform the public of the intent to officially file the survey plat listed below, and afford a proper period of time to protest this action prior to the plat filing, 30 calendar days from the date of this publication. During this time, the plat will be available for review in the BLM-ES Public Room. The survey, executed at the request of the Bureau of Indian Affairs (BIA) and the BLM, is necessary for the management of these lands.
Unless there are protests of this action, the filing of the plat described in this Notice will happen on August 18, 2017.
You may submit written protests to the BLM-Eastern States, Suite 950, 20 M Street SE., Washington DC, 20003.
Dominica Van Koten, Chief Cadastral Surveyor for Eastern States; (202) 912-7756; email:
The BIA and BLM requested this survey for Township 7 North, Range 10 East, Choctaw Meridian, Mississippi. The plat of survey represents the dependent resurvey of a portion of the sub-divisional lines. The survey of the sub-division of sections 14 and 23, and the metes and bounds survey of parcels held in trust for the Mississippi Band of Choctaw and which are identified as: sections 14 and 23 of Township 7 North, Range 10 East, of the Choctaw Meridian, in the state of Mississippi; was accepted September 30, 2016. A copy of the described plat will be placed in the open files, and available to the public as a matter of information.
A person or party who wishes to protest a survey must file a notice that they wish to protest with the Chief, Branch of Cadastral Survey. A statement of reasons for a protest may be filed with the notice of protest and must be filed with the Chief, Branch of Cadastral Survey within 30 days after the protest is filed. If a protest against the survey is received prior to the date of official filing, the filing will be stayed pending consideration of the protest. A plat will not be officially filed until the day after all protests have been dismissed or otherwise resolved. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask the BLM in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
43 CFR 1831.1
Bureau of Land Management, Interior.
Notice of intent.
In compliance with the National Environmental Policy Act of 1969, as amended (NEPA), and the Federal Land Policy and Management Act of 1976, as amended, the Bureau of Land Management (BLM) Mount Lewis Field Office, Battle Mountain, Nevada, intends to prepare a Supplemental Environmental Impact Statement (SEIS) for the Mount Hope Project, a new open pit and milling operation for the recovery of molybdenum, in Eureka County, Nevada. This notice initiates the NEPA process for the SEIS.
The BLM will provide opportunities for public comment upon publication of the Draft SEIS.
Print and electronic copies of the 2012 Final Environmental Impact Statement (EIS) for the Mount Hope Project, along with background materials, are available at the BLM Mount Lewis Field Office, 50 Bastian Road, Battle Mountain, Nevada, during regular business hours of 7:30 a.m. to 4:30 p.m., Monday through Friday, except holidays. Copies of the 2012 Final EIS are also available for download at the following Web site:
Christine Gabriel, Project Manager, telephone: 775-635-4000; address: 50 Bastian Road, Battle Mountain, NV 89820. Contact Ms. Gabriel if you wish to add your name to our mailing list. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service (FRS) at 1-800-877-8339 to contact the above individual during normal business hours. The FRS is available 24 hours a day, 7 days a week, to leave a message or question with the above individual. You will receive a reply during normal business hours.
The Notice of Availability for the Mount Hope Project Final EIS was published in the
On December 28, 2016, the United States Court of Appeals for the Ninth Circuit partially reversed and vacated the BLM's decision with respect to certain aspects of the agency's air quality impact and cumulative air impacts analysis. The court also remanded to the BLM to clarify the status of any public water reserves (PWRs). The SEIS will provide updated information and discussion regarding certain air quality data and analysis used in the original EIS, and will also provide clarifying language regarding PWRs potentially impacted by the project.
The BLM will consult with Native American tribes, all the stakeholders included in the original EIS, and all other interested parties.
40 CFR 1501.7
National Park Service, Interior.
Notice; correction.
The U.S. Army Corps of Engineers, Huntington District (Huntington District) has corrected an inventory of associated funerary objects, published in a Notice of Inventory Completion in the
Lineal descendants or representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these associated funerary objects should submit a written request with information in support of the request to the Huntington District at the address in this notice by August 18, 2017.
Mr. Rodney Parker, District Archeologist, U.S. Army Corps of Engineers, Huntington District, 502, Eighth Street, Huntington, WV 25701, telephone (304) 399-5729, email
Notice is here given in accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), 25 U.S.C. 3003, of the correction of an inventory of associated funerary objects under the control of the Huntington District. The associated funerary objects were removed from Bluestone Lake in Summers County, WV; Deer Creek Lake in Pickaway County, OH; Fishtrap Lake in Pike County, KY; Meldahl Lock and Dam in Adams County, OH; Paint Creek Lake in Highland County, OH; and Paintsville Lake in Johnson County, KY.
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA, 25 U.S.C. 3003(d)(3). The determinations in this notice are the sole responsibility of the museum, institution, or Federal agency that has control of the Native associated funerary objects. The National Park Service is not responsible for the determinations in this notice.
This notice corrects the number of associated funerary objects published in a Notice of Inventory Completion in the
In the
The 1,336 associated funerary objects are 788 shell beads, 23 shell pendants, 1 biface fragment, 4 flakes, 2 unmodified rocks, 1
In the
The 57 associated funerary objects are 21 fragments of unmodified animal bone, 28 fragments of unmodified mussel shell, and 8 fragments of charcoal.
In the
The 1 associated funerary object is 1 projectile point fragment.
In the
The 57 associated funerary objects are 4 chert tools, 3 projectile points, 8 flakes, 1 slate gorget, 35 fragments of unmodified faunal remains, 1 fragment of modified faunal remain, 1 fragment modified antler, 1 mica fragment, 2 fragments of unmodified shell, and 1 fragment of charcoal.
In the
The 1,107 funerary objects are 7 core fragments, 2 groundstone tools, 87 flakes, 1 hematite fragment, 3 miscellaneous rock fragments, 347 ceramic sherds, 564 fragments of unmodified faunal remains, 86 fragments of unmodified shell, 1 modified wood fragment, and 9 shell beads.
In the
The 1,577 funerary objects are 1534 shell beads, 29 unmodified faunal remains, 7 modified faunal remains, 2 modified shell fragments, and 1 bone bead. 1 shell pendant, and 3 ochre pigment fragments.
In the
Pursuant to 25 U.S.C. 3001(3)(A), the 4,151 funerary objects described in this notice are reasonably believed to have been placed with or near individual human remains at the time of death or later as part of the death rite or ceremony.
Lineal descendants or representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these associated funerary items should submit a written request with information in support of the request to Mr. Rodney Parker, District Archeologist, U.S. Army Corps of Engineers, Huntington District, 502, Eighth Street, Huntington, WV 25701, telephone (304) 399-5729, email
The Huntington District is responsible for notifying the Absentee-Shawnee Tribe of Indians of Oklahoma, Eastern Shawnee Tribe of Oklahoma, and Shawnee Tribe that this notice has been published.
National Park Service, Interior.
Notice.
History Colorado, formerly Colorado Historical Society, has completed an inventory of human remains, in consultation with the appropriate Indian Tribes or Native Hawaiian organizations, and has determined that there is no cultural affiliation between the human remains and any present-day Indian Tribes or Native Hawaiian organizations. Representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these human remains should submit a written request to History Colorado. If no additional requestors come forward, transfer of control of the human remains to the Indian Tribes or Native Hawaiian organizations stated in this notice may proceed.
Representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these human remains should submit a written request with information in support of the request to History Colorado at the address in this notice by August 18, 2017.
Sheila Goff, NAGPRA Liaison, History Colorado, 1200 Broadway, Denver, CO 80203, telephone (303) 866-4531, email
Notice is here given in accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), 25 U.S.C. 3003, of the completion of an inventory of human remains under the control of History Colorado, Denver, CO. The human remains were recovered from Southwest Colorado.
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA, 25 U.S.C. 3003(d)(3) and 43 CFR 10.11(d). The determinations in this notice are the sole responsibility of the museum, institution, or Federal agency that has control of the Native American human remains. The National Park Service is not responsible for the determinations in this notice.
A detailed assessment of the human remains was made by History Colorado professional staff in consultation with representatives of the Arapaho Tribe of the Wind River Reservation, Wyoming; Cheyenne and Arapaho Tribes, Oklahoma (previously listed as the Cheyenne-Arapaho Tribes of Oklahoma); Hopi Tribe of Arizona; Kiowa Indian Tribe of Oklahoma; Mescalero Apache Tribe of the Mescalero Reservation, New Mexico; Navajo Nation, Arizona, New Mexico & Utah; Northern Cheyenne Tribe of the Northern Cheyenne Indian Reservation, Montana; Ohkay Owingeh, New Mexico (previously listed as the Pueblo of San Juan); Pueblo of Acoma, New Mexico; Pueblo of Jemez, New Mexico; Pueblo of Laguna, New Mexico; Pueblo of Nambe, New Mexico; Pueblo of Picuris, New Mexico; Pueblo of Pojoaque, New Mexico; Pueblo of San Felipe, New Mexico; Pueblo of San Ildefonso, New Mexico; Pueblo of Sandia, New Mexico;
At an unknown time, human remains representing, at minimum, one individual were removed from private property in Southwest Colorado. In February of 2017, the human remains were anonymously sent by mail to the Anasazi Heritage Center, Dolores, CO. The Montezuma County Coroner ruled out a forensic interest in the human remains and transferred them to the Office of the State Archaeologist (OSAC), where they are identified as Office of Archaeology and Historic Preservation (OAHP) Case Number 321. Osteological analysis by Dr. Dawn Mulhern of Fort Lewis College indicates that the human remains are likely of Native American ancestry. The human remains represent one individual of indeterminate age or sex. No known individuals were identified. No associated funerary objects are present.
At some time in the 1890s, human remains representing, at minimum, one individual were removed from an unknown location in Southwest Colorado. In March 2017, the human remains were given to the OSAC, where they are identified as OAHP Case Number 322. Osteological description by Dr. Diane France indicates that the human remains are likely of Native American ancestry. The human remains represent one individual of indeterminate age or sex. No known individuals were identified. No associated funerary objects are present.
History Colorado, in partnership with the Colorado Commission of Indian Affairs, Southern Ute Indian Tribe of the Southern Ute Reservation, Colorado, and the Ute Mountain Ute Tribe (previously listed as the Ute mountain Tribe of the Ute Mountain Reservation, Colorado, New Mexico & Utah), conducted consultations among the Indian Tribes with ancestral ties to the State of Colorado to develop the process for disposition of culturally unidentifiable Native American human remains and associated funerary objects originating from inadvertent discoveries on Colorado State and private lands. As a result of the consultation, a process was developed,
The Native American Graves Protection and Repatriation Review Committee (Review Committee) is responsible for recommending specific actions for disposition of culturally unidentifiable human remains. On November 3-4, 2006, the
43 CFR 10.11 was promulgated on March 15, 2010, to provide a process for the disposition of culturally unidentifiable Native American human remains recovered from tribal or aboriginal lands as established by the final judgment of the Indian Claims Commission or U.S. Court of Claims, a treaty, Act of Congress, or Executive Order, or other authoritative governmental sources. As there is no evidence to suggest that the human remains reported in this notice originated from tribal or aboriginal lands, they are eligible for transfer of control under the
Officials of History Colorado have determined that:
• Pursuant to 25 U.S.C. 3001(9), the human remains described in this notice are Native American based on osteological analysis.
• Pursuant to 25 U.S.C. 3001(9), the human remains described in this notice represent the physical remains of two individuals of Native American ancestry.
• Pursuant to 25 U.S.C. 3001(2), a relationship of shared group identity cannot be reasonably traced between the Native American human remains and any present-day Indian Tribe.
• Pursuant to 43 CFR 10.11(c)(2)(ii) and the
Representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these human remains should submit a written request with information in support of the request to Sheila Goff, NAGPRA Liaison, History Colorado, 1200 Broadway, Denver, CO 80203, telephone (303) 866-4531, email
History Colorado is responsible for notifying The Consulted and Invited Tribes that this notice has been published.
National Park Service, Interior.
Notice.
The U.S. Army Corps of Engineers, Nashville District (USACE), has completed an inventory of human remains and associated funerary objects, in consultation with the appropriate Indian Tribes or Native Hawaiian organizations, and has determined that there is no cultural affiliation between the human remains and associated funerary objects and any present-day Indian Tribes or Native Hawaiian organizations. Representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these human remains and associated funerary objects should submit a written request to the U.S. Army Corps of Engineers, Nashville District. If no additional requestors come forward, transfer of control of the human remains and associated funerary objects to the Indian Tribes or Native Hawaiian organizations stated in this notice may proceed.
Representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these human remains and associated funerary objects should submit a written request with information in support of the request to the U.S. Army Corps of Engineers, Nashville District, at the address in this notice by August 18, 2017.
Dr. Valerie McCormack, Archaeologist, Department of Defense, Nashville District, Corps of Engineers, U.S. Army Corps of Engineers, Nashville District, 110 9th Avenue South, Room A-405, Nashville, TN 37203, telephone (615) 736-7847, email
Notice is here given in accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), 25 U.S.C. 3003, of the completion of an inventory of human remains and associated funerary objects under the control of the U.S. Army Corps of Engineers, Nashville District, Nashville, TN. The human remains and associated funerary objects were removed from Trigg County, KY, and Stewart County, TN.
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA, 25 U.S.C. 3003(d)(3) and 43 CFR 10.11(d). The determinations in this notice are the sole responsibility of the museum, institution, or Federal agency that has control of the Native American human remains and associated funerary objects. The National Park Service is not responsible for the determinations in this notice.
A detailed assessment of the human remains was made by the U.S. Army Corps of Engineers, Nashville District, and the St. Louis District's Mandatory Center for Expertise for the Curation and Management of Archaeological Collections (MCX-CMAC) professional staff in consultation with representatives of the Absentee Shawnee Tribe of Indians of Oklahoma, Cherokee Nation, Eastern Band of Cherokee Indians, Eastern Shawnee Tribe of Oklahoma, Shawnee Tribe, The Chickasaw Nation, The Osage Nation, and United Keetoowah Band of Cherokee Indians in Oklahoma (hereafter referred to as “The Consulted Tribes”).
In 1959, human remains representing, at minimum, one individual were removed from the Stone site (40SW23) in Stewart County, TN. Michael D. Coe and F. William Fischer of the University of Tennessee undertook archaeological research at the Stone site prior to the inundation of Lake Barkley. Coe and Fisher documented extensive looting and encountered little undisturbed area of the site. Artifacts indicate a Mississippian occupation. The collection is stored in the McClung Museum, University of Tennessee, Knoxville, TN. As indicated by excavation notes, the human remains consist of an infant encased in plaster that is housed within a burlap. Due to the plaster encasement, the MCX-CMAC could not verify the number or age of individuals encased within the plaster. No known individual was identified. No associated funerary objects are present.
In 1959, human remains representing, at minimum, two individuals were removed from the Shamble site (40SW41) in Stewart County, TN. Michael D. Coe and F. William Fischer of the University of Tennessee undertook archaeological research at the Shamble site prior to the inundation of Lake Barkley. Artifacts indicate Woodland and Mississippian occupation and a mound at the site dates to the Mississippian period. The collection is stored in the McClung Museum, University of Tennessee, Knoxville, TN. The human remains consist of an adult male and an adult probable male. No known individuals were identified. No associated funerary objects are present.
In 1962, human remains representing, at minimum, 26 individuals were removed from the Hogan site (40SW24) in Stewart County, TN. J.B. Graham of the University of Tennessee undertook excavation of the site prior to the inundation of Lake Barkley. Artifacts indicated Archaic, Woodland, and Mississippian occupation. The Mississippian occupation covered approximately five acres and contained a stone box grave cemetery. The collection is stored in the McClung Museum, University of Tennessee, Knoxville, TN. The human remains consist of one adult female, three adult probable females, three adult males, 10 adults of indeterminate sex, five sub-adults, and four infants. No known individuals were identified. The 87 associated funerary objects include fragments of a copper rattle consisting of 12 copper fragments and 12 pebbles, 2 reconstructed pottery vessels, 3 pottery vessels, 1 clay owl effigy, 1 pottery trowel, 1 pottery sherd, 1 shell gorget, 8 shell gorget fragments, 6 mussel shells, 8 mussel shell fragments, 1 scalloped quart pendant, 1 limestone disc, 2 bone awls, 1 bone needle, 22 bone scraper fragments, 1 hammerstone, 2 chert flakes, and 2 cannel coals.
In 1962, human remains representing, at minimum, eight individuals were removed from the Buchanan site (40SW33) in Stewart County, TN. J.B. Graham of the University of Tennessee undertook excavation of the site prior to the inundation of Lake Barkley. Artifacts indicate Archaic, Woodland, and Mississippian occupation of less than an acre in size. The collection is stored in the McClung Museum, University of Tennessee, Knoxville, TN. The human remains date to the Archaic and Mississippian period and consist of two adult probable females, two adult probable males, two adults of indeterminate sex, and two infants. No known individuals were identified. The 44 associated funerary objects are pottery sherds representing two vessels.
On July 10, 1962, human remains representing, at minimum, two individuals were removed from the Harry Rodgers site (15TR17) in Trigg County, KY. Rudolf Berle Clay of the University of Kentucky collected the remains from a sand bank. Artifacts
In July of 1962, human remains representing, at minimum, one individual were removed from the Wilson site (15TR19) in Trigg County, KY. Rudolf Berle Clay of the University of Kentucky collected the remains from a sand bank. The collection is stored at the Webb Museum, University of Kentucky, Lexington, KY. The human remains consist of an adult probable male. No known individual was identified. No associated funerary objects are present.
These sites were excavated as part of the U.S. Army Corps of Engineers, Lake Barkley Project, by the University of Kentucky and the University of Tennessee, using funds provided by the National Park Service under the River Basins Archaeological Salvage Program.
Officials of the U.S. Army Corps of Engineers, Nashville District have determined that:
• Pursuant to 25 U.S.C. 3001(9), the human remains described in this notice are Native American based on the archeological context.
• Pursuant to 25 U.S.C. 3001(9), the human remains described in this notice represent the physical remains of 40 individuals of Native American ancestry.
• Pursuant to 25 U.S.C. 3001(3)(A), the 131 objects described in this notice are reasonably believed to have been placed with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• Pursuant to 25 U.S.C. 3001(2), a relationship of shared group identity cannot be reasonably traced between the Native American human remains and associated funerary objects and any present-day Indian Tribe.
• According to final judgments of the Indian Claims Commission or the Court of Federal Claims, the land from which the Native American human remains and associated funerary objects from sites 15TR19, 40SW23, and 40SW41 were removed is the aboriginal land of the Cherokee Nation, Eastern Band of Cherokee Indians, and United Keetoowah Band of Cherokee Indians in Oklahoma.
• Treaties, Acts of Congress, or Executive Orders, indicate that the land from which the Native American human remains from sites 15TR17, 40SW24, and 40SW33 were removed is the aboriginal land of Cherokee Nation, Eastern Band of Cherokee Indians, and United Keetoowah Band of Cherokee Indians in Oklahoma.
• Pursuant to 43 CFR 10.11(c)(1), the disposition of the human remains and associated funerary objects may be jointly to the Cherokee Nation, Eastern Band of Cherokee Indians, and United Keetoowah Band of Cherokee Indians in Oklahoma.
Representatives of any Indian Tribe or Native Hawaiian organization not identified in this notice that wish to request transfer of control of these human remains and associated funerary objects should submit a written request with information in support of the request to: Dr. Valerie McCormack, Archaeologist, Department of Defense, Nashville District, Corps of Engineers, U.S. Army Corps of Engineers, Nashville District, 110 9th Avenue South, Room A-405, Nashville, TN 37203, telephone (615) 736-7847, email
The U.S. Army Corps of Engineers, Nashville District is responsible for notifying The Consulted Tribes that this notice has been published.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined to review in-part an initial determination (“ID”) (Order No. 27) of the presiding administrative law judge (“ALJ”) granting Complainant's motion for summary determination of section 337 violation by Defaulting Respondents. Specifically, the Commission has determined to review the ID's analysis and findings with respect to the existence of a domestic industry. The Commission also requests written submissions, under the schedule set forth below, on remedy, the public interest, and bonding.
Houda Morad, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 708-4716. Copies of non-confidential documents filed in connection with this investigation are or will be available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 205-2000. General information concerning the Commission may also be obtained by accessing its Internet server at
The Commission instituted this investigation on August 1, 2016, based on a complaint filed by Complainant Excel Dryer, Inc. of East Longmeadow, Massachusetts, alleging a violation of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337 (“section 337”), based upon the importation into the United States, or in the sale of certain hand dryers and housings for hand dryers by reason of trade dress infringement, the threat or effect of which is to destroy or substantially injure an industry in the United States.
The ALJ terminated six respondents from the investigation based on consent order stipulations and the entry of consent orders, namely: Respondent Alpine (Order No. 11 (Sept. 8, 2016),
On March 24, 2017, Complainant Excel filed a motion for summary determination on domestic industry and violation of section 337 by the Defaulting Respondents. Complainant Excel also requested a general exclusion order, cease and desist orders, and a bond of 100% during Presidential review. On April 5, 2017, the Commission Investigative Attorney filed a response in support of Complainant's Motion and requested remedy. On June 2, 2017, the ALJ issued the subject ID/RD (Order No. 27) granting Complainant's motion for summary determination on domestic industry and violation of section 337 by the Defaulting Respondents and recommending that the Commission issue a general exclusion order and cease and desist orders, and set a bond at 100% during the Presidential review period. No petitions for review of the subject ID were filed.
The Commission has determined to review the ID in-part. Specifically, the Commission has determined to review the ID's analysis and findings with respect to the existence of a domestic industry. The Commission does not request any submissions on the issue under review.
In connection with the final disposition of this investigation, the Commission may (1) issue an order that could result in the exclusion of the subject articles from entry into the United States, and/or (2) issue one or more cease and desist orders that could result in the respondent(s) being required to cease and desist from engaging in unfair acts in the importation and sale of such articles. Accordingly, the Commission is interested in receiving written submissions that address the form of remedy, if any, that should be ordered. If a party seeks exclusion of an article from entry into the United States for purposes other than entry for consumption, the party should so indicate and provide information establishing that activities involving other types of entry either are adversely affecting it or likely to do so. For background,
(1) Please identify with citations to the record any information regarding commercially significant inventory in the United States as to each respondent against whom a cease and desist order is sought. If Complainant also relies on other significant domestic operations that could undercut the remedy provided by an exclusion order, please identify with citations to the record such information as to each respondent against whom a cease and desist order is sought.
(2) In relation to the infringing products, please identify any information in the record, including allegations in the pleadings, that addresses the existence of any domestic inventory, any domestic operations, or any sales-related activity directed at the United States for each respondent against whom a cease and desist order is sought.
If the Commission contemplates some form of remedy, it must consider the effects of that remedy upon the public interest. The factors the Commission will consider include the effect that an exclusion order and/or cease and desist orders would have on (1) the public health and welfare, (2) competitive conditions in the U.S. economy, (3) U.S. production of articles that are like or directly competitive with those that are subject to investigation, and (4) U.S. consumers. The Commission is therefore interested in receiving written submissions that address the aforementioned public interest factors in the context of this investigation.
If the Commission orders some form of remedy, the U.S. Trade Representative, as delegated by the President, has 60 days to approve or disapprove the Commission's action.
Written submissions must be filed no later than close of business on July 28, 2017. Reply submissions must be filed no later than the close of business on August 4, 2017. Such submissions should address the ALJ's recommended determinations on remedy and bonding which were made in Order No. 27. No further submissions on any of these issues will be permitted unless otherwise ordered by the Commission.
Persons filing written submissions must file the original document electronically on or before the deadlines
Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in part 210 of the Commission's Rules of Practice and Procedure (19 CFR part 210).
By order of the Commission.
Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
60-day notice.
The Department of Justice (DOJ), Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 60 days until September 18, 2017.
If you have additional comments, particularly with respect to the estimated public burden or associated response time, have suggestions, need a copy of the proposed information collection instrument with instructions, or desire any additional information, please contact Shawn Stevens, ATF Industry Liaison, Federal Explosives Licensing Center, either by mail at Federal Explosives Licensing Center, 244 Needy Road, Martinsburg, WV 25405 or by email at
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
Overview of this information collection:
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Mississippi River Commission.
9:00 a.m., August 7, 2017.
On board MISSISSIPPI V at City Front, Cape Girardeau, Missouri.
Open to the public.
(1) Summary report by President of the Commission on national and regional issues affecting the U.S. Army Corps of Engineers and Commission programs and projects on the Mississippi River and its tributaries; (2) District Commander's overview of current project issues within the St. Louis and Memphis Districts; and (3) Presentations by local organizations and members of the public giving views or comments on any issue affecting the programs or projects of the Commission and the Corps of Engineers.
9:00 a.m., August 9, 2017.
On board MISSISSIPPI V at Beale Street Landing, Memphis, Tennessee.
Open to the public.
(1) Summary report by President of the Commission on national and regional issues affecting the U.S. Army Corps of Engineers and Commission programs and projects on the Mississippi River and its tributaries; (2) District Commander's overview of current project issues within the Memphis District; and (3) Presentations by local organizations and members of the public giving views or comments on any issue affecting the programs or projects of the Commission and the Corps of Engineers.
9:00 a.m., August 11, 2017.
On board MISSISSIPPI V at City Front, Vicksburg, Mississippi.
Open to the public.
(1) Summary report by President of the Commission on national and regional issues affecting the U.S. Army Corps of Engineers and Commission programs and projects on the Mississippi River and its tributaries; (2) District Commander's overview of current project issues within the Vicksburg District; and (3) Presentations by local organizations and members of the public giving views or comments on any issue affecting the programs or projects of the Commission and the Corps of Engineers.
9:00 a.m., August 18, 2017.
On board MISSISSIPPI V at CENAC Towing Dock, Houma, Louisiana.
Open to the public.
(1) Summary report by President of the Commission on national and regional issues affecting the U.S. Army Corps of Engineers and Commission programs and projects on the Mississippi River and its tributaries; (2) District Commander's overview of current project issues within the New Orleans District; and (3) Presentations by local organizations and members of the public giving views or comments on any issue affecting the programs or projects of the Commission and the Corps of Engineers.
Mr. Charles A. Camillo, telephone 601-634-7023.
Nuclear Regulatory Commission.
Final environmental assessment and finding of no significant impact; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is considering an amendment of Source and Byproduct Materials License SUA-1601 to modify a License Condition for the Strata Energy, Inc. (Strata) Ross
The EA and FONSI referenced in this document are available on July 12, 2017.
Please refer to Docket ID NRC-2011-0148 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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Jessie Muir Quintero, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington DC 20555-0001; telephone: 301-415-7476; email:
The NRC is considering amending License Condition 11.3 (A) and (B) of License SUA-1601 issued to Strata. As required by part 51 of title 10 of the
The proposed action would amend License Condition 11.3 (A) and (B) of Strata's Ross license. Strata's amendment request consists of modifying the minimum density requirement in a wellfield baseline monitoring program and the distance to and spacing of wells on the perimeter monitoring well ring (ADAMS Accession No. ML16004A032).
The proposed action would allow Strata flexibility in the placement of wells to avoid certain natural features and infrastructure.
The NRC assessed the environmental impacts to ground water as a result of amending License Condition 11.3 (A) and (B) and determined that there would be no significant impact to ground-water quality. The NRC determined the proposed changes to the License Condition—changes to well density requirements and distance to and spacing of wells in perimeter monitoring well ring—would still maintain Strata's ability to develop appropriate baseline and restoration data and continue the timely and accurate identification of ground-water excursions.
As an alternative to the proposed action, the NRC staff considered denial of the proposed action (
On June 14, 2017, the NRC staff sent a copy of the draft EA to the Wyoming Department of Environmental Quality (DEQ) for their review and comment. The state official responded on July 6, 2017, that DEQ had reviewed the EA and did not have any comments (ADAMS Accession No. ML17191A327).
Based on its review of the proposed action, and in accordance with the requirements in 10 CFR part 51, the NRC staff has determined that amending License Condition 11.3(A) and (B) for the Ross ISR project would not significantly affect ground-water quality. The NRC staff has determined that pursuant to 10 CFR 51.31, preparation of an EIS is not required for the proposed action and, pursuant to 10 CFR 51.32, a FONSI is appropriate.
On the basis of the final EA, the NRC concludes that the proposed action will not have a significant effect on the quality of the human environment. Accordingly, the NRC has determined not to prepare an EIS for the proposed action.
For the U.S. Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Notice of process change; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is issuing a notice regarding a process change. The NRC is migrating to a ListServ, to distribute emails with links to publicly-available documents related to the Waste Incidental to Reprocessing (WIR) Program. The current method of using email lists will be discontinued. If a member of the public does not currently receive such NRC emails and they would like to receive those NRC emails in the future, then they need to voluntarily sign-up for the WIR ListServ via a link to the NRC Public Web site. The instructions for signing up for the WIR ListServ are provided in this
Please refer to Docket ID NRC-2017-0164 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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Harry Felsher, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-6559; email:
For those members of the public who are currently on the NRC WIR email list and already receive NRC emails with links to publicly-available WIR Program documents, your email address has already been transferred to the WIR ListServ and you do not need to do anything to continue to receive those NRC emails in the future. If any other member of the public would like to start receiving NRC emails with a link to future publicly-available WIR Program documents, then they need to voluntarily sign-up for the WIR LIstServ using the link and instructions provided below.
The only way to sign-up for the WIR ListServ is to: (1) Go to the following Web page on the NRC Public Web site:
Note that after you are subscribed to an NRC ListServ, you will receive an email from the NRC indicating which ListServ you have subscribed to, which email address you used to subscribe to that ListServ, and instructions on how you can unsubscribe to that ListServ, if desired. You are responsible for ensuring that the ListServ has your current email address.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
License amendment application; issuance.
By letter dated February 15, 2017, as supplemented March 9, 2017, and as supplemented June 6, 2017, GE-Hitachi (GEH) submitted to the Nuclear Regulatory Commission (NRC) a license amendment request (LAR) No. 15, Materials License No. SNM-2500 (LAR 2500-15) for the GEH Facility at Morris, Illinois, in accordance with NRC's regulations. The amendment provides clarification for the storage of liquid and solid waste treatment products. The amendment requested no changes to the technical or regulatory provisions of the license. The application included adequate justification for the proposed changes. The NRC has approved and issued the amendment in its letter dated June 29th, 2017, along with its safety evaluation report.
July 19, 2017.
Please refer to Docket ID NRC-2017-0103 when contacting the NRC about the availability of information regarding this document. You may access publicly-available information related to this document using any of the following methods:
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Christian Jacobs, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-6825: email:
On December 21, 2004, the NRC renewed Special Nuclear Materials License No. SNM-2500 for the GEMO independent spent fuel storage installation (ISFSI) (ADAMS Accession No. ML043630433), located near Morris, Illinois. The renewed license authorizes GE-Hitachi Nuclear Energy Americas, LLC, to possess, store, and transfer spent nuclear fuel and associated radioactive materials at the GEMO ISFSI for a term of 20 years. The NRC also issued an environmental assessment and finding of no significant impact related to the issuance of the renewed ISFSI license on November 30, 2004 (ADAMS Accession No. ML043360409), in accordance with the National Environmental Policy Act, and in conformance with the applicable requirements of part 51 of title 10 of the
Pursuant to 10 CFR 72.46 and 72.58, the NRC has docketed, approved and issued Amendment No. 15 to Special Nuclear Materials License No. SNM-2500, held by GE-Hitachi Nuclear Energy Americas, LLC, for the possession, transfer and storage of spent fuel at the GEMO ISFSI. Amendment No. 15 is effective as of the date of issuance.
Amendment No. 15 complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings, as required by the Act and the Commission's rules and regulations in 10 CFR chapter 1, which are set forth in Amendment No. 15. The issuance of Amendment No. 15 satisfied the criteria specified in 10 CFR 51.22(c)(10)(v) for a categorical exclusion. Thus, the preparation of an environmental assessment or an environmental impact statement was not required.
A Notice of Opportunity to Request a Hearing and to Petition for Leave to Intervene in connection with this action was published in the
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Exemption; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is granting exemptions from certain portions of the acceptance criteria for emergency core cooling, and the general design criteria for emergency core cooling, containment heat removal, and atmosphere cleanup for the use of a risk-informed analysis to evaluate the effects of debris in containment following a loss-of-coolant accident (LOCA) for the South Texas Project (STP), Units 1 and 2, located in Matagorda County, Texas, Docket Nos. 50-498 and 50-499, respectively. The exemptions are in response to a request dated June 19,
The exemption was issued on July 11, 2017.
Please refer to Docket ID NRC-2016-0092 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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Lisa Regner, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington DC 20555-0001; telephone: 301-415-1906, email:
The licensee is the holder of Facility Operating License Nos. NPF-76 and NPF-80, which authorize operation of the STP Units 1 and 2, respectively. The licenses provide, among other things, that the facility is subject to all rules, regulations, and orders of the NRC now or hereafter in effect. The facility consists of two PWRs located in Matagorda County, Texas.
In 1996, the NRC identified Generic Safety Issue (GSI)-191 associated with the effects of debris accumulation on PWR sump performance during design-basis accidents. As part of the actions to resolve GSI-191, the NRC issued Generic Letter (GL) 2004-02, “Potential Impact of Debris Blockage on Emergency Recirculation during Design Basis Accidents at Pressurized-Water Reactors,” dated September 13, 2004, to holders of operating licenses for PWRs. In GL 2004-02, the NRC staff requested that licensees perform an evaluation of their emergency core cooling systems (ECCS) and containment spray system (CSS) recirculation functions considering the potential for debris-laden coolant to be circulated by the ECCS and the CSS after a LOCA or high energy line break inside containment and, if appropriate, take additional actions to ensure system function. The GL required that licensees provide a written response to the NRC, pursuant to section 50.54(f) of title 10 of the
By letter dated June 19, 2013, as supplemented by letters dated August 20, 2015, and April 13, 2016, STPNOC submitted requests for exemptions pursuant to 10 CFR 50.12, “Specific exemptions,” from the requirements of 10 CFR 50.46, “Acceptance criteria for emergency core cooling systems for light-water nuclear power reactors,” and 10 CFR part 50, appendix A, General Design Criterion (GDC) 35, “Emergency core cooling,” GDC 38, “Containment heat removal,” and GDC 41, “Containment atmosphere cleanup,” to use a risk-informed methodology instead of the traditional deterministic methodology, to resolve the concerns associated with GSI-191 and respond to GL 2004-02.
Specifically, the licensee requested an exemption from 10 CFR 50.46(a)(1)(i), which, in part, requires ECCS cooling performance to be calculated in accordance with an acceptable evaluation model, as described in 10 CFR 50.46(a)(1), for postulated LOCAs of different sizes, locations and other properties sufficient to provide assurance that the most severe LOCAs are evaluated in order to demonstrate that acceptance criteria in 10 CFR 50.46(b) are met. The NRC staff interprets 10 CFR 50.46(a)(1) requirement to calculate ECCS performance for “other properties” as requiring licensees to consider the impacts of debris generation and transport in containment. The most significant form of debris in nuclear power reactor containments is piping and component insulation that becomes debris during LOCAs, is transported and accumulates in the sumps, and clogs the sumps strainers, thus creating resistance to coolant flow. Fibrous debris from this insulation can also enter the reactor core and directly impede heat transfer from the fuel to the coolant. The licensee also requested exemptions from GDC 35, which contain ECCS performance requirements, and GDCs 38 and 41, which respectively set performance requirements for reactor containment heat removal following a LOCA and for containment atmosphere cleanup following postulated accidents.
The approval of a risk-informed methodology would require exemptions from 10 CFR 50.46(a)(1)(i) and GDCs 35, 38, and 41 because the NRC has interpreted these regulations as requiring a deterministic approach and bounding calculation to show compliance with ECCS and CSS performance criteria in 10 CFR 50.46(b) and GDCs 35, 38 and 41. Issuance of exemptions is an appropriate means to grant relief from the use of a deterministic approach to show compliance with these requirements.
The licensee's 10 CFR 50.46 deterministic analysis considered the debris in containment and demonstrated that the debris loading could prevent acceptable ECCS and CSS operation and core cooling for certain pipe ruptures. Based on its analysis, the licensee concluded that the amount of debris in the STP containment would need to be reduced to demonstrate compliance with 10 CFR 50.46 criteria using a deterministic analysis for certain large-break LOCA sizes because, for those breaks, the plant-specific testing threshold for generation and transport of debris was exceeded.
Additionally, the licensee's deterministic thermal-hydraulic (TH) analysis could not show that hot-leg LOCAs greater than 16 inches could maintain adequate cooling. While not all large-break hot-leg LOCAs resulted in a loss of in-core cooling due to strainer blockage, the licensee categorized all hot-leg breaks greater than 16 inches as assumed to fail in order to simplify the TH analysis.
The licensee requested exemptions from the requirement to use a deterministic analysis for specific scenarios of LOCA breaks producing and transporting debris in excess of the plant-specific tested debris limits and
The GDC 35, in part, requires that the ECCS safety system functions adequately to transfer heat from the reactor core following a LOCA and in the presence of a worst single failure, at a rate such that (a) fuel and clad damage that could interfere with continued effective core cooling is prevented and (b) clad metal-water reactor is limited to negligible amounts. The licensee stated in its submittal that the function of the ECCS emergency sump is assumed to fail for debris that exceeds the amount determined in acceptable plant-specific testing. Failure of the sump and strainers result in loss of cooling to the core. The licensee requested an exemption from the deterministic requirements of GDC 35 to use a risk-informed approach to show ECCS function for those LOCA breaks that exceed the plant-specific testing debris threshold, and for large hot-leg breaks. The use of a risk-informed analysis, in accordance with the criteria in RG 1.174, would allow the licensee to show that the risk from debris effects is very low.
The GDC 38 requires containment heat removal, rapid reduction of containment pressure and temperature, and maintenance of pressure and temperature at an acceptably low level following a LOCA, and in the presence of a single failure, to preserve containment function. The STPNOC proposed that an exemption be granted from the deterministic requirements in GDC 38, for those LOCA breaks that exceed the plant-specific testing debris threshold. Current STP design basis calculations are based on the reactor containment fan coolers functioning in conjunction with the CSS and ECCS, both of which can be affected by debris. Using deterministic assumptions, STPNOC's analysis and testing does not assure that the emergency sump strainers will be available to support the CSS and ECCS function considering the effects of debris produced by those breaks that can generate and transport debris amounts greater than the plant-specific testing threshold. The licensee requested an exemption from the deterministic requirements of GDC 38 to use a risk-informed analysis, in accordance with the criteria in RG 1.174, to show that the risk from debris effects is very low.
The GDC 41, in part, requires containment atmosphere cleanup to control substances that may be released into the reactor containment, to reduce the concentration and quality of fission products released to the environment following postulated accidents, and to control the concentration of hydrogen or oxygen and other substances in the containment atmosphere following postulated accidents, assuming a single failure. The licensee stated that using deterministic assumptions, STPNOC's analysis and testing cannot demonstrate that the emergency sump strainers will be available to support the CSS function considering the effects of debris produced and transported by breaks not bounded by acceptable plant-specific testing. The licensee requested an exemption from the deterministic requirements of GDC 41 to use a risk-informed analysis, in accordance with the criteria in RG 1.174, to show that the risk from debris effects is very low.
Pursuant to 10 CFR 50.12, the Commission may, upon application by any interested person or upon its own initiative, grant exemptions from the requirements of 10 CFR part 50, when (1) the exemptions are authorized by law, will not present an undue risk to public health or safety, and are consistent with the common defense and security; and (2) when special circumstances are present. Under 10 CFR 50.12(a)(2)(ii), special circumstances are present “when application of the regulation in the particular circumstances would not serve the underlying purpose of the rule or is not necessary to achieve the underlying purpose of the rule.”
The licensee proposed to use a risk-informed methodology instead of a deterministic approach to account for the effects of debris in containment for portions of the LOCA analysis applicable to breaks that exceed the STP plant-specific debris testing threshold and large hot-leg piping breaks. The STPNOC methodology, termed Risk over Deterministic, or RoverD, divides the loss of core cooling design-basis analysis into two portions: the “deterministic analysis” and the “risk-informed analysis.” The risk-informed analysis is used by the licensee for breaks that generate and transport debris exceeding the plant-specific testing threshold. These breaks result in low density fiber glass fiber fines estimated to arrive in the ECCS sump post-LOCA in amounts that are equal to or greater than the amount of fines used in acceptable strainer testing. The acceptable limit was determined using testing methods intended to determine the maximum ECCS strainer head loss for the tested condition.
Also, the licensee evaluated the in-core TH aspects of fibrous debris to prevent adequate fuel cooling, finding that hot-leg breaks greater than 16 inches have the potential to prevent adequate in-core cooling. In order to simplify its TH evaluation, the licensee assumed that all large breaks greater than 16 inches in the hot-leg will result in the loss of the cooling function. For ECCS and CSS analyses other than the postulated large-break LOCAs in the hot-leg piping in containment and those breaks that exceed the STP plant-specific testing limit, STPNOC applied a deterministic methodology. If the exemptions were granted for these postulated breaks, the requirement to use a deterministic methodology for all other postulated LOCA breaks would continue to apply.
Under the regulations in 10 CFR 50.12, the Commission may grant exemptions from the requirements of 10 CFR part 50 provided certain findings are made; namely, that special circumstances are present, the exemptions present no undue risk to public health and safety, the exemptions are consistent with the common defense and security, and the exemptions are authorized by law. The exemptions would allow the licensee to use a risk-informed methodology to show compliance with 10 CFR 50.46(b), and GDCs 35, 38, and 41, specifically for the analyses of debris in containment impacting emergency cooling function during postulated large-break hot-leg LOCAs and those breaks that exceed the plant-specific testing threshold.
The licensee requested exemptions citing the special circumstances criteria
The licensee stated that an objective of each of the regulations for which an exemption is proposed is to maintain low risk to the public health and safety through the adequate functioning of the ECCS and CSS safety systems. These systems must be supported by adequate functioning of the containment sumps. The regulations in 10 CFR 50.46(a)(1)(i) and GDCs 35, 38, and 41 are met when the licensee is able to demonstrate, using a bounding calculation or other deterministic method that the ECCS and CSS are capable of functioning during design basis events. The STPNOC stated that its risk-informed analysis to show adequate functioning of ECCS and CSS considering the impacts of debris during certain LOCA events demonstrates that the risk of failure of these systems is very small. The licensee stated that special circumstances exist because the underlying intent of the regulations, to ensure adequate protection of public health and safety is met when applying a risk-informed approach to address GSI-191 and respond to GL 2004-02. Further, it states that the risk-informed approach is consistent with RG 1.174, and supports operation of those functions with a high degree of reliability. Thus, the licensee concludes that the underlying intent of each regulation is met and the special circumstances described in 10 CFR 50.12(a)(2)(ii) apply to each of the exemptions proposed by STPNOC.
The NRC staff evaluated the STPNOC submittal and supplements, and discussed the details of its evaluation of the risk-informed approach in an NRC safety evaluation available in ADAMS under Accession No. ML17019A001. Although 10 CFR 50.46(a)(1) requires a deterministic approach, the GDCs do not specify that a risk-informed methodology may not be used to show compliance; however, because the NRC has interpreted each of these regulations as requiring a deterministic approach, an exemption is an appropriate means to grant the licensee relief to use an alternative approach. The underlying purpose of each regulation is to protect public health and safety in the event of a LOCA by establishing criteria for emergency core cooling, containment cooling and containment atmosphere cleanup system performance. In its safety evaluation, the NRC staff concluded, in part, that the licensee adequately demonstrated that the change in risk attributable to debris in postulated hot-leg LOCAs greater than 16 inches, and those breaks that exceed the plant specific threshold, is very small. The NRC staff also concluded that the licensee's proposal for demonstrating compliance with the ECCS and CSS performance requirements meet the risk acceptance guidelines in RG 1.174 because the approach is related to a permissible exemption request, is consistent with defense-in-depth philosophy, maintains sufficient safety margins, results in a small increase in risk, and the impact of this approach is monitored by the licensee using performance measurement strategies. Therefore, the licensee's use of the risk-informed analysis to consider the impacts of debris meets the underlying requirements of 10 CFR 50.46 and GDCs 35, 38, and 41, to ensure that a licensee demonstrates that the ECCS and CSS will provide adequate cooling for the reactor core and containment, as well as containment atmosphere cleanup following postulated design-basis accidents.
Based on the above, the NRC staff concludes that special circumstances under 10 CFR 50.12(a)(2)(ii) exist because compliance with the deterministic requirements of 10 CFR 50.46(a)(1)(i), and GDCs 35, 38, and 41 is not necessary to achieve the underlying purpose of each rule.
The provisions of 10 CFR 50.46 and GDCs 35, 38, and 41 establish criteria for the emergency core cooling, containment cooling, and containment atmosphere cleanup system performance. As part of the amendment requests, the STPNOC submitted exemption requests to change its design-basis analysis specified in the Updated Final Safety Analysis Report (UFSAR) to use new risk-informed and deterministic methodologies to specifically account for the impacts of debris in containment. The licensee justified its use of the risk-informed approach by stating that the proposed risk-informed approach meets the key principles in RG 1.174 in that it is consistent with defense-in-depth philosophy, maintains sufficient safety margins, results in a small increase in risk, and is monitored by the licensee using performance measurement strategies.
Additionally, the licensee stated that the proposed exemptions to use the risk-informed method are consistent with Key Principle 1 in RG 1.174 that requires a proposed change to the licensing basis (or amendment) to meet current regulations unless the change is explicitly related to a requested exemption. The licensee's probabilistic risk analysis results provided by the licensee and evaluated by the NRC staff in its safety evaluation, showed that the increase in risk associated with debris generation and transport on ECCS and CSS function following postulated LOCAs is very low, in accordance with the criteria in RG 1.174.
The NRC staff concluded that the risk is consistent with the guidance in RG 1.174 and with the Commission policy statements on safety goals and the use of probabilistic risk assessment methods in nuclear regulatory activities; therefore, the requested exemption presents no undue risk to public health and safety.
The requested exemptions to use a risk-informed methodology allow STPNOC to resolve a generic safety concern for PWRs associated with potential clogging of the ECCS and CSS strainers during certain design-basis events. The change is adequately controlled by safety acceptance criteria and technical specification requirements and is not related to security issues. Because the common defense and security is not impacted by the exemption, the exemption is consistent with the common defense and security.
The exemptions to use a risk-informed methodology allow STPNOC to show compliance with 10 CFR 50.46(a)(1)(i), and GDCs 35, 38, and 41, when considering debris in containment generated and transported during postulated hot-leg LOCA breaks greater than 16 inches, and those breaks that exceed the plant-specific testing threshold. These regulations were promulgated under, and are consistent with the Commission's authority under Section 161 of the Atomic Energy Act. Because the application of a risk-informed methodology to show compliance with 10 CFR 50.46, and GDC 35, 38, and 41 would not violate the Atomic Energy Act of 1954, as amended, or the Commission's regulations, the exemptions are authorized by law provided all requisite findings are made.
Pursuant to 10 CFR 51.21, “Criteria for and identification of licensing and regulatory actions requiring environmental assessments,” the NRC has prepared an Environmental Assessment (EA) summarizing the findings of its review of the environmental impacts of the proposed action under the National Environmental Policy Act. The NRC staff determined that special circumstances under 10 CFR 51.21 exist to warrant preparation of an EA because STP is the pilot plant to propose a risk-informed approach to resolve GSI-191 as recognized in Staff Requirement Memorandum SECY-12-0093, “Closure Options for Generic Safety Issue-191, Assessment of Debris Accumulation on Pressurized-Water Reactor Sump Performance,” dated December 14, 2012. Because this is the first approval of a risk-informed approach, the NRC staff considered preparations of an EA to be a prudent course of action that would further the purposes of the National Environmental Policy Act. Based on its review, the NRC concluded that an environmental impact statement is not required and that the proposed action will have no significant impact on the environment.
The NRC published a final EA on the proposed action in the
Accordingly, the Commission has determined that, pursuant to 10 CFR 50.12, exemptions are authorized by law, will not present an undue risk to the public health and safety, are consistent with the common defense and security, and special circumstances are present pursuant to 10 CFR 50.12(a)(2)(ii). Therefore, the NRC hereby grants STPNOC a one-time exemption from 10 CFR 50.46(a)(1), and 10 CFR part 50, appendix A, GDCs 35, 38, and 41 to use a risk-informed methodology in lieu of a deterministic methodology to show conformance with the ECCS and CSS performance criteria accounting for debris in containment for large-break hot-leg LOCAs and those breaks that exceed the plant-specific STP testing threshold.
The documents identified in the following table are available for public inspection through the NRC's Agencywide Documents Access and Management System (ADAMS).
For the Nuclear Regulatory Commission.
Pension Benefit Guaranty Corporation.
Notice of request for extension of OMB approval without change.
The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) extend approval without change, under the Paperwork Reduction Act of 1995, of its collection of information for Annual Reporting (OMB control number 1212-0057, expires July 31, 2017). This notice informs the public of PBGC's request and solicits public comment on the collection of information.
Comments must be submitted by August 18, 2017.
Comments should be sent to the Office of Informatioon and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Pension Benefit Guaranty Corporation, via electronic mail at
Jo Amato Burns (
The Employee Retirement Income Security Act of 1974 (ERISA) contains three separate sets of provisions—in Title I (Labor provisions), Title II (Internal Revenue Code provisions), and Title IV (PBGC provisions)—requiring administrators of employee pension and welfare benefit plans (collectively referred to as employee benefit plans) to file returns or reports annually with the federal government.
PBGC, the Department of Labor (DOL), and the Internal Revenue Service (IRS) work together to produce the Form 5500 Annual Return/Report for Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report for Small Employee Benefit Plan (Form 5500 Series), through which the regulated public can satisfy the combined reporting/filing requirements applicable to employee benefit plans.
The collection of information has been approved by OMB under control number 1212-0057 through July 31, 2017. PBGC is requesting that OMB extend its approval for another three years without change. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
On May 1, 2017 (82 FR 20396), PBGC published a notice informing the public that it intended to request OMB approval and soliciting public comment. Only one comment was received and it supported the information collection.
Estimates are that PBGC will receive approximately 23,700 filings per year under this collection of information. PBGC further estimates that the total annual burden of this collection of information will be 1,200 hours and $1,655,000.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning negotiated service agreements. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's Web site (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II.
1.
This notice will be published in the
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning negotiated service agreements. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's Web site (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II.
1.
This notice will be published in the
Postal Service.
Notice of availability of a Programmatic Environmental Assessment.
To comply with the requirements of the National Environmental Policy Act (NEPA), the Postal Service has prepared and is making available for comments a Draft Programmatic Environmental Assessment (PEA) for Commercial Off-the-Shelf (COTS) Vehicle Acquisitions (the Proposed Action), which is national in scope. This PEA evaluated the environmental impacts of the Proposed Action and an Alternative Action versus taking No Action. The Draft PEA can be reviewed online at
Comments should be received no later than 5:00 p.m. ET, August 3, 2017.
Direct written comments to: Davon Collins, Environmental Counsel, U.S. Postal Service, Room 6333, 475 L'Enfant Plaza SW., Washington, DC 20260, email
Davon M. Collins, (202) 268-4570.
To stabilize its delivery fleet pending the development of a longer-term solution to its vehicle needs and in furtherance of its statutory Universal Service Obligation, the Postal Service is considering the purchase of an estimated 26,000 COTS delivery vehicles to accommodate route growth over the next three years, and to replace accident-damaged, aged and high-maintenance-cost vehicles.
Pursuant to the requirements of NEPA, the Postal Service's implementing procedures at 39 CFR 775, and the President's Council on Environmental Quality Regulations (40 CFR parts 1500-1508), the Postal Service has prepared a PEA to evaluate the environmental impacts of the following three actions on the physical, biological, cultural, and socioeconomic environments. To assist in this process, the Postal Service is soliciting the public's input and comments.
The
The Draft PEA concludes that the Proposed Action would not result in significant adverse impacts on the physical, biological, cultural, and socioeconomic environments. The Proposed Action would result in beneficial impacts to current air quality nationwide, as the new vehicles would have better emission controls than the vehicles being replaced, and therefore decrease emissions as compared with the No Action Alternative, and at a significantly lower cost than the Alternative Action. Adverse impacts to other aspects of the environment such as biological, water, and cultural resources; energy resources; waste management; and community services would be minor to insignificant. The Proposed Action would also have an insignificant but beneficial socioeconomic impact nationwide, as new hires and additional related material purchases would produce beneficial economic results.
Unless substantive comments are received during the 15-day comment period and significant issues are identified, the Postal Service will finalize the PEA, issue a Finding of No Significant Impact (FONSI), and proceed with the project. Should a FONSI be issued, it will be available for public viewing at
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Maria W. Votsch, 202-268-6525.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on July 13, 2017, it filed with the Postal Regulatory Commission a
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Schedule of Fees to assess fees for OTTO Port, CTI Port, FIX Port, FIX Drop Port and Disaster Recovery Port connectivity, and to provide monthly [sic] cap on those fees of $7,500. The Exchange is also proposing to delete fees and descriptions thereof for connectivity no longer used by the Exchange.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of the proposed rule change is to amend the Schedule of Fees to assess fees for OTTO
The Exchange is proposing to amend the Nasdaq GEMX Schedule of Fees Section IV.E.4. to assess a fee of $650 per month, per port, per account number
The Exchange is also proposing to delete “Market Makers API Quoting, Order Entry and Listening” and its associated $100 per month, per API fee from Nasdaq GEMX Schedule of Fees Section IV.E.1., and “Nasdaq GEMX Only” and its associated $100 per session, per month fee from Nasdaq GEMX Schedule of Fees Section IV.E.2. (EAM Options API).
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed fees are reasonable because they are similar to the fees assessed by other exchanges. As noted above, NOM, BX and Phlx provide some or all of the same connectivity options. For example, Nasdaq assesses a fee of $750 per port, per month for OTTO Ports, $650 per port, per month for CTI, FIX (order entry) Ports and FIX Drop Ports. Moreover, Nasdaq assesses a fee of $25 per port, per month for equities Disaster recovery ports (OUCH, RASH, and DROP).
The Exchange believes that the proposed fees are an equitable allocation and are not unfairly discriminatory because the Exchange must ultimately assesses [sic] fees to cover the costs associated with offering the connectivity. The Exchange notes that members have historically paid fees for Exchange connectivity and, in adopting the connectivity for which the Exchange is proposing to assess a fee, it noted that it was not adopting a fee at that time to avoid being double charged for connectivity to the old Exchange architecture and the new Nasdaq INET architecture. Now that members no longer have connectivity to the old Exchange architecture, and therefore are not assessed connectivity fees, the Exchange is now proposing to assess fees for connectivity to the new Nasdaq INET architecture of the Exchange. The Exchange believes that the proposed $7,500 fee cap is an equitable allocation and is not unfairly discriminatory because the [sic] any member that subscribes to connectivity under the rule that would otherwise exceed $7,500 per month will have its fees capped. Although members that do not have fees under the rule in excess of $7,500 per month will not benefit from the fee cap, the Exchange notes that any member may increase the number of ports subscribed to receive the fee cap, should their activity on the Exchange warrant increased subscription. Moreover, members that do not qualify for the fee cap will benefit from the greater liquidity provided by members that conduct a sufficient level of activity on the Exchange to require connectivity in excess of the fee cap. For these reasons, the Exchange believes that the proposed fees are an equitable allocation and are not unfairly discriminatory.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may connect to third parties instead of directly connecting to the Exchange, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the charges assessed for connectivity to the Exchange are consistent with the fees assessed by other exchanges for the same or similar connectivity. Moreover, the Exchange must assess fees to cover the costs incurred in providing connectivity and members had been assessed fees for Exchange connectivity prior to the sunset of the old Exchange architecture. As a consequence, competition will not be burdened by the proposed fees. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal for the Exchange's equity options platform (“EDGX Options”) to adopt new rules that describe the trading of complex orders on the Exchange.
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to adopt new rules that describe the trading of complex orders on the Exchange. Proposed new Rule 21.20, Complex Orders, details the functionality of the System
Additionally, the Exchange is proposing to amend Exchange Rule 21.1, Definitions, to add two new Times in Force to be added in conjunction with the proposed change, “Good Til Cancelled” (or “GTC”) and “At the Open” (or “OPG”). The Exchange is also proposing to amend: Exchange Rule 21.15, Data Dissemination, to add references to data feeds to be added in conjunction with the proposed change; and Rule 21.16, Risk Monitor Mechanism, to make clear that complex orders are considered in connection with existing risk protections offered by the Exchange.
Proposed Rule 21.20(a) provides definitions of terms that apply to the trading of complex orders, and such terms are used throughout this proposed rule change. The Exchange proposes to specify that for purposes of Rule 21.20, the included terms will have the meanings specified in proposed paragraph (a). A term defined elsewhere in Exchange Rules will have the same meaning with respect to Rule 21.20, unless otherwise defined in paragraph (a). Below is a summary of the proposed definitions.
The term “ABBO” means the best bid(s) or offer(s) disseminated by other Eligible Exchanges (as defined in Rule 27.1(a)(7))
The term “BBO” means the best bid or offer on the Simple Book (as defined below) on the Exchange.
A “Complex Order Auction” or “COA” is an auction of a complex order as set forth in proposed Rule 21.20(d), described below.
A “COA-eligible order” is a complex order designated to be placed into a Complex Order Auction upon receipt that meets the requirements of Rule 21.20(d)(l), as described below.
A “complex order” is any order involving the concurrent purchase and/or sale of two or more different options in the same underlying security (the “legs” or “components” of the complex order),
The “Complex Order Book” or “COB” is the Exchange's electronic book of complex orders. All Members may submit orders to trade against interest or rest in the COB pursuant to the proposed Rule.
The term “complex strategy” means a particular combination of components and their ratios to one another. New complex strategies can be created as the result of the receipt of a complex instrument creation request or complex order for a complex strategy that is not currently in the System. The Exchange is thus proposing two methods to create a new complex strategy, one of which is a message that a Member can send to create the strategy and the other is a message a Member can send that will generate the strategy and that is also an order for that same strategy. These methods will be equally available to all Members but [sic] anticipates that Market Makers and other liquidity providers who anticipate providing larger amounts of trading activity in complex strategies are the most likely to send in a complex instrument creation request (
The term “NBBO” means the national best bid or offer as calculated by the Exchange based on market information received by the Exchange from the appropriate Securities Information Processor (“SIP”).
The term “regular trading” means trading of complex orders that occurs during a trading session other than: (i) At the opening or re-opening of the COB for trading following a halt, or (ii) during the COA process (as described below and in proposed Rule 21.20(d)).
The “Simple Book” is the Exchange's regular electronic book of orders.
The “Synthetic Best Bid or Offer” (“SBBO”) is calculated using the best displayed price for each component of a complex strategy from the Simple Book.
The “Synthetic National Best Bid or Offer” (“SNBBO”) is calculated using the NBBO for each component of a complex strategy to establish the best net bid and offer for a complex strategy.
Proposed Rule 21.20(b), Availability of Types of Complex Orders, describes the various types and specific times-in-force for complex orders handled by the System.
As an initial matter, proposed Rule 21.20(b) states that the Exchange will determine and communicate to Members via specifications and/or a Regulatory Circular listing which complex order types, among the complex order types set forth in the proposed Rule, are available for use on the Exchange. Additional information will be issued as additional complex order types, among those complex order types set forth in the proposed Rule, become available for use on the Exchange. Additional information will also be issued when a complex order type that had been in usage on the Exchange will no longer be available for use. This is substantially similar to, and based upon, the manner in which MIAX determines the available order types for its complex order book.
Among the complex order types that may be submitted are limit orders and market orders, and orders with a Time in Force of Good Til Day (“GTD”),
The Exchange proposes to allow orders with a Time in Force of DAY or IOC to only check against the COB (
As noted above, the Exchange proposes to define a COA-eligible order as a complex order designated to be placed into a Complex Order Auction upon receipt that meets the requirements of Rule 21.20(d)(l), as described below. The Exchange proposes to allow all types of orders to initiate a COA but proposes to have certain types of orders default to initiating a COA upon arrival with the ability to opt-out of initiating a COA and other types of orders default to not initiating a COA upon arrival with the ability to opt-in to initiating a COA.
The Exchange also proposes to allow the use of certain Match Trade Prevention (“MTP”) Modifiers, which allow a Member to avoid trading against the Member's own orders or orders of affiliates as specified on an identifier established by the Member (“Unique Identifiers).
Proposed Rule 21.20(c), Trading of Complex Orders, describes the manner in which complex orders will be handled and traded on the Exchange. The Exchange will determine and communicate to Members via specifications and/or Regulatory Circular which complex order origin codes (
Proposed Rule 21.20(c)(1)(A) provides that bids and offers on complex orders may be expressed in $0.01 increments, and the component(s) of a complex order may be executed in $0.01 increments, regardless of the minimum increments otherwise applicable to individual components of the complex order,
Additionally, respecting execution pricing, proposed Rule 21.20(c)(1)(C) states generally that a complex order will not be executed at a net price that would cause any component of the complex strategy to be executed: (i) At a price of zero; or (ii) ahead of a Priority Customer Order on the Simple Book without improving the BBO of at least one component of the complex strategy. These restrictions are designed to protect the priority of Priority Customer Orders that is established in the Simple Book.
Proposed Rule 21.20(c)(2) describes: The process of accepting orders prior to the opening of the COB for trading (and prior to re-opening after a halt); the process by which the Exchange will open the COB or re-open the COB following a halt (the “Opening Process”); the prices at which executions may occur on the Exchange for complex strategies, including through the Opening Process; execution of complex orders against the individual components or “legs” on the Simple Book; and the process of evaluation that is conducted by the System on an ongoing basis respecting complex orders.
Proposed Rule 21.20(c)(2)(A) states that Members may submit orders to the Exchange as set forth in Rule 21.6, which currently allows orders to be entered into the System beginning at 7:30 a.m. Eastern Time. The proposed Rule also states that any orders designated for the Opening Process will be queued until 9:30 a.m. at which time they will be eligible to be executed in the Opening Process. Any orders designated for a re-opening following a halt will be queued until the halt has ended, at which time they will be eligible to be executed in the Opening Process. Finally, proposed Rule 21.20(c)(2)(A) states that beginning at 7:30 a.m. and updated every five seconds thereafter, indicative prices and order imbalance information associated with the Opening Process will be disseminated by the Exchange while orders are queued prior to 9:30 a.m. or, in the case of a halt, prior to re-opening.
Proposed Rule 21.20(c)(2)(B) states that complex orders do not participate in the Opening Process for the individual option series conducted pursuant to Rule 21.7.
Proposed Rule 21.20(c)(2)(C) describes the manner in which the System determines the equilibrium price to be used for the purpose of execution of complex orders in the Opening Process. If there are complex orders that can match, the System will determine the equilibrium price where the most complex orders can trade. If there are multiple price levels that would result in the same number of strategies executed, the System will choose the price that would result in the smallest remaining imbalance. If there are multiple price levels that would result in the same number of strategies executed and would leave the same “smallest” imbalance, the System will choose the price that is closest to the Volume Based Tie Breaker (“VBTB”) as the opening price. For purposes of proposed subparagraph (C), the VBTB is the midpoint of the SNBBO. If there is no valid VBTB available, the System will use the midpoint of the highest and lowest potential opening prices as the opening price. If the midpoint price would result in an invalid increment, the System will round up to the nearest permissible increment and use that as the opening price. If executing at the equilibrium price would require printing at the same price as a Priority Customer on any leg in the Simple Book, the System will adjust the equilibrium price to a price that is better than the corresponding bid or offer in the marketplace by at least a $0.01 increment.
Pursuant to proposed paragraph Proposed Rule 21.20(c)(2)(D), when an equilibrium price is established at or within the SNBBO, the Exchange will execute matching complex orders in price/time priority at the equilibrium price. Any remaining complex order or the remaining portion thereof will be entered into the COB, subject to the Member's instructions. If the System cannot match orders because it cannot determine an equilibrium price (
Next, with respect to the execution of orders on the COB, as described in proposed paragraph (c)(2)(E), incoming complex orders will be executed by the System in accordance with the provisions below, and will not be executed at prices inferior to the SBBO or at a price that is equal to the SBBO when there is a Priority Customer Order at the best SBBO price. Complex orders will never be executed at a price that is outside of the individual component prices on the Simple Book. Furthermore, the net price of a complex order executed against another complex order on the COB will never be inferior to the price that would be available if the complex order legged into the Simple Book. The purpose of this provision is to prevent a component of a complex order from being executed at a price that is inferior to the best-priced contra-side orders on the Simple Book (on which the SBBO is based) and to prevent a component of a complex order from being executed at a price that compromises the priority already established by a Priority Customer on the Simple Book. The Exchange believes that such priority should be protected and that such protection should be extended to the execution of complex orders on the COB.
Incoming complex orders that could not be executed because the executions would be priced (i) outside of the SBBO, or (ii) equal to the SBBO due to a Priority Customer Order at the best SBBO price, will be cancelled if such complex orders are not eligible to be placed on the COB. Complex orders will be executed without consideration of any prices for the complex strategy that might be available on other exchanges trading the same complex strategy provided, however, that such complex order price may be subject to the Drill-Through Price Protection set forth in Interpretation and Policy .04(f) of proposed Rule 21.20.
Proposed Rule 21.20(c)(2)(F) describes the Legging process through which complex orders, under certain circumstances, are executed against the individual components of a complex strategy on the Simple Book. Complex orders up to a maximum number of legs (determined by the Exchange on a class-by-class basis as either two, three, or four legs and communicated to Members via specifications and/or Regulatory Circular) may be automatically executed against bids and offers on the Simple Book for the individual legs of the complex order (“Legging”), provided the complex order can be executed in full or in a permissible ratio by such bids and offers.
As proposed, all two leg COA-eligible Customer complex orders will be allowed to leg into the Simple Book without restriction. The benefit of Legging against the individual components of a complex order on the Simple Book is that complex orders can access the full liquidity of the Exchange's Simple Book, thus enhancing the possibility of executions at the best available prices on the Exchange. The Exchange believes this is particularly true for Customer complex orders and, thus, does not propose to limit the ability of such orders to leg into the Simple Book (when such orders are two leg orders).
Notwithstanding the foregoing, the Exchange is proposing to establish, in proposed Rule 21.20(c)(2)(F), that complex orders that could otherwise be eligible for Legging will only be permitted to trade against other complex orders in the COB in certain situations. Specifically, proposed Rule 21.20(c)(2)(F) would provide that other than two leg COA-eligible Customer complex orders, any other complex orders (
Currently, liquidity providers (typically Market Makers, though such functionality is not currently limited to registered Market Makers) in the Simple Book are protected by way of the Risk Monitor Mechanism (“Risk Monitor”)
All of a participant's quotes in each option class are considered firm until such time as the Risk Monitor's threshold has been equaled or exceeded and the participant's quotes are removed by the Risk Monitor in all series of that option class.
Based on the foregoing, the Exchange has proposed to modify the Risk Monitor as described in greater detail further below and has also proposed limitations to Rule 21.20(c)(2)(F). The purpose of the limitations in proposed Rule 21.20(c)(2)(F) is to minimize the impact of Legging on single leg Market Makers and other liquidity providers by limiting a potential source of unintended risk when certain types of complex orders leg into the Simple Book. The Exchange believes that the proposed limitation on the availability of Legging to (i) complex orders with two option legs where both legs are buying or both legs are selling and both legs are calls or both legs are puts, and
Proposed Rule 21.20(c)(2)(G) sets forth the process for evaluation of complex orders, and the COB, on a regular basis and for various conditions and events that result in the System's particular handling and execution of complex orders in response to such regular evaluation, conditions and events. The System will evaluate complex orders initially once all components of the complex strategy are open as set forth in proposed Rule 21.20(c)(2)(B)-(D) as described above, upon receipt as set forth in proposed Rule 21.20(c)(5)(A) as described below, and continually as set forth in proposed Rule 21.20(c)(5)(B) as described below.
The purpose of the evaluation process for complex orders is to determine (i) their eligibility to initiate, or to participate in, a COA as described in proposed Rule 21.20(d)(1); (ii) their eligibility to participate in the managed interest process as described in proposed Rule 21.20(c)(4); (iii) their eligibility for full or partial execution against a complex order resting on the COB or through Legging into the Simple Book (as described in proposed Rule 21.20(c)(2)(F)); (iv) whether the complex order should be cancelled; and (v) whether the complex order or any remaining portion thereof should be placed or remain on the COB.
The continual and event-triggered evaluation process ensures that the System is monitoring and assessing the COB for incoming complex orders, and changes in market conditions or events that cause complex orders to re-price and/or execute, and conditions or events that result in the cancellation of complex orders on the COB. This ensures the integrity of the Exchange's System in handling complex orders and results in a fair and orderly market for complex orders on the Exchange.
Proposed Rule 21.20(c)(3) describes how the System will establish priority for complex orders. As described below, the proposed priority structure for the COB differs from the priority structure applicable to the Simple Book as established in Exchange Rule 21.8.
Regarding execution and allocation of complex orders, proposed Rule 21.20(c)(3)(B) establishes that complex orders will be automatically executed against bids and offers on the COB in price priority. Bids and offers at the same price on the COB will be executed in time priority. Complex orders that leg into the Simple Book will be executed in accordance with Rule 21.8, which includes Priority Customer priority as well as pro rata executions. The Exchange notes that although it has proposed a different priority model for its COB (price-time) than its Simple Book (pro rata), the Exchange has proposed to operate the COB to respect Priority Customer priority on the Simple Book and will also continue to execute orders that leg into the Simple Book based on its existing priority model. The Exchange believes that operating the COB with price-time priority and without providing allocation benefits to particular types of Members will allow the Exchange to launch complex order functionality with relatively straightforward features and results. The Exchange also notes that this same priority model (COB as price-time and Simple Book as pro rata) is used by at least one other options exchange.
In order to ensure that complex orders (which are non-routable) receive the best executions on the Exchange, proposed Rule 21.20(c)(4) sets forth the price(s) at which complex orders will be placed on the COB. More specifically, the managed interest process is used to manage the prices at which a complex order that is not immediately executed upon entry is handled by the System, including how such an order is priced and re-priced on the COB. The managed interest process is initiated when a complex order that is eligible to be placed on the COB cannot be executed against either the COB or the Simple Book (with the individual legs) at the complex order's net price, and is intended to ensure that a complex order to be managed does not result in a locked or crossed market on the Exchange. Once initiated, the managed interest process for complex orders will be based upon the SBBO.
Under the managed interest process, a complex order that is resting on the COB and is either a complex market order as described in proposed Rule 21.20(c)(6) and discussed below, or has a limit price that locks or crosses the current opposite side SBBO when the SBBO is the best price, may be subject to the managed interest process for complex orders as discussed herein. If the order is not a COA-eligible order as defined in proposed Rules 21.20(a)(4) described above and 21.20(d)(1) described below, the System will first determine if the inbound complex order can be matched against other complex orders resting on the COB at a price that is at or inside the SBBO (provided there are no Priority Customer Orders on the Simple Book at that price). Second, the System will determine if the inbound complex order can be executed by Legging against individual orders resting on the Simple Book at the SBBO. A complex order subject to the managed interest process will never be executed at a price that is through the individual component prices on the Simple Book. Furthermore, the net price of a complex order subject to the managed interest process that is executed against another
Example—
• The Exchange receives an initiating Priority Customer complex order to buy 1 Mar 50 Call and sell 2 Mar 55 Calls for a 2.30 debit, 100 times.
• Assume the do-not-COA instruction is present on this order, so the order will not initiate a COA auction upon arrival regardless of any other factor.
• The SBBO is 1.40 debit bid at 2.30 credit offer.
• Since the Mar 55 call is 2.10 bid for only one contract (the Priority Customer Order), the complex order cannot be legged against the Simple Book at a 2.30 debit as a 2.30 debit would require selling two March 55 Calls at 2.10 while buying one March 50 Call at 6.50. Since there is Priority Customer interest on one leg of the complex order on the Simple Book, the inbound complex order cannot trade at this price by matching with other complex liquidity.
• Thus, the order is managed for display purposes at a price one penny inside of the opposite side SBBO, 2.29 and is available to trade with other complex liquidity at 2.29. The combination of the Simple Book and the COB will be a one penny wide market of 2.29 debit bid at 2.30 credit offer.
• If additional interest were to arrive on the Mar 55 Call 2.10 bid, the inbound complex order would be re-evaluated and would in this example become eligible to leg with the Priority Customer interest on the Simple Book at the 2.30 credit offer.
Example—
• The Exchange receives an initiating Priority Customer complex order to buy 1 Mar 50 call and sell 2 Mar 55 calls for a 2.30 debit, 100 times.
• The SBBO is 1.40 debit bid at 2.30 credit offer.
• Assume the do-not-COA instruction is present on this order, so the order will not initiate a COA auction upon arrival regardless of any other factor.
• Since the Mar 55 call is 2.10 bid for only one contract (the Broker Dealer order), the complex order cannot be legged against the Simple Book at a 2.30 debit, as a 2.30 debit would require selling two March 55 Calls at 2.10 while buying one March 50 Call at 6.50. Although the inbound complex order cannot trade at this time because there is insufficient interest to buy the March 55 Call, there is no Priority Customer interest on either side of the 2.30 credit offer and therefore the order will be able to trade at that price when sufficient interest exists. Thus, the order is managed for display purposes at a price locking the opposite side SBBO 2.30 and is available to trade against other complex interest at 2.30. The combination of the Simple Book and the COB will be a locked market of 2.30 debit bid at 2.30 credit offer.
Should the SBBO change, the complex order's book and display price will continuously re-price to the new SBBO until: (i) The complex order has been executed in its entirety; (ii) if not executed, the complex order's book and display price has reached its limit price or, in the case of a complex market order, the new SBBO, subject to any applicable price protections; (iii) the complex order has been partially executed and the remainder of the order's book and display price has reached its limit price or, in the case of a complex market order, the new SBBO, subject to any applicable price protections; or (iv) the complex order or any remaining portion of the complex order is cancelled. If the Exchange receives a new complex order for the complex strategy on the opposite side of the market from the managed complex order that can be executed, the System will immediately execute the remaining contracts from the managed complex order to the extent possible at the complex order's current book and display price. If unexecuted contracts remain from the complex order on the COB, the complex order's size will be revised and disseminated to reflect the complex order's remaining contracts at its current managed book and display price.
The purpose of using the calculated SBBO is to enable the System to determine a valid trading price range for complex strategies and to protect orders resting on the Simple Book by ensuring that they are executed when entitled. Additionally, the managed interest process is designed to ensure that the System will not execute any component of a complex order at a price that would trade through an order on the Simple Book or that would disrupt the established priority of Priority Customer interest resting on the Simple Book.
Proposed Rule 21.20(c)(5) describes how and when the System determines to execute or otherwise handle complex orders in the System. As stated above, the System will evaluate complex orders and the COB on a regular basis and will respond to the existence of various conditions and/or events that trigger an evaluation. Evaluation results in the various manners of handling and executing complex orders as described herein. The System will evaluate complex orders initially once all components of the complex strategy are open as set forth in proposed Rule 21.20(c)(2)(B)-(D), upon receipt as set forth in proposed Rule 21.20(c)(5)(A), and continually as set forth in proposed Rule 21.20(c)(5)(B), each of which as described herein.
Proposed Rule 21.20(c)(5)(A) describes the evaluation process that occurs upon receipt of complex orders once a complex strategy is open for trading. After a complex strategy is open for trading, all new complex orders that are received for the complex strategy are evaluated upon arrival. The System will determine if such complex orders are COA-eligible orders using the process and criteria described in proposed Rule 21.20(d). The System will also evaluate: (i) Whether such complex orders are
Proposed Rule 21.20(c)(5)(B) describes the System's ongoing regular evaluation of the COB. The System will continue, on a regular basis, to evaluate the factors listed in (i)-(v) described above with respect to evaluation performed on receipt.
The System will also continue to evaluate whether there is a halt affecting any component of a complex strategy, and, if so, the System will handle complex orders in the manner set forth in proposed Interpretation and Policy .05, as described below.
Proposed Rule 21.20(c)(5)(C) states that if the System determines that a complex order is a COA-eligible order (described below), such complex order will be submitted into the COA process as described in proposed Rule 21.20(d) and discussed below.
Proposed Rule 21.20(c)(5)(D) describes the handling of orders that are determined not to be COA-eligible. If the System determines that a complex order is not a COA-eligible order, such complex order may be, as applicable: (i) Immediately matched and executed against a complex order resting on the COB; (ii) executed against the individual components of the complex order on the Simple Book through Legging (as described in proposed Rule 21.20(c)(2)(F) above); placed on the COB and managed pursuant to the managed interest process as described in proposed Rule 21.20(c)(4) and discussed above; or cancelled by the System if the time-in-force (
Proposed Rule 21.20(c)(6) states that complex orders may be submitted as market orders and may be designated as COA-eligible. The proposed rule then distinguishes between complex market orders designated as COA-eligible and those that are not so designated. Proposed Rule 21.20(c)(6)(A) states that complex market orders designated as COA-eligible may initiate a COA upon arrival. The COA process is set forth in proposed Rule 21.20(d) and discussed below. Proposed Rule 21.20(c)(6)(B) states that complex market orders not designated as COA-eligible will trade immediately with any contra-side complex orders, or against the individual legs, up to and including the SBBO, and if not fully executed due to applicable price protections, may be posted to the COB subject to the managed interest process, and the Evaluation Process, each as described above.
Proposed Rule 21.20(d), COA Process, describes the process for determining if a complex order is eligible to begin a COA. All option classes will be eligible to participate in a COA.
Proposed Rule 21.20(d)(l) defines and describes the handling of a COA eligible order. A “COA-eligible order” means a complex order that, as determined by the Exchange, is eligible to initiate a COA based upon the Member's instructions, the order's marketability (
In order to initiate a COA upon receipt, a COA-eligible order must be designated as such (either affirmatively or by default) and must meet the criteria described in proposed Rule 21.20, Interpretation and Policy .02, as described below.
Complex orders processed through a COA may be executed without consideration to prices of the same complex interest that might be available on other exchanges. A COA will be allowed to occur at the same time as other COAs for the same complex strategy. The Exchange has not proposed to limit the frequency of COAs for a complex strategy and could have multiple COAs occurring concurrently with respect to a particular complex strategy.
Proposed Rule 21.20(d)(2) describes the circumstances under which a COA is begun. Upon receipt of a COA-eligible order, the Exchange will begin the COA process by sending a COA auction message to all subscribers to the Exchange's data feeds that deliver COA auction messages.
Proposed Rule 21.20(d)(3) defines the amount of time within which participants may respond to a COA auction message. The term “Response Time Interval” means the period of time during which responses to the RFR may be entered. The Exchange will determine the duration of the Response Time Interval, which shall not exceed 500 milliseconds, and will communicate it to Members via specifications and/or Regulatory Circular.
Proposed Rule 21.20(d)(4) states that Members may submit a response to the COA auction message (a “COA Response”) during the Response Time Interval. COA Responses can be submitted by a Member with any origin code, including Priority Customer. COA Responses may be submitted in $0.01 increments and must specify the price, size, side of the market (
Proposed Rule 21.20(d)(5) describes how COA-eligible orders are handled following the Response Time Interval. At the end of the Response Time Interval, COA-eligible orders may be executed in whole or in part. COA-eligible orders will be executed against the best priced contra side interest, and any unexecuted portion of a COA-eligible order remaining at the end of the Response Time Interval will be placed on the COB and ranked pursuant to proposed Rule 21.20(c)(3) as discussed above or cancelled, if IOC.
The COA will terminate: (i) Upon receipt of a new non-COA-eligible order on the same side as the COA but with a better price, in which case the COA will be processed and the new order will be posted to the COB; (ii) if an order is received that would improve the SBBO on the same side as the COA in progress to a price better than the auction price, in which case the COA will be processed, the new order will be posted to the Simple Book and the SBBO will be updated; or (iii) if a Priority Customer Order is received that would join or improve the SBBO on the same side as the COA in progress to a price equal to or better than the auction price, in which case the COA will be processed, the new order will be posted to the Simple Book and the SBBO will be updated. Additionally, a COA will terminate immediately without trading if any individual component or underlying security of a complex strategy in the COA process is subject to a halt as described in proposed Rule 21.20, Interpretation and Policy .05.
Proposed Rule 21.20(d)(6) describes the manner in which the System prices and executes complex orders at the conclusion of the Response Time Interval.
The proposed Rule initially states the broader pricing policy and functionality of all trading of complex orders in the System (whether a trade is executed in the COA process or in regular trading). Specifically, a complex strategy will not be executed at a net price that would cause any component of the complex strategy to be executed: (A) At a price of zero; or (B) ahead of a Priority Customer Order on the Simple Book without improving the BBO on at least one component of the complex strategy by at least $.01. At the conclusion of the Response Time Interval, COA-eligible orders will be allocated pursuant to proposed Rule 21.20(d)(7).
• The Exchange receives an initiating Priority Customer complex order to sell 3 Mar 50 calls and buy 2 Mar 55 calls at a 1.10 credit, 100 times. The COA-eligible instruction is present on this complex order, so the complex order will initiate a COA upon arrival if it equals or improves the SBBO.
• The SBBO is 1.10 debit bid at 1.55 credit offer.
• Since the initiating Priority Customer Order price would equal or improve the SBBO upon arrival, the COA meets the eligibility requirements and a COA auction message is broadcast showing the COA auction ID, instrument ID, origin code, quantity, side of the market, and price, and a 500 millisecond Response Time Interval is started.
• The System starts the COA at the initiating Priority Customer price offering to sell 100 strategies at 1.10 (but will be restricted to executing at 1.11 or better). The following responses are received:
• @500 milliseconds the Response Time Interval expires, the COA ends and the trade is allocated against initiating Priority Customer in the following manner:
Proposed Rule 21.20(d)(7) describes the allocation of complex orders that are executed in a COA. Once the COA is complete (at the end of the Response Time Interval), such orders will be allocated first in price priority based on their original limit price, and thereafter as stated herein.
Priority Customer Orders resting on the Simple Book have first priority. COA Responses and all other interest on the COB will have second priority and will be allocated in time priority (
The following examples illustrate the manner in which complex orders are allocated at the conclusion of the COA as well as the Exchange's initiation of a second COA process in the event a same-side COA-eligible order is received while a COA is already underway (in contrast to such order “joining” the COA that had already begun).
• The Exchange receives an initiating Priority Customer complex order to buy 1 Mar 50 call and Sell 1 Mar 55 call for a 3.20 debit, 1000 times.
• The COA-eligible instruction is present on this complex order, so the complex order will initiate a COA upon arrival if it equals or improves the SBBO.
• The SBBO is 2.70 debit bid at 3.50 credit offer.
• Since the initiating Priority Customer Order price would improve the SBBO upon arrival, the COA meets the eligibility requirements and a COA auction message is broadcast showing the COA auction ID, instrument ID, origin code, quantity, side of the market, and price, and a 500 millisecond Response Time Interval is started.
• The System starts the auction at the initiating Priority Customer price bidding 3.20 to buy 1000 contracts. The following responses are received:
• @500 milliseconds the Response Time Interval ends, the COA ends and the trade is allocated against the initiating Priority Customer using the single best price at which the greatest quantity can trade in the following manner:
• The Exchange receives an initiating Priority Customer complex order to buy 1 Mar 50 call and Sell l Mar 55 call for a 3.20 debit, 1000 times.
• The COA-eligible order instruction is present on this order, so the order will initiate an auction upon arrival if it equals or improves the SBBO.
• The SBBO is 2.70 debit bid at 3.50 credit offer.
• Since the initiating Priority Customer Order price would improve the SBBO upon arrival, the COA meets the eligibility requirements and a COA auction message is broadcast showing the COA auction ID, instrument ID, origin code, quantity, side of the market, and price, and a 500 millisecond Response Time Interval is started.
• The System starts the auction (“COA #1”) at the initiating Priority Customer price bidding 3.20 to buy 1000 contracts. The following responses are received:
• The System starts the auction at the initiating Broker-Dealer (BD2) price bidding 3.20 to buy 200 contracts. The following responses are received:
• @500 milliseconds the Response Time Interval for COA #1 ends, COA #1 ends and the trade is allocated against the initiating Priority Customer in the following manner:
• @500 milliseconds the Response Time Interval for COA #2 ends, COA #2 ends and the trade is allocated against the initiating Broker-Dealer in the following manner:
Proposed Rule 21.20(d)(8) states that, consistent with Exchange Rule 21.1(d)(5), the System will reject a complex market order received when the underlying security is subject to a “Limit State” or “Straddle State” as defined in the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the “Limit Up-Limit Down Plan”). If the underlying security of a COA-eligible order that is a market order enters a Limit State or Straddle State, the COA will end early without trading and all COA Responses will be cancelled.
Proposed Rule 21.20(d)(9), states that if, during a COA, the underlying security and/or any component of a COA-eligible order is subject to a trading halt, the COA will be handled as set forth in proposed Rule 21.20, Interpretation and Policy .05 as described in detail below.
The Exchange believes that the provisions regarding the COA provide a framework that will enable the efficient trading of complex orders in a manner that is similar to other options exchanges as stated above. Further, this clarity in the operation of the COA and its consistency with other exchanges will help promote a fair and orderly options market. As described above, the COA is designed to work in concert with the COB and with a simple priority of allocation that continues to respect the priority of allocations on the Simple Book (via the Exchange's pro rata allocation methodology).
The Exchange also proposes several Interpretations and Policies to proposed Rule 21.20.
The Exchange has not proposed different standards for participation by Market Makers on the COB (
Proposed Rule 21.20, Interpretation and Policy .02 establishes the method by which the Exchange will determine whether complex order interest is qualified to initiate a COA and also describes the operation of the proposed functionality with respect to the fact multiple COAs would be allowed to operate concurrently. If a COA-eligible order is priced equal to, or improves, the SBBO and is also priced to improve other complex orders resting at the top of the COB, the complex order will be eligible to initiate a COA, provided that if any of the bids or offers on the Simple Book that comprise the SBBO consists of a Priority Customer Order, the COA will only be initiated if it will trade at a price that is better than the corresponding bid or offer by at least a $0.01 increment.
Pursuant to the proposed Rule, a COA will be allowed to commence even to the extent a COA for the same complex strategy is already underway. The Exchange notes at the outset that based on how Exchange Systems operate (and computer processes generally), it is impossible for COAs to occur “simultaneously”, meaning that they would commence and conclude at exactly the same time. Thus, although it is possible as proposed for one or more COAs to overlap, each COA will be started in a sequence and with a time that will determine its processing. The Exchange proposes to codify in Interpretation and Policy .02 that to the extent there is more than one COA for a specific complex strategy underway at a time, each COA will conclude sequentially based on the exact time each COA commenced, unless terminated early pursuant to proposed paragraph (d)(5)(C) of the Rule.
Thus, even if there are two COAs that commence and conclude at nearly the same time each COA will have a distinct conclusion at which time the COA will be allocated. In turn, when the first COA concludes, orders on the Simple Book and unrelated complex orders that then exist will be considered for participation in the COA. If unrelated orders are fully executed in such COA, then there will be no unrelated orders for consideration when the subsequent COA is processed (unless new unrelated order interest has arrived). If instead there is remaining unrelated order interest after the first COA has been allocated, then such unrelated order interest will be considered for allocation when the subsequent COA is processed. As another example, each COA Response is required to specifically identify the COA for which it is targeted
Proposed Rule 21.20, Interpretation and Policy .03 is a regulatory provision that prohibits the dissemination of information related to COA-eligible orders by the submitting Member to third parties. Such conduct will be deemed conduct inconsistent with just and equitable principles of trade as described in Exchange Rule 3.1.
Proposed Interpretation and Policy .04 establishes Price Protection standards that are intended to ensure that certain types of complex strategies will not be executed outside of a preset standard minimum and/or maximum price limit. These Rules are based on and similar to portions of Interpretation and Policy .08 to CBOE Rule 6.53C.
First, in paragraph (a) of Proposed Rule 21.20, Interpretation and Policy .04, the Exchange proposed to define various terms necessary for such Interpretation,
• A “vertical” spread is a two-legged complex order with one leg to buy a number of calls (puts) and one leg to sell the same number of calls (puts) with the same expiration date but different exercise prices.
• A “butterfly” spread is a three-legged complex order with two legs to buy (sell) the same number of calls (puts) and one leg to sell (buy) twice as many calls (puts), all with the same expiration date but different exercise prices, and the exercise price of the middle leg is between the exercise prices of the other legs. If the exercise price of the middle leg is halfway between the exercise prices of the other legs, it is a “true” butterfly; otherwise, it is a “skewed” butterfly.
• A “box” spread is a four-legged complex order with one leg to buy calls and one leg to sell puts with one strike price, and one leg to sell calls and one leg to buy puts with another strike price, all of which have the same expiration date and are for the same number of contracts.
Second, in paragraph (b), the Exchange has proposed to specify credit-to-debit parameters that would prevent execution of, and instead cancel, market orders that would be executed at a net debit price after receiving a partial execution at a net credit price.
Next, in paragraph (c), the Exchange proposes to set forth various Debit/Credit Price Reasonability Checks, as follows. To the extent a price check parameter is applicable, the Exchange will not accept a complex order that is a limit order for a debit strategy with a net credit price that exceeds a pre-set buffer, a limit order for a credit strategy with a net debit price that exceeds a pre-set buffer, or a market order for a credit strategy that would be executed at a net
As proposed in paragraph (c)(2), the System would define a complex order as a debit or credit as follows: (A) A call butterfly spread for which the middle leg is to sell (buy) and twice the exercise price of that leg is greater than or equal to the sum of the exercise prices of the buy (sell) legs is a debit (credit); (B) a put butterfly spread for which the middle leg is to sell (buy) and twice the exercise price of that leg is less than or equal to the sum of the exercise prices of the buy (sell) legs is a debit (credit); and (C) an order for which all pairs and loners are debits (credits) is a debit (credit).
For purposes of Debit/Credit Price Reasonability Checks, a “pair” is a pair of legs in an order for which both legs are calls or both legs are puts, one leg is a buy and one leg is a sell, and both legs have the same expiration date but different exercise prices or, for all options except European-style index options, the same exercise price but different expiration dates. A “loner” is any leg in an order that the System cannot pair with another leg in the order (including legs in orders for European-style index options that have the same exercise price but different expiration dates). The proposed rule would further specify: that the System first pairs legs to the extent possible within each expiration date, pairing one leg with the leg that has the next highest exercise price; and that the System then, for all options except European-style index options, pairs legs to the extent possible with the same exercise prices across expiration dates, pairing one leg with the leg that has the next nearest expiration date.
A pair of calls is a credit (debit) if the exercise price of the buy (sell) leg is higher than the exercise price of the sell (buy) leg (if the pair has the same expiration date) or if the expiration date of the sell (buy) leg is farther than the expiration date of the buy (sell) leg (if the pair has the same exercise price). A pair of puts is a credit (debit) if the exercise price of the sell (buy) leg is higher than the exercise price of the buy (sell) leg (if the pair has the same expiration date) or if the expiration date of the sell (buy) leg is farther than the expiration date of the buy (sell) leg (if the pair has the same exercise price). A loner to buy is a debit, and a loner to sell is a credit.
In addition to the definitions and parameters described above, proposed paragraph (c)(3) would also state that the System rejects or cancels back to the Member any limit order or any market order (or any remaining size after partial execution of the order), that does not satisfy this check. Also, proposed paragraph (c)(4) would make clear that the check applies to auction responses in the same manner as it does to orders.
In addition to the proposed Debit/Credit Price Reasonability Checks described above, the Exchange proposes to adopt specific Buy Strategy Parameters that would be set forth in paragraph (d) to Interpretation and Policy .04. As proposed, the System will reject a limit order where all the components of the strategy are to buy and the order is priced at zero, any net credit price that exceeds a pre-set buffer, or a net debit price that is less than the number of individual option series legs in the strategy (or applicable ratio) multiplied by the applicable minimum net price increment for the complex order.
Proposed paragraph (e) to Interpretation and Policy .04 would set forth a Maximum Value Acceptable Price Range as an additional price check for vertical, true butterfly or box spreads as well as certain limit and market orders.
The last paragraph of proposed Interpretation and Policy .04, paragraph (f), would set forth the Exchange's Drill-Through Price Protection. The Drill-Through Price Protection feature is a price protection mechanism applicable to all complex orders under which a buy (sell) order will not be executed at a price that is higher (lower) than the SNBBO or the SNBBO at the time of order entry plus (minus) a buffer amount (the “Drill-Through Price”).
• The Exchange receives an initiating Priority Customer Order to buy 1 Mar 50 call and sell 2 Mar 55 calls for a 2.50 debit x 100.
• Assume the Exchange has established two seconds as the amount of time an order will rest in the COB with a price equal to the Drill-Through Price before cancellation.
• The SBBO is 1.40 debit bid at 2.50 credit offer.
• The SNBBO is 1.80 debit bid (CBOE) at 2.30 credit offer (ISE).
• Assume the do-not-COA instruction is present on this order, so the order will not initiate a COA auction upon arrival regardless of any other factor.
• Further assume the Member has set its Drill-Through Price Protection with zero tolerance to execute through the SNBBO, so the Exchange will protect the order to the best bid for the strategy or best offer for the strategy available from any single exchange's protected quotation in the Simple Order Market, including the Exchange.
• Due to the Drill-Through Price Protection, the inbound order cannot be legged against the Simple Book for a 2.50 debit (the strategy is offered at 2.30 on ISE). In order to display the order at its maximum tradable price, the inbound order is managed on the COB and displayed at its protected limit of 2.30 debit bid. While the (EDGX) SBBO remains 1.40 debit bid at 2.50 credit offer, the combination of the Simple Book and the COB becomes 2.30 debit bid at 2.50 credit offer.
• If the order managed and displayed at its protected limit of 2.30 debit bid is not executed within 2 seconds it will be cancelled.
The Exchange is proposing to establish in proposed Rule 21.20, Interpretation and Policy .05, the details regarding the Exchange's handling of complex orders in the context of a trading halt.
Proposed Interpretation and Policy .05, paragraph (a) would govern halts during regular trading and would state that if a trading halt exists for the underlying security or a component of a complex strategy, trading in the complex strategy will be suspended. The COB will remain available for Members to enter and manage complex orders. Incoming complex orders that could otherwise execute or initiate a COA in the absence of a halt will be placed on the COB. This is similar to functionality that is currently operative on other exchanges.
Proposed in Interpretation and Policy .05, paragraph (b) would govern halts during a COA and would state that if, during a COA, any component(s) and/or the underlying security of a COA-eligible order is halted, the COA will end early without trading and all COA Responses will be cancelled. Remaining complex orders will be placed on the COB if eligible, or cancelled. When trading in the halted component(s) and/or underlying security of the complex order resumes, the System will evaluate and re-open the COB pursuant to subparagraph (c)(2)(B)-(D) described above.
Other investor protections proposed by the Exchange are described in Interpretation and Policy .06. Specifically, the Exchange proposes an additional price protection referred to as Fat Finger Price Protection as well as a complex order size protection. Both of these protections will be will be [sic] available for complex orders as determined by the Exchange and communicated to Members via specifications and/or Regulatory Circular.
Pursuant to the Fat Finger Price Protection, the Exchange will define a price range outside of which a complex limit order will not be accepted by the System.
With respect to the proposed order size protection, the System will prevent certain complex orders from executing or being placed on the COB if the size of the complex order exceeds the complex order size protection designated by the Member.
As noted above, the Exchange proposes to adopt two new Times in Force not currently available on the Exchange in connection with the proposal, GTC and OPG. The Exchange notes that as proposed, both of these Times in Force will ultimately be available on both the Simple Book and the COB. The Exchange proposes to include GTC and OPG within Rule 21.1(f), which currently lists all Times in Force available for use on EDGX Options. As proposed, “Good Til Cancelled or “GTC” shall mean, for an order so designated, that if after entry into the System, the order is not fully executed, the order (or the unexecuted portion thereof) shall remain available for potential display and/or execution unless cancelled by the entering party, or until the option expires, whichever comes first. “At the Open” or “OPG” shall mean, for an order so designated, an order that shall only participate in the opening process on the Exchange. An OPG order not executed in the opening process will be cancelled.
The Exchange currently offers various data feeds that contain information regarding activity on EDGX Options, including auctions conducted by EDGX Options. The Exchange proposes to amend Rule 21.15 to specify the data feeds the Exchange proposes to adopt in connection with this proposal. As set forth in current Rule 21.15, all data products are free of charge, except as otherwise noted in the Fee Schedule; thus, if the Exchange proposes to adopt fees in connection with any of these data feeds, it will file a separate fee filing and will add such fees to the Fee Schedule. The proposed data feeds and related changes are described below.
First, the Exchange currently offers a Multicast PITCH data feed, which is an
Second, although it offers a “top of book” feed for its equities trading platform, EDGX Options does not currently offer such a feed. In connection with this proposal, the Exchange proposes to offer a Multicast TOP data feed. As proposed, Multicast TOP would be an uncompressed data feed that offers top of book quotations and execution information based on options orders entered into the System. The Exchange proposes to offer separate Multicast TOP data feeds for the Exchange's Simple Book and the COB.
Third, the Exchange currently offers an Auction Feed, which is an uncompressed data product that provides information regarding the current status of price and size information related to auctions conducted by the Exchange. The Exchange proposes to adopt a similar, but separate, Auction data feed for the COB.
Fourth, pursuant to current Rule 21.15(c)(2), the Exchange identifies Priority Customer Orders and trades as such on messages disseminated by the Exchange through its Multicast PITCH and Auction data feeds. The Exchange proposes to also disseminate this information on its Multicast TOP data feed.
Finally, the Exchange proposes to re-number the provisions for the DROP and Historical Data products, but does not propose any changes with respect to such products.
The Exchange proposes to adopt Interpretation and Policy .01 to Rule 21.16 to state that complex orders will participate in the Exchange's existing risk functionality, the Risk Monitor. As noted above, the Risk Monitor functions by counting Member activity both within a specified time period and also on an absolute basis for the trading day and then rejecting or cancelling orders that exceed Member-designated volume, notional, count or percentage triggers. The Exchange proposes to make clear in this Interpretation that for purposes of counting within a specified time period and for purposes of calculating absolute limits, the Exchange will count individual trades executed as part of a complex order when determining whether a volume trigger, notional trigger or count trigger has been reached. Further, the Exchange proposes to make clear that for purposes of counting within a specified time period and for purposes of calculating absolute limits, the Exchange will count the percentage executed of a complex order when determining whether the percentage trigger has been reached.
If the proposed changes are approved by the Commission, the Exchange proposes to implement the System changes described herein on October 23, 2017.
The Exchange believes that the proposed rule change is consistent with the provisions of the Act,
The Exchange believes in particular that its proposal regarding executions of complex orders against the Simple Book is consistent with the Act and furthers the objectives of Section 6(b)(5) of the Act
The Exchange also believes the interaction of orders will benefit investors by increasing the opportunity for complex orders to receive execution, while also enhancing execution quality for orders on the Simple Book. Generally, the options industry rules for the execution of complex orders provide that two complex orders may execute against one another if the execution prices of the component legs result in a net price that is better than the best customer limit order available for the individual component legs. This permits an exchange, when executing two complex orders against one another, to execute each component leg on the market's best bid or offer so long as the execution does not trade ahead of customer interest.
The Exchange believes it is reasonable to permit complex orders that are the subject of this rule change to leg into the Simple Book. The proposed rule concerning Legging will facilitate the execution of more complex orders, and will thus benefit investors and the general public because complex orders will have a greater chance of execution when they are allowed to leg into the simple market. This will increase the execution rate for these orders, thus providing market participants with an increased opportunity to execute these orders on the Exchange. The prohibition (though inapplicable to two-leg COA-eligible Customer complex orders) against the Legging of complex orders with two option legs where both legs are buying or both legs are selling and both legs are calls or both legs are puts, and on complex orders with three or four option legs where all legs are buying or all legs are selling regardless of whether the option leg is a call or a put, protects investors and the public interest by ensuring that Market Makers providing liquidity do not trade above their established risk tolerance levels, as described above.
Despite the enhanced execution opportunities provided by legging, as described above, the Exchange believes it is reasonable and consistent with the Act to permit Members to submit orders designated as Complex Only Orders that will not leg into the Simple Book. As described above, the Exchange notes that the Complex Only Order option is analogous to functionality on the MIAX complex order book, which includes certain types of orders and quotes that do not leg into the simple marketplace but instead will only execute against or post to the MIAX complex book.
The Exchange also believes it is reasonable to limit other types of complex orders that are eligible to leg into the Simple Book. The Exchange believes that the vast majority of complex orders sent to the Exchange will be unaffected by this proposed rule, including two leg COA-eligible Customer complex orders, which will still be allowed to leg into the Simple Book without restriction. Moreover, the Exchange believes that the potential risk of offering Legging functionality for complex orders such as those impacted by the proposed rule could limit the amount of liquidity that Market Makers are willing to provide in the Simple Book. In particular, Market Makers, without the proposed limitation, are at risk of executing the cumulative size of their quotations across multiple options series without an opportunity to adjust their quotes. Market Makers may be compelled to change their quoting and trading behavior to account for this additional risk by widening their quotes and reducing the size associated with their quotes, which would diminish the Exchange's quality of markets and the quality of the markets in general. The limitations in proposed Rule 21.20(c)(2)(F) substantially diminish a potential source of unintended Market Maker risk when certain types of complex orders leg into the Simple Book, thereby removing impediments to and perfecting the mechanisms of a free and open market and a national market system and, in general, protecting investors and the public interest by adding confidence and stability in the Exchange's marketplace. This benefit to investors far exceeds the small amount of potential liquidity provided by the few complex orders to which this aspect of the proposal applies.
Additionally, investors will have greater opportunities to manage risk with the new availability of trading in complex orders. The proposed adoption of rules governing complex order auctions will facilitate the execution of complex orders while providing opportunities to access additional liquidity and fostering price improvement. The Exchange believes the proposed rules are appropriate in that complex orders are widely recognized by market participants as invaluable, both as an investment, and a risk management strategy. The proposed rules will provide an efficient mechanism for carrying out these strategies. In addition, the proposed complex order rules promote equal access by providing Members that subscribe to the Exchange's data feeds that include auction notifications with the opportunity to interact with orders in the COA. In this regard, any Member can subscribe to the options data provided through the Exchange's data feeds that include auction notifications.
The Exchange believes that the general provisions regarding the trading of complex orders provide a clear framework for trading of complex orders in a manner consistent with other options exchanges. This consistency should promote a fair and orderly national options market system. The Exchange believes that the proposed rules will result in efficient trading and reduce the risk for investors that complex orders could fail to execute by providing additional opportunities to fill complex orders.
The proposed execution and priority rules will allow complex orders to interact with interest in the Simple Book and, conversely, interest on the Simple Book to interact with complex orders in an efficient and orderly manner. Consistent with other exchanges and with well-established principles of customer protection, the proposed rules state that a complex order may be executed at a net credit or debit price against another complex order without giving priority to bids or offers established in the marketplace that are no better than the bids or offers comprising such net credit or debit; provided, however, that if any of the bids or offers established in the marketplace consist of a Priority Customer Order, at least one component of the complex strategy must trade at a price that is better than the corresponding BBO.
For the reasons set forth above, the Exchange believes the proposed rule change regarding complex order execution is consistent with the goals of the Act to remove impediments to and to perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest.
The Exchange proposes that complex orders may be submitted as limit orders and market orders, and orders with a Time in Force of GTD, IOC, DAY, GTC, or OPG, as each such term is defined in Exchange Rule 21.1, or as a Complex Only order, COA-eligible or do-not-COA order.
Further, the Exchange believes it is reasonable and appropriate to add GTC and OPG modifiers as new Times in Force that will be generally available for use on the Simple Book or the COB. The Exchange notes that GTC orders are offered by other exchanges
The Exchange believes that the regular and event-driven evaluation of the COB for the eligibility of complex orders to initiate a COA, and to determine their eligibility to participate in the managed interest process, their eligibility for full or partial execution against a complex order resting on the COB or through Legging with the Simple Book, whether the complex order should be cancelled, and whether the complex order or any remaining portion thereof should be placed on the COB are consistent with the principles of the Act to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest.
Evaluation of the executability of complex orders and for the determination as to whether a complex order is COA-eligible is central to the removal of impediments to, and the perfection of, the mechanisms of a free and open market and a national market system and, in general, the protection of investors and the public interest. The evaluation process ensures that the System will capture and act upon complex orders that are due for execution or placed in a COA. The regular and event-driven evaluation process removes potential impediments to the mechanisms of the free and open market and the national market system by ensuring that complex orders are given the best possible chance at execution at the best price, evaluating the availability of complex orders to be handled in a number of ways as described in this proposal. Any potential impediments to the order handling and execution process respecting complex orders are substantially removed due to their continual and event-driven evaluation for subsequent action to be taken by the System. This protects investors and the public interest by ensuring that complex orders in the System are continually monitored and evaluated for potential action(s) to be taken on behalf of investors that submit their complex orders to the Exchange.
The COA process is also designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest.
Following evaluation, a COA-eligible order may begin a new COA. The COA process promotes just and equitable principles of trade, fosters cooperation and coordination with persons engaged in facilitating transactions in securities, removes impediments to and perfects the mechanisms of a free and open market and a national market system and, in general, protects investors and the public interest by ensuring that eligible complex orders are given every opportunity to be executed at the best prices against an increased level of contra-side liquidity responding to the COA auction message. This mechanism of a free and open market is designed to enhance liquidity and the potential for better execution prices during the Response Time Interval, all to the benefit of investors on the Exchange, and thereby consistent with the Act.
The Exchange believes that the determination to initiate a COA removes impediments to, and perfects the mechanisms of, a free and open market and a national market system and, in general, protects investors and the public interest, by ensuring that a COA is conducted for a complex order only when there is a reasonable and realistic chance for price improvement through a COA. As described above, the Exchange has proposed to initiate a COA if a COA-eligible order is priced equal to, or improves, the SBBO and is also priced to improve other complex orders resting at the top of the COB, provided that if any of the bids or offers on the Simple Book that comprise the SBBO consists of a Priority Customer Order, the COA will only be initiated if it will trade at a price that is better than the corresponding bid or offer by at least a $0.01 increment. The purpose of this provision is to ensure that a complex order will not initiate a COA if it is priced through the bid or offer at a point where it is not reasonable to anticipate that it would generate a meaningful number of COA Responses such that there would be price improvement of the complex order's limit price. Promoting the orderly initiation of a COA is essential to maintaining a fair and orderly market for complex orders; otherwise, the initiation of COAs that are unlikely to result in price improvement might result in unnecessary activity in the marketplace when there is no meaningful opportunity for price improvement.
If a complex order is not priced equal to, or better than, the SBBO or is not priced to improve other complex orders resting at the top of the COB, the Exchange does not believe that it is reasonable to anticipate that it would generate a meaningful number of COA Responses such that there would be price improvement of the complex order's limit price. Promoting the orderly initiation of COAs is essential to maintaining a fair and orderly market for complex orders; otherwise, the initiation of COAs that are unlikely to result in price improvement could affect the orderliness of the marketplace in general. The Exchange believes that this removes impediments to and perfects the mechanisms of a free and open market and a national market system by promoting the orderly initiation of COAs, and by limiting the likelihood of unnecessary COAs that are not expected to result in price improvement.
The Exchange believes the proposed maximum 500 millisecond Response Time Interval promotes just and equitable principles of trade and removes impediments to a free and open market because it allows sufficient time for Members participating in a COA to submit COA Responses and would encourage competition among participants, thereby enhancing the potential for price improvement for complex orders in the COA to the benefit of investors and public interest. The Exchange believes the proposed rule change is not unfairly discriminatory because it establishes a Response Time Interval applicable to all Exchange participants participating in a COA.
The Exchange again notes that it has not proposed to limit the frequency of COAs for a complex strategy and could have multiple COAs occurring concurrently with respect to a particular complex strategy. The Exchange represents that it has systems capacity to process multiple overlapping COAs consistent with the proposal, including systems necessary to conduct surveillance of activity occurring in such auctions. Further, the Exchange reiterates that at least one options exchange has permitted multiple complex auctions in the same strategy to run concurrently and intends to reintroduce such functionality.
The Exchange does not anticipate overlapping auctions necessarily to be a common occurrence, however, after considerable review, believes that such behavior is more fair and reasonable with respect to Members who submit orders to the COB because the alternative presents other issues to such Members. Specifically, if the Exchange does not permit overlapping COAs then a Member who wishes to submit a COA-eligible order but has its order rejected because another COA is already underway in the complex strategy must either wait for such COA to conclude and re-submit the order to the Exchange (possibly constantly resubmitting the complex order to ensure it is received by the Exchange before another COA commences) or must send the order to another options exchange that accepts complex orders.
The COA process also protects investors and the public interest by creating more opportunities for price improvement of complex orders, all to the benefit of Exchange participants and the marketplace as a whole.
The Exchange believes that the proposed complex order price protections will provide market participants with valuable price and order size protections in order to enable them to better manage their risk exposure when trading complex orders. In particular, the Exchange believes the proposed price protection mechanisms will protect investors and the public interest and maintain fair and orderly markets by mitigating potential risks associated with market participants entering orders at clearly unintended prices and orders trading at prices that are extreme and potentially erroneous, which may likely have resulted from human or operational error.
The Exchange is proposing to suspend trading in complex orders, to remove certain complex orders from the COB, and to end a COA early when there is a halt in the underlying security of, or in an individual component of, a complex order. This protection is intended to protect investors and the public interest by causing the System not to execute during potentially disruptive conditions or events that could affect customer protection, and to resume trading in complex orders to the extent possible upon the conclusion or resolution of the potentially disruptive condition or event. The System's proposed functionality during a trading halt protects investors and the public interest by ensuring that the execution of complex orders on behalf of investors and the public will only occur at times when there is a fair and orderly market.
The Exchange believes it is reasonable and appropriate to offer the proposed data feeds described above in order to provide information regarding activity on the COB, including COA auction messages. Each of the proposed data feeds is based on and similar to an existing data feed offered by EDGX Options and/or the EDGX equities trading platform (“EDGX Equities”).
The proposed amendment to Exchange Rule 21.16, Risk Monitor Mechanism, to reject complex orders that exceed Member-designated volume, notional, count or percentage triggers is designed to protect investors and the public interest by assisting Members submitting complex orders in their risk management. Members are vulnerable to the risk from system or other error or a market event that may cause them to send a large number of orders or receive multiple, automatic executions before they can adjust their order exposure in the market. Without adequate risk management tools, such as the Risk Monitor Mechanism, Members could reduce the amount of order flow and liquidity that they provide to the market. Such actions may undermine the quality of the markets available to customers and other market participants. Accordingly, the proposed amendments to the Risk Protection Monitor should instill additional confidence in Members that submit orders to the Exchange that their risk tolerance levels are protected, and thus should encourage such Members to submit additional order flow and liquidity to the Exchange with the understanding that they have this protection respecting all orders they submit to the Exchange, including complex orders, thereby removing impediments to and perfecting the mechanisms of a free and open market and a national market system and, in general, protecting investors and the public interest.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The competition among the options exchanges is vigorous and this proposal is intended to afford market participants on EDGX Options the opportunity to execute complex orders in a manner that is similar to that allowed on other options exchanges.
The Exchange believes that the proposal will enhance competition among the various markets for complex order execution, potentially resulting in more active complex order trading on all exchanges.
The Exchange notes that as to intramarket competition, its proposal is designed to treat all Exchange participants in the same category of participant equally. The Exchange believes that it is equitable and reasonable to afford trade allocation priority to certain categories of participants. The proposal to establish first priority to Priority Customer orders resting on the Simple Book is consistent with the long-standing policies of customer protection found throughout the Act and maintains the Exchange's current practice by affording such priority.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Exchange's transaction fees at Rule 7018 to assess a new charge for adding displayed liquidity for members that equal or exceed a specified monthly volume threshold, as described further below.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of the proposed rule change is to amend the Exchange's transaction fees at Rule 7018 to assess a new charge for adding displayed liquidity for members that equal or exceed a specified monthly volume threshold.
The Exchange operates on the “taker-maker” model, whereby it pays credits to members that take liquidity and charges fees to members that provide liquidity. Currently, the Exchange assesses three fees to members that provide liquidity on BX through displayed orders if the member meets certain volume requirements. First, the Exchange assesses a charge of $0.0014 per share executed for a displayed order entered by a member that adds liquidity equal to or exceeding 0.25% of total Consolidated Volume during a month. Second, the Exchange assesses a charge of $0.0017 per share executed for a displayed order entered by a member that adds liquidity equal to or exceeding 0.15% of total Consolidated Volume during a month. Third, the Exchange assesses a charge of $0.0018 per share executed for a displayed order entered by a member that adds liquidity equal to or exceeding the member's Growth Target.
The Exchange now proposes to assess a charge of $0.0013 per share executed for a displayed order entered by a member that adds liquidity equal to or exceeding 0.55% of total Consolidated Volume during a month. As with the other charges and credits in Rule 7018, Consolidated Volume shall be defined as the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed
By assessing a lower charge on displayed orders for members that add increased liquidity, the Exchange is incentivizing members to add greater liquidity on BX, to the benefit of all BX market participants.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Likewise, in
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .”
The Exchange believes that the proposed charge and its attendant volume requirement is reasonable. In reducing the charge to add displayed liquidity if the volume threshold is met, the proposed charge and its volume requirement is designed to incentivize members to add greater liquidity to the Exchange. Accordingly, the amount of the charge is less than other charges for adding displayed liquidity, and the volume requirement is correspondingly more stringent than volume requirements for higher charges,
The Exchange believes that the proposed change is equitably allocated among members, and is not designed to permit unfair discrimination. BX notes that participation on the Exchange, and eligibility for this charge, is voluntary, and that the Exchange continues to offer other charge [sic] for which members may attempt to qualify instead of the proposed charge. The proposed charge applies to all members that otherwise qualify for the charge by meeting its volume requirement. The Exchange believes that it is equitable and not unfairly discriminatory to adopt this charge and its volume requirement because the Exchange is attempting, through this charge and its volume requirement, to incentivize members to add greater liquidity to the Exchange, which may benefit all BX market participants.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In this instance, the proposed charge for adding displayed liquidity does not impose a burden on competition because the Exchange's execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. The new charge applies equally to all members that otherwise meet the requirement,
In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed change will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” )
FINRA is proposing to update cross-references and make other non-substantive changes within FINRA rules.
The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On October 18, 2016, the SEC approved changes to FINRA Rule 6730 (Transaction Reporting) to expand the Trade Reporting and Compliance Engine (“TRACE”) reporting rules to include most secondary market transactions in marketable U.S. Treasury securities.
The proposed rule change would update the cross reference in FINRA Rule 6730(a)(1) to clarify that Reportable TRACE Transactions in U.S. Treasury Securities are not subject to the 15-minute reporting requirement.
In addition, the proposed rule change would make technical changes to FINRA Rule 6810 (Definitions)
FINRA has filed the proposed rule change for immediate effectiveness and has requested that the SEC waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so that FINRA can implement the proposed rule change to coincide with effective dates of the affected rule. The implementation date for the proposed changes to FINRA Rule 6730 will be July 10, 2017, to coincide with the implementation date of earlier changes to the rule.
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change brings clarity and consistency to FINRA rules without adding any burden on firms.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative before 30 days from the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),
The Exchange has asked the Commission to waive the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The waiver will allow FINRA to update the cross reference in FINRA Rule 6730 to coincide with the implementation date of that rule, which is July 10, 2017. The implementation date for the proposed changes to FINRA Rule 6810 is June 30, 2017, the date FINRA filed the instant proposed rule change. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change to be operative upon filing with the Commission.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Securities and Exchange Commission (“Commission”).
Notice.
Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would permit (a) actively-managed series of certain open-end management investment companies (“Funds”) to issue shares redeemable in large aggregations only (“Creation Units”); (b) secondary market transactions in Fund shares to occur at negotiated market prices rather than at net asset value (“NAV”); (c) certain Funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption; (d) certain affiliated persons of a Fund to deposit securities into, and receive securities from, the Fund in connection with the purchase and redemption of Creation Units; (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds (“Acquiring Funds”) to acquire shares of the Funds; and (f) certain Funds (“Feeder Funds”) to create and redeem Creation Units in-kind in a master-feeder structure.
Northern Lights Fund Trust (the “Trust”), a Delaware statutory trust registered under the Act as an open-end management investment company with multiple series, and Toews Corporation (the “Initial Adviser”), a Delaware corporation registered as an investment adviser under the Investment Advisers Act of 1940.
The application was filed on June 26, 2017.
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on August 7, 2017, and should be accompanied by proof of service on applicants, in the form of an affidavit, or for lawyers, a certificate of service. Pursuant to rule 0-5 under the Act, hearing requests should state the nature of the writer's interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: The Trust, 17605 Wright Street Omaha, NE 68130; the Initial Adviser, 1750 Zion Road, Suite 201, Northfield, NJ 08225.
Courtney S. Thornton, Senior Counsel, at (202) 551-6812, or Robert H. Shapiro, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
The following is a summary of the application. The complete application may be obtained via the Commission's Web site by searching for the file number, or for an applicant using the Company name box, at
1. Applicants request an order that would allow Funds to operate as actively-managed exchange traded funds (“ETFs”).
2. Each Fund will consist of a portfolio of securities and other assets and investment positions (“Portfolio Positions”). Each Fund will disclose on its Web site the identities and quantities of the Portfolio Positions that will form the basis for the Fund's calculation of NAV at the end of the day.
3. Shares will be purchased and redeemed in Creation Units and generally on an in-kind basis. Except where the purchase or redemption will include cash under the limited circumstances specified in the application, purchasers will be required to purchase Creation Units by depositing specified instruments (“Deposit Instruments”), and shareholders redeeming their shares will receive specified instruments (“Redemption Instruments”). The Deposit Instruments and the Redemption Instruments will each correspond pro rata to the positions in the Fund's portfolio (including cash positions) except as specified in the application.
4. Because shares will not be individually redeemable, applicants request an exemption from section 5(a)(1) and section 2(a)(32) of the Act that would permit the Funds to register as open-end management investment companies and issue shares that are redeemable in Creation Units only.
5. Applicants also request an exemption from section 22(d) of the Act and rule 22c-1 under the Act as secondary market trading in shares will take place at negotiated prices, not at a current offering price described in a Fund's prospectus, and not at a price based on NAV. Applicants state that (a) secondary market trading in shares does not involve a Fund as a party and will not result in dilution of an investment in shares, and (b) to the extent different prices exist during a given trading day, or from day to day, such variances occur
6. With respect to Funds that hold non-U.S. Portfolio Positions and that effect creations and redemptions of Creation Units in kind, applicants request relief from the requirement imposed by section 22(e) in order to allow such Funds to pay redemption proceeds within fifteen calendar days following the tender of Creation Units for redemption. Applicants assert that the requested relief would not be inconsistent with the spirit and intent of section 22(e) to prevent unreasonable, undisclosed or unforeseen delays in the actual payment of redemption proceeds.
7. Applicants request an exemption to permit Acquiring Funds to acquire Fund shares beyond the limits of section 12(d)(1)(A) of the Act; and the Funds, and any principal underwriter for the Funds, and/or any broker or dealer registered under the Exchange Act, to sell shares to Acquiring Funds beyond the limits of section 12(d)(1)(B) of the Act. The application's terms and conditions are designed to, among other things, help prevent any potential (i) undue influence over a Fund through control or voting power, or in connection with certain services, transactions, and underwritings, (ii) excessive layering of fees, and (iii) overly complex fund structures, which are the concerns underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
8. Applicants request an exemption from sections 17(a)(1) and 17(a)(2) of the Act to permit persons that are affiliated persons, or second tier affiliates, of the Funds, solely by virtue of certain ownership interests, to effectuate purchases and redemptions in-kind. The deposit procedures for in-kind purchases of Creation Units and the redemption procedures for in-kind redemptions of Creation Units will be the same for all purchases and redemptions and Deposit Instruments and Redemption Instruments will be valued in the same manner as those Portfolio Positions currently held by the Funds. Applicants also seek relief from the prohibitions on affiliated transactions in section 17(a) to permit a Fund to sell its shares to and redeem its shares from an Acquiring Fund, and to engage in the accompanying in-kind transactions with the Acquiring Fund.
9. Applicants also request relief to permit a Feeder Fund to acquire shares of another registered investment company managed by the Adviser having substantially the same investment objectives as the Feeder Fund (“Master Fund”) beyond the limitations in section 12(d)(1)(A) and permit the Master Fund, and any principal underwriter for the Master Fund, to sell shares of the Master Fund to the Feeder Fund beyond the limitations in section 12(d)(1)(B).
10. Section 6(c) of the Act permits the Commission to exempt any persons or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act.
For the Commission, by the Division of Investment Management, under delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend NYSE Arca Equities Rule 7.38 (Odd and Mixed Lots) to specify the ranking of an odd lot order that has a display price that is better than its working price. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend NYSE Arca Equities Rule 7.38 (Odd and Mixed Lots) (“Rule 7.38”) to specify the ranking of an odd lot order that has a display price that is better than its working price.
Rule 7.38 provides that the working price of an odd lot order will be adjusted both on arrival and when resting on the NYSE Arca Book based on the limit price of the order as follows:
• If the limit price of an odd lot order is equal to or worse than the contra-side PBBO, it will have a working price equal to the limit price.
• If the limit price of an odd lot order is better than the contra-side PBBO, it will have a working price equal to the contra-side PBBO.
• If the PBBO is crossed, the odd lot order will have a working price equal to the same-side PBB or PBO.
By moving the working price, an odd lot order to buy (sell) will not trade at a price above (below) the PBO (PBB), or if the PBBO is crossed, above (below) the PBB (PBO). In either case, if the odd lot order is ranked Priority 2—Display Orders,
Exchange rules are currently silent regarding how a resting odd lot order that has a display price that is better than its working price would be ranked for trading at that working price.
The Exchange proposes to specify that in such case, the ranking and priority category applicable to such an order at its display price,
The Exchange further believes that if an odd-lot order is assigned a new working price that is worse than its display price, such order should not be assigned a new working time. In other words, when trading at its working price, its time ranking would be based on the working time associated with its display price.
To effect this change, the Exchange proposes to amend Rule 7.38(b)(1) to provide that an odd-lot order ranked Priority 2—Display Orders would not be assigned a new working time if its working price is adjusted under Rule 7.38(b)(1). In addition, if the display price of an odd lot order to buy (sell) is above (below) its working price, it would be ranked based on its display price.
Because an odd lot order with a display price better than its working price currently trades in this manner, these changes will be in effect when this proposed rule change is operative.
The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the “Act”),
Specifically, the Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because the Exchange believes that an order that has been displayed should receive the benefit of the ranking of that displayed price if it trades at a less aggressive working price. This scenario would only occur if a resting odd-lot order has been displayed at a price, and then an Away Market PBBO crosses that price and then the working price of that order is adjusted to a price inferior to its display price. In such case, while the odd lot order would be executed at its working price, because it was both willing to trade at a better price
The Exchange further believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would promote transparency in Exchange rules and reduce potential confusion regarding how an odd-lot order would be ranked and execute [sic] in the limited scenario when the display price of a resting odd lot has been crossed, and it has been assigned a working price inferior to its display price.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change is not designed to address any competitive issues but rather to provide an incentive for market participants to enter aggressively-priced displayed liquidity.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the NYSE Arca Options Fee Schedule (“Fee Schedule”). The Exchange proposes to implement the fee change effective July 10, 2017.
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change
The purpose of this filing is to amend the Fee Schedule to offer an incentive for Market Makers to post liquidity in the SPDR S&P 500 ETF Trust (“SPY”). The Exchange also proposes a number of textual changes designed to clarify certain aspects of the Fee Schedule.
Currently, Market Makers receive a $0.28 per contract credit for executions against Market Maker posted liquidity in Penny Pilot Issues and Lead Market Makers (“LMMs”) may receive an additional $.04 per contract credit (for a total of $0.32 per contract credit) for posted liquidity in Penny Pilot Issues that are in the LMM's appointment.
The Exchange proposes to add a new incentive to encourage Market Makers to post interest in SPY. Specifically, the Exchange proposes to offer any Market Maker that has posted interest of at least 0.20% of TCADV in SPY during a calendar month, a per contract credit of $0.45 for electronic executions against such posted interest.
The Exchange also proposes to make the following textual changes to the Fee Schedule regarding Market Maker incentives, which are designed to make the Fee Schedule easier to navigate and comprehend:
• The Exchange proposes to re-locate the reference to Endnote 15 from the beginning to the end of each of the following tables: The Market Maker Incentive For Penny Pilot Issues; the Market Maker Incentive For Non-Penny Pilot Issues; and the MM Tiers (collectively, the “MM Tables”). Endnote 15 defines an Appointed Market Maker (“MM”) and an Appointed Order Flow Provider (“OFP”).
• The Exchange proposes to add a sentence to the beginning of Endnote 15 to make clear that the qualification thresholds set forth in the MM Tables “[i]ncludes transaction volume from the OTP Holder's or OTP Firm's affiliates or its Appointed OFP or Appointed MM.”
• The Exchange proposes to modify Endnote 8 to define Total Industry Customer equity and ETF option average daily volume as “TCADV” and to use this shorthand reference in each of the MM Tables.
• The Exchange proposes to clarify how the credit for each of the MM Tables is applied,
• In each of the MM Tables, the Exchange proposes to replace reference to “Posted Orders” with “posted interest” and “orders” with “interest” to make clear that, where applicable, liquidity may include orders or quotes.
• In the fee table for Market Maker Incentive for Penny Pilot Issues, the Exchange proposes to replace reference to “both Penny and Non-Penny Issues” with “all issues.”
• For consistency, the Exchange proposes to remove the capitalization from “Non-Penny,” as appears in the Market Maker Incentive For Non-Penny Pilot Issues, and to remove any capitalization from “all' and “issues” in reference to “all issues” in the MM Tables.
• For ease of reference, the Exchange proposes to rename the Market Maker Monthly Posting Credit Tiers and Qualifications for Executions in Penny Pilot Issues and SPY (
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that providing an enhanced incentive for executions against posted liquidity in SPY is reasonable, equitable, and not unfairly discriminatory because, among other things, it may encourage greater participation in SPY—which is consistently the most active options issue nationally. The proposed SPY incentive would also provide an additional means for Market Makers to qualify for credits for posting volume on the Exchange. By encouraging activity in SPY, the Exchange believes that opportunities to qualify for other rebates are increased, which benefits all participants through increased Market Maker activity. The Exchange also believes that encouraging a higher level of trading volume in SPY should increase opportunities for OTP Holders and OTP Firms (“OTPs”) to achieve credits available through existing incentive programs, such as the MM
The Exchange also believes the proposed SPY incentive is not unfairly discriminatory to non-Market Markers (
The Exchange also notes that the proposed credit for posting in SPY is reasonable, equitable, and not unfairly discriminatory as it is consistent with credits offered to Market Makers by other options exchanges.
The Exchange believes that the proposed textual modifications are reasonable, equitable, and not unfairly discriminatory because the proposed changes would add clarity, transparency and internal consistency to the Fee Schedule making it easier to navigate and comprehend, which is in the public interest.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of New York (FEMA-4322-DR), dated 07/12/2017.
Issued on July 12, 2017.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416, (202) 205-6734.
Notice is hereby given that as a result of the President's major disaster declaration on 07/12/2017, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 15207B and for economic injury is 15208B.
U.S. Small Business Administration (“SBA”).
The purpose of this Notice is to provide the public with notification of program changes to SBA's Secondary Market Loan Pooling Program. The changes described in this Notice are being made to ensure that there are sufficient funds to cover the estimated cost of the timely payment guaranty for newly formed SBA 7(a) loan pools. The changes in this Notice will be incorporated, as needed, into the SBA Secondary Market Program Guide, and all other appropriate SBA Secondary Market documents.
The changes in this Notice will apply to SBA 7(a) loan pools with an issue date on or after October 1, 2017.
Address comments concerning this Notice to John M. Wade, Chief Secondary Market Division, U.S. Small Business Administration, 409 3rd Street SW., Washington, DC 20416, or
John M. Wade, Chief, Secondary Market Division, U.S. Small Business Administration, 409 3rd Street SW., Washington, DC 20416, or
The Secondary Market Improvements Act of 1984 authorized SBA to guaranty the timely payment of principal and interest on Pool Certificates. A Pool Certificate represents a fractional undivided interest in a “Pool,” which is an aggregation of SBA guaranteed portions of loans made by SBA Lenders under section 7(a) of the Small Business Act, 15 U.S.C. 636(a). In order to support the timely payment guaranty requirement, SBA established the Master Reserve Fund (“MRF”), which serves as a mechanism to cover the cost of SBA's timely payment guaranty. Borrower payments on the guaranteed portions of pooled loans, as well as SBA guaranty payments on defaulted pooled loans, are deposited into the MRF. Funds are held in the MRF until distributions are made to investors (“Registered Holders”) of Pool Certificates. The interest earned on the borrower payments and the SBA guaranty payments deposited into the MRF supports the timely payments made to Registered Holders.
To facilitate the formation of SBA loan Pools and to enhance the marketability of the SBA Secondary Market (as defined in 13 CFR 120.601), SBA allows loans with different maturity dates to be placed in the same Pool. From time to time, SBA provides instruction to SBA Pool Assemblers on the required loan and pool characteristics necessary to form a Pool. These characteristics include, among other things, the minimum number of guaranteed portions of loans required to form a Pool, the allowable difference between the highest and lowest gross and net note rates of the guaranteed portions of loans in a Pool, and the minimum maturity ratio of the guaranteed portions of loans in a Pool. The minimum maturity ratio is equal to the ratio of the shortest and the longest remaining term to maturity of the guaranteed portions of loans in a Pool.
In November of 2008, SBA published changes to the regulations governing SBA's Secondary Market to allow SBA Pool Assemblers to form and initiate the sale of Weighted Average Coupon (WAC) Pools.
Based on SBA's expectations as to future Pool performance, SBA has determined that, in order to lower the costs associated with SBA's Secondary Market Loan Pooling Program, it is necessary to increase the minimum maturity ratio—in other words, to reduce the difference between the shortest and the longest remaining term of the guaranteed portions of loans in a Pool. A higher minimum maturity ratio will decrease the difference between the amortization rates of the guaranteed portions of loans in a Pool. This will cause the cash flows from the guaranteed portions of loans in the Pool to be more homogenous, and will more closely match the amortization rate of the Pool Certificate. This is an important driver in reducing the cost of SBA's timely payment guaranty on Pool Certificates.
Therefore, effective October 1, 2017, all guaranteed portions of loans in a Pool presented for settlement with SBA's Fiscal Transfer Agent will be required to have a minimum maturity ratio of at least 94% for Standard Pools and WAC Pools. SBA has monitored Pools formed over the last 6 months, and has observed that many existing Pools have a minimum maturity ratio of at least 94%.
SBA will continue to monitor loan and pool characteristics and will provide notification of additional changes as necessary. It is important to note that there is no change to SBA's obligation to honor its guaranty of the amounts owed to Registered Holders of Pool Certificates and that such guaranty continues to be backed by the full faith and credit of the United States.
This program change will be incorporated as necessary into SBA's Secondary Market documents. As indicated above, this change will be effective for Pools with an issue date on or after October 1, 2017, and will modify any previous description or guidance regarding the minimum maturity ratio for Standard Pools or WAC Pools. SBA is making this change pursuant to Section 5(g)(2) of the Small Business Act, 15 U.S.C. 634 (g)(2).
15 U.S.C. 634 (g)(2).
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of North Dakota (FEMA-4323-DR), dated 07/12/2017.
Issued July 12, 2017.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416, (202) 205-6734.
Notice is hereby given that as a result of the President's major disaster declaration on 07/12/2017, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 152096 and for economic injury is 152106.
Notice of request for public comment.
The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB.
The Department will accept comments from the public up to September 18, 2017.
You may submit comments by any of the following methods:
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You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence.
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to G. Kevin Saba, Director, Office of Policy and Program Support, Office of Private Sector Exchange, ECA/EC, SA-5, Floor 5, Department of State, 2200 C Street, NW., Washington, DC 20522-0505, who may be reached at
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The collection is the continuation of information collected and needed by the Bureau of Educational and Cultural Affairs in administering the Exchange Visitor Program (J-Nonimmigrant) under the provisions of the Mutual Educational and Cultural Exchange Act, as amended (22 U.S.C. 2451,
Access to Form DS-2019 is made available to Department designated sponsors electronically via the Student and Exchange Visitor Information System (SEVIS).
Notice of request for public comment.
The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment.
The Department will accept comments from the public up to August 18, 2017.
Direct comments to the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB). You may submit comments by the following methods:
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Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents may be sent to
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The Online Application for Nonimmigrant Visa (DS-160) is used to collect biographical information from individuals seeking a nonimmigrant visa. The consular officer uses the information collected to determine the applicant's eligibility for a visa.
The DS-160 will be submitted electronically to the Department via the internet. The applicant will be instructed to print a confirmation page containing a bar coded record locator,
Notice of request for public comment.
The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment.
The Department will accept comments from the public up to August 18, 2017.
Direct comments to the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB). You may submit comments by the following methods:
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Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents to
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
Form DS-156 is required by regulation of all nonimmigrant visa applicants who do not use the Online Application for Nonimmigrant Visa (Form DS-160). Posts will use the DS-156 in limited circumstances when use of the DS-160 unavailable as outlined below, to elicit information necessary to determine an applicant's visa eligibility.
This form will only be used if in the following limited circumstances when applicants cannot access the DS-160, Online Application for Nonimmigrant Visa:
• An applicant has an urgent medical or humanitarian travel need and the consular officer has received explicit permission from the Visa Office to accept form DS-156;
• The applicant is a student exchange visitor who must leave immediately in order to arrive on time for his/her course and the consular officer has explicit permission from the Visa Office to accept form DS-156;
• The applicant is a diplomatic or official traveler with urgent government business and form DS-160 has been unavailable for more than four hours; or
• Form DS-160 has been unavailable for more than three days and the consular officer receives explicit permission from the Visa Office.
In order to obtain a copy of form an applicant must contact the Embassy or consulate at which he or she is applying and request a copy.
Portland Vancouver Junction Railroad, LLC (PVJR), a Class III rail carrier, has filed a verified notice of exemption under 49 CFR 1150.41 to operate approximately 3 miles of rail line owned by Columbia Business Center (CBC), a noncarrier, pursuant to an agreement with FC Service LLC, an agent for CBC, also a noncarrier.
According to PVJR, the 3-mile line is located within a business park in Clark County, Wash., and there are no mileposts. PVJR states that the lines interconnect with lines of the BNSF Railway Company (BNSF).
The transaction may be consummated on or after August 4, 2017, the effective date of the exemption (30 days after the verified notice was filed).
PVJR certifies that, as a result of this transaction, its projected revenues would not exceed those that would qualify it as a Class III rail carrier and will not exceed $5 million. PVJR states that the agreement does not involve any provision or agreement that may limit future interchange.
If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions to stay must be filed no later than July 27, 2017 (at least seven days before the exemption becomes effective).
An original and 10 copies of all pleadings, referring to Docket No. FD 36134, must be filed with the Surface Transportation Board, 395 E Street SW., Washington, DC 20423-0001. In addition, a copy must be served on
According to PVJR, this action is categorically excluded from environmental review under 49 CFR 1105.6(c).
Board decisions and notices are available on our Web site at
By the Board, Scott M. Zimmerman, Acting Director, Office of Proceedings.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Notice of Petition for Exemption Received.
This notice contains a summary of a petition seeking relief from specified requirements of Title 14, Code of Federal Regulations (14 CFR). The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before August 8, 2017.
Send comments identified by docket number FAA-2017-0647 using any of the following methods:
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Tara Fitzgerald, Federal Aviation Administration, Engine and Propeller Directorate, Standards Staff, ANE-112, 1200 District Avenue, Burlington, Massachusetts 01803-5229; (781) 238-7130; facsimile: (781) 238-7199; email:
This notice is published pursuant to 14 CFR 11.85.
Federal Aviation Administration (FAA), DOT.
Notice.
This notice contains a summary of a petition seeking relief from specified requirements of Federal Aviation Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before August 8, 2017.
Send comments identified by docket number FAA-2015-0226 using any of the following methods:
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Alphonso Pendergrass (202) 267-4713, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591.
This notice is published pursuant to 14 CFR 11.85.
Federal Aviation Administration (FAA), Department of Transportation (DOT)
Notice of petition for exemption received.
This notice contains a summary of a petition seeking relief from specified requirements of Title 14, Code of Federal Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, this aspect of the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before August 8, 2017.
You may send comments identified by docket number FAA-2017-0471 using any of the following methods:
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Mark Bouyer, Federal Aviation Administration, Engine and Propeller Directorate, Standards Staff, ANE-110, 1200 District Avenue, Burlington, Massachusetts 01803-5229; (781) 238-7755; facsimile: (781) 238-7199; email:
This notice is published pursuant to 14 CFR 11.85.
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on a continuing information
The OCC is soliciting comment concerning the renewal of its information collection titled “Reporting and Recordkeeping Requirements Associated with Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring.”
You should submit written comments by September 18, 2017.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557-0323, 400 7th Street SW., Suite 3E-218, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465-4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Shaquita Merritt, OCC Clearance Officer, (202) 649-5490, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from OMB for each collection of information that they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of title 44 requires federal agencies to provide a 60-day notice in the
The rule applies to large and internationally active banking organizations—generally, bank holding companies, certain savings and loan holding companies, and depository institutions with $250 billion or more in total assets or $10 billion or more in on-balance sheet foreign exposure—and to their consolidated subsidiaries that are depository institutions with $10 billion or more in total consolidated assets.
Section 50.22 requires that, with respect to each asset eligible for inclusion in a national bank or federal savings association's high-quality liquid assets (HQLA) amount, the national bank or federal savings association must implement policies that require eligible HQLA to be under the control of the management function in the national bank or federal savings association responsible for managing liquidity risk. The management function must evidence its control over the HQLA by segregating the HQLA from other assets, with the sole intent to use the HQLA as a source of liquidity, or demonstrating the ability to monetize the assets and making the proceeds available to the liquidity management function without conflicting with a business or risk management strategy of the national bank or federal savings association. In addition, § 50.22 requires that a national bank or federal savings association have a documented methodology that results in a consistent treatment for determining that the national bank or federal savings association's eligible HQLA meet the requirements of § 50.22.
Section 50.40 requires that a national bank or federal savings association notify its appropriate federal banking agency on any day when its liquidity coverage ratio is calculated to be less than the minimum requirement in § 50.10. If a national bank or federal savings association's liquidity coverage ratio is below the minimum requirement in § 50.10 for three consecutive days, or if the OCC has determined that the institution is otherwise materially noncompliant, the national bank or federal savings association must promptly provide a plan for achieving compliance with the minimum liquidity requirement in § 50.10 and all other requirements of § 50.40 to the OCC.
The liquidity plan must include, as applicable: (1) An assessment of the national bank or federal savings association's liquidity position; (2) the actions the national bank or federal savings association has taken and will take to achieve full compliance, including a plan for adjusting the national bank or federal savings association's risk profile, risk management, and funding sources in order to achieve full compliance and a plan for remediating any operational or management issues that contributed to noncompliance; (3) an estimated time frame for achieving full compliance; and (4) a commitment to provide a progress report to the OCC at least weekly until full compliance is achieved.
Comments submitted in response to this notice will be summarized and included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the information collection burden;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Department of Veterans Affairs.
Notice of Funding Availability (Grant Renewals).
The Department of Veterans Affairs (VA) is announcing the availability of funds under the Grants for Transportation of Veterans in Highly Rural Areas program. This Notice of Funding Availability (Notice) contains information concerning the Grants for Transportation of Veterans in Highly Rural Areas program, grant renewal application process, and amount of funding available.
Applications for assistance under the Grants for Transportation of Veterans in Highly Rural Areas Program must be submitted to
The application can be found at
Applications may not be sent by facsimile. Applications must be submitted to
Darren Wallace, National Coordinator, Highly Rural Transportation Grants, Veterans Transportation Program, Member Services (10NF4), 2957 Clairmont Road, Atlanta, GA 30329; (404) 828-5380 (this is not a toll-free number); and Sylvester Wallace at
• One renewal grant may be awarded to each grantee for fiscal year 2017 for each highly rural area in which the grantee provides transportation services. (A listing of the highly rural counties can be found at this Web site under additional resources:
• Transportation services may not be simultaneously provided by more than one grantee in any single highly rural area.
• No single grant will exceed $50,000.
• A veteran who is provided transportation services through a grantee's use of these grant monies will not be charged for such services.
• Renewal grants awarded under this Notice will be for a 1-year period.
• All awards are subject to the availability of appropriated funds and to any modifications or additional requirements that may be imposed by law.
Current 2016 program grantees are the only eligible entities that are eligible to apply for a renewal grant. Interested eligible entities must submit a complete renewal grant application package to be considered for a grant renewal. Further, a renewal grant will only be awarded if the grantee's program will remain substantially the same as the program for which the original grant was awarded. How the grantee will meet this requirement must be specifically addressed in the renewal grant application.
This solicitation does not require grantees to provide matching funds as a condition of receiving such grants.
Additional grant application requirements are specified in the application package. Submission of an incorrect or incomplete application package will result in the application being rejected during the threshold review, the initial review conducted by VA to ensure the application package contains all required forms and certifications. Complete packages will then be subject to the evaluation/scoring and selection processes described in § 17.705(c) and (d), respectively. Applicants will be notified of any additional information needed to confirm or clarify information provided in the renewal grant application and the deadline by which to submit such information.
Renewal applications will be submitted through
Registration in
Search for the funding opportunity on grants.gov using the following identifying information. The Catalog of Federal Domestic Assistance (CFDA) number for this solicitation is 64.035, titled “Veterans transportation program,” and the funding opportunity number is VA-HRTG-2017.
Submit an application consistent with this solicitation by following the directions in grants.gov. Within 24-48 hours after submitting the electronic application, the applicant should receive an email validation message from
If an applicant experiences unforeseen grants.gov technical issues beyond the applicant's control that prevents submission of its application by the deadline, the applicant must contact the VTP Office staff no later than 24 hours after the deadline and request approval to submit its application. At that time, VTP Office staff will instruct the applicant to submit specific information detailing the technical difficulties. The applicant must email the following: A description of the technical difficulties, a timeline of submission efforts, the complete grant application, the applicant's Data Universal Numbering System (DUNS) number, and
To ensure a fair competition for limited discretionary funds, the following conditions are not valid reasons to permit late submissions: (1) Failure to begin the registration process in sufficient time, (2) failure to follow
This section describes what a renewal application must include. Failure to submit an application that contains all of the specified elements will result in the rejection of the application at the threshold review stage. Moreover, if applications are not adequately responsive to the scope of the solicitation, particularly to any critical element, or fail to include a program narrative, budget detail worksheet including a budget narrative, tribal resolution (if applicable), eligibly entity designation, or a list of the highly rural county or counties to be served, they will be rejected and receive no further consideration.
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Budget Brief (example):
1. Our organization requests ____ for the acquisition of _____ van(s).
2. The total cost of the van(s)____. This is the amount requested from VA.
3. Our organization will utilize ____ for innovative approaches for transporting veterans. This is the amount requested from VA for a maximum of $50,000.
Indirect costs are allowed only if the applicant has a federally approved indirect cost rate. (This requirement does not apply to units of local government). A copy of the rate approval must be attached. If the applicant does not have an approved rate, one can be requested by contacting the applicant's cognizant Federal agency, which will review all documentation and approve a rate for the applicant organization or, if the applicant's accounting system permits, costs may be allocated in the direct cost categories. If VA is the cognizant Federal agency, obtain information needed to submit an indirect cost rate proposal from the contact person listed in this solicitation.
If an application identifies a subrecipient that is either (1) a tribe or tribal organization or (2) a third party proposing to provide direct services or assistance to residents on tribal lands, then a current authorizing resolution of the governing body of the tribal entity or other enactment of the tribal council or comparable governing body authorizing the inclusion of the tribe or tribal organization and its membership must be included with the application. In those instances when an organization or consortium of tribes proposes to apply for a grant on behalf of a tribe or multiple specific tribes, the application must include a resolution from all tribes that will be included as a part of the services/assistance provided under the grant. A consortium of tribes for which existing consortium bylaws allow action without support from all tribes in the consortium (
Renewal grant applications under the Grants for Transportation of Veterans in Highly Rural Areas program must be submitted to
The application can be found at
Renewal grant applications may not be sent by facsimile. These applications must be submitted to
Some states require that applicants must contact their State's Single Point of Contact (SPOC) to find out and comply with the State's process, to comply with Executive Order (E.O.) 12372 (1982). Names and addresses of the SPOCs are listed in the Office of Management and Budget's homepage at
Grants will only be awarded to those organizations that are eligible under law as described in the eligibility information section.
For technical assistance with submitting the application, contact the grants.gov customer support hotline at 1-800-518-4726 or via email to
Additional forms that may be required in connection with an award are available for download on
VA is committed to ensuring a fair and open process for awarding these renewal grants. The VTP Office will review the renewal grant application to make sure that the information presented is reasonable, understandable, measurable, and achievable, as well as consistent with the solicitation. Peer reviewers will conduct a threshold review of all applications submitted under this solicitation to ensure they meet all of the critical elements and all other minimum requirements as identified herein. The VTP Office may use either internal peer reviewers, external peer reviewers, or a combination to review the applications under this solicitation. An external peer reviewer is an expert in the field of the subject matter of a given solicitation who is not a current VA employee. An internal reviewer is a current VA employee who is well-versed or has expertise in the subject matter of this solicitation. Eligible applications will then be evaluated, scored, and rated by a peer review panel. Peer reviewers' ratings and any resulting recommendations are advisory only.
VTP Member Services Office conducts a financial review of applications for potential discretionary awards to evaluate the fiscal integrity and financial capability of applicants; examines proposed costs to determine if the Budget Detail Worksheet and Budget Narrative accurately explain project costs; and determines whether costs are reasonable, necessary, and allowable under applicable federal cost principles and agency regulations.
Absent explicit statutory authorization or written delegation of authority to the contrary, the Veterans Health Administration, through the VTP Office, will forward the reviewers' recommendations for award to the Secretary of Veterans Affairs, who will then review and approve each award decision. Such determinations by the Secretary will be final. VA will also give consideration to factors including, but not limited to: Underserved populations, geographic diversity, strategic priorities, and available funding when making awards.
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A. VA will award up to 55 points (an applicant must score at a minimum of 27.5 points) based on the success of the grantee's program, as demonstrated by the following: Application shows that the grantee or identified subrecipient provided transportation services which allowed participants to be provided medical care timely and as scheduled; and application shows that participants were satisfied with the transportation services provided by the grantee or identified subrecipient, as described in the Notice;
B. VA will award up to 35 points (an applicant must score at a minimum of 17.5 points) based on the cost effectiveness of the program, as demonstrated by the following: The grantee or identified subrecipient administered the program on budget and grant funds were utilized in a sensible manner, as interpreted by information provided by the grantee to VA under 38 CFR 17.725(a)(1-7); and
C. VA will award up to 15 (an applicant must score at a minimum of 7.5 points) points based on the extent to which the program complied with the grant agreement and applicable laws and regulations.
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A. VA will rank those grantees who receive at least the minimum amount of total points (52.5) and points per category set forth in the Notice. The grantees will be ranked in order from highest to lowest scores.
B. VA will use the grantee's ranking as the basis for selection for funding. VA will fund the highest-ranked grantees for which funding is available.
After an applicant is selected for a renewal grant in accordance with 38 CFR 17.705(d) and notified as described above, VA will send renewal grant agreement to be executed by the Assistant Deputy Under Secretary for Health for Administrative Operations in VA and the grantee. Upon execution of the renewal grant agreement, VA will obligate the approved amount. Recipients will use the U.S. Department of Health and Human Services Payment Management System for grant drawdowns. Instructions for submitting requests for payment may be found at
The Grant Agreement will be sent through the U.S. Postal Service to the awardee organization as listed on its SF424. Note that any communication between the VTP Office and awardees prior to the issuance of the Notice of Award (NoA) is not authorization to begin performance on the project.
Unsuccessful applicants will be notified of their status by letter, which will likewise be sent through the U.S. Postal Service to the applicant organization as listed on its SF 424.
The renewal grant agreement will provide that:
1. The grantee must operate the program in accordance with the provisions of this section and the grant application;
2. If a grantee's renewal application identified a subrecipient, such subrecipient must operate the program in accordance with the provisions of this section and the grant application; and
3. If a grantee's application identified that funds will be used to procure or operate vehicles to directly provide transportation services, the following requirements must be met:
A. Title to the vehicles must vest solely in the grantee or in the identified subrecipient or with leased vehicles in an identified lender;
B. The grantee or identified subrecipient must, at a minimum, provide motor vehicle liability insurance for the vehicles to the same extent they would insure vehicles procured with their own funds;
C. All vehicle operators must be licensed in a U.S. State or Territory to operate such vehicles;
D. Vehicles must be safe and maintained in accordance with the manufacturer's recommendations; and
E. Vehicles must be operated in accordance with applicable Department of Transportation regulations concerning transit requirements under the Americans with Disabilities Act.
Successful applicants selected for awards must agree to comply with additional applicable legal requirements upon acceptance of an award. (VA strongly encourages applicants to review the information pertaining to these additional requirements prior to submitting a renewal application). As to those additional requirements, we note that while their original grants were subject to additional legal requirements as set forth in 38 CFR parts 43 and 49 those regulatory provisions have since been superseded by the Common Rule governing all Federal Grant Programs. The Common Rule is codified at 2 CFR part 200. Thus, grantees and identified
Awardees must agree to cooperate with any VA evaluation of the program and provide required quarterly, annual, and final (at the end of the fiscal year) reports in a form prescribed by VTP. A final report consists of a summation of grant activities which include progress toward goals, financial administration of grant funds, grant administration issues and barriers. Reports are to be submitted electronically. These reports must outline how grant funds were used, describe program progress and barriers, and provide measurable outcomes.
Required quarterly and annual reports must include the following information:
• Record of time expended assisting with the provision of transportation services;
• Record of grant funds expended assisting with the provision of transportation services;
• Trips completed;
• Total distance covered;
• Veterans served;
• Locations which received transportation services; and
• Results of veteran satisfaction survey.
VTP is responsible for program monitoring. All awardees will be required to cooperate in providing the necessary data elements to the VTP. The goal of program monitoring is to ensure program requirements are met; this will be accomplished by tracking performance and identifying quality and compliance problems through early detection. Methods of program monitoring may include: Monitoring the performance of a grantee's or sub-recipient's personnel, procurements, and/or use of grant-funded property; collecting, analyzing data, and assessing program implementation and effectiveness; assessing costs and utilization; and providing technical assistance when needed. Site visit monitoring will include the above-described activities, in addition to the conduct of safety assessments and, if applicable, verification of both current driver's licenses and vehicle insurance coverage.
Awardees are required to submit the FFR SF 425 on a quarterly basis. More details will be announced in the NoA.
Awardees must comply with the audit requirements of Office of Management and Budget Uniform Guidance 2 CFR part 200 subpart F. Information on the scope, frequency and other aspects of the audits can be found on at
Any changes in a grantee's program activities which result in deviations from the grant renewal agreement must be reported to VA.
Additional reporting requirements may be requested by VA to allow VA to fully assess program effectiveness.
All recipients (excluding an individual recipient of Federal assistance) of awards of $25,000 or more under this solicitation, consistent with the Federal Funding Accountability and Transparency Act of 2006 (FFATA), Public Law 109-282 (Sept. 26, 2006), will be required to report award information on the subaward reporting system of any first-tier subawards totaling $25,000 or more, and, in certain cases, to report information on the names and total compensation of the five most highly compensated executives of the recipient and first-tier subrecipients. Each applicant entity must ensure that it has the necessary processes and systems in place to comply with the reporting requirements should it receive funding.
It is expected that reports regarding subawards will be made through the FFATA Subaward Reporting System (FSRS) found at
Please note also that no subaward of an award made under this solicitation may be made to a subrecipient that is subject to the terms of FFATA unless the potential subrecipient acquires and provides a DUNS number.
Pursuant to 38 CFR 17.730(a), VA may recover from the grantee any funds that are not used in accordance with a grant agreement. If VA decides to recover funds, VA will issue to the grantee a notice of intent to recover grant funds, and the grantee will then have 30 days to submit documentation demonstrating why the grant funds should not be recovered. After review of all submitted documentation, VA will determine whether action will be taken to recover the grant funds. When VA determines action will be taken to recover grant funds from the grantee, the grantee is then prohibited under 38 CFR 17.730(b) from receiving any further grant funds.
The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Gina S. Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, approved this document on July 11, 2017, for publication.
Bureau of Consumer Financial Protection.
Final rule; official interpretations.
Pursuant to section 1028(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau of Consumer Financial Protection (Bureau) is issuing this final rule to regulate arbitration agreements in contracts for specified consumer financial product and services. First, the final rule prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service. Second, the final rule requires covered providers that are involved in an arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau and also to submit specified court records. The Bureau is also adopting official interpretations to the regulation.
Benjamin Cady and Lawrence Lee Counsels; Owen Bonheimer, Eric Goldberg and Nora Rigby Senior Counsels, Office of Regulations, Consumer Financial Protection Bureau, at 202-435-7700 or
On May 24, 2016, the Bureau of Consumer Financial Protection published a proposal to establish 12 CFR part 1040 to address certain aspects of consumer finance dispute resolution.
Congress directed the Bureau to study these pre-dispute arbitration agreements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank or Dodd-Frank Act).
Second, the final rule requires providers that use pre-dispute arbitration agreements to submit certain records relating to arbitral and court proceedings to the Bureau. The Bureau will use the information it collects to continue monitoring arbitral and court proceedings to determine whether there are developments that raise consumer protection concerns that may warrant further Bureau action. The Bureau is also finalizing provisions that will require it to publish the materials it collects on its Web site with appropriate redactions as warranted, to provide greater transparency into the arbitration of consumer disputes.
The final rule applies to providers of certain consumer financial products and services in the core consumer financial markets of lending money, storing money, and moving or exchanging money, including, subject to certain exclusions specified in the rule, providers that are engaged in:
• Extending consumer credit, participating in consumer credit decisions, or referring or selecting creditors for non-incidental consumer credit, each when done by a creditor under Regulation B implementing the Equal Credit Opportunity Act (ECOA), acquiring or selling consumer credit, and servicing an extension of consumer credit;
• extending or brokering automobile leases as defined in Bureau regulation;
• providing services to assist with debt management or debt settlement, to modify the terms of any extension of consumer credit, or to avoid foreclosure, and providing products or services represented to remove derogatory information from, or to improve, a person's credit history, credit record, or credit rating;
• providing directly to a consumer a consumer report as defined in the Fair Credit Reporting Act (FCRA), a credit score, or other information specific to a consumer derived from a consumer file, except for certain exempted adverse action notices (such as those provided by employers);
• providing accounts under the Truth in Savings Act (TISA) and accounts and remittance transfers subject to the Electronic Fund Transfer Act (EFTA);
• transmitting or exchanging funds (except when necessary to another product or service not covered by this rule offered or provided by the person transmitting or exchanging funds), certain other payment processing services, and check cashing, check collection, or check guaranty services consistent with the Dodd-Frank Act; and
• collecting debt arising from any of the above products or services by a provider of any of the above products or services, their affiliates, an acquirer or purchaser of consumer credit, or a person acting on behalf of any of these persons, or by a debt collector as defined by the Fair Debt Collection Practices Act (FDCPA).
Consistent with the Dodd-Frank Act, the final rule applies only to agreements entered into after the end of the 180-day period beginning on the regulation's
Arbitration is a dispute resolution process in which the parties choose one or more neutral third parties to make a final and binding decision resolving the dispute.
In the last few decades, companies have begun inserting arbitration agreements in a wide variety of standard-form contracts, such as in contracts between companies and consumers, employees, and investors. As is underscored by the range of comments received on the proposal, the use of arbitration agreements in such contracts has become a contentious legal and policy issue due to concerns about whether the effects of arbitration agreements are salient to consumers, whether arbitration has proved to be a fair and efficient dispute resolution mechanism, and whether arbitration agreements effectively discourage and limit the filing or resolution of certain claims in court or in arbitration.
In recent years, Congress has taken steps to restrict the use of arbitration agreements in connection with certain consumer financial products and services and other consumer and investor relationships. Most recently, in the 2010 Dodd-Frank Act, Congress prohibited the use of arbitration agreements in connection with mortgage loans,
In addition, and of particular relevance here, Congress directed the Bureau to study the use of arbitration agreements in connection with other, non-mortgage consumer financial products and services and authorized the Bureau to prohibit or restrict the use of such agreements if it finds that such action is in the public interest and for the protection of consumers.
Companies typically provide consumer financial products and services under the terms of a written contract. In addition to being governed by such contracts and the relevant State's contract law, the relationship between a consumer and a financial service provider is typically governed by consumer protection laws at the State level, Federal level, or both, as well as by other State laws of general applicability (such as tort law). Collectively, these laws create legal rights for consumers and impose duties on the providers of financial products and services that are subject to those laws and, depending on the contract and the product or service, a service provider to the underlying provider.
Prior to the twentieth century, the law generally embraced the notion of
In the late 1960s, Congress began passing consumer protection laws focused on financial products, beginning with the Consumer Credit
Congress followed the enactment of TILA with several other consumer financial protection laws, many of which provided private rights of action for at least some statutory violations. For example, in 1970, Congress passed the FCRA, which promotes the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies, as well as providing consumers access to their own information.
In the 1960s, States began passing their own consumer protection statutes modeled on the FTC Act to prohibit unfair and deceptive practices. Unlike the FTC Act, however, these State statutes typically provide for private enforcement.
In 1966, shortly before Congress first began passing the wave of consumer financial protection statutes described above, the Federal Rules of Civil Procedure (Federal Rules or FRCP) were amended to make class actions substantially more available to litigants, including consumers. The class action procedure in the Federal Rules, as discussed in detail in Part II.B below, allows an individual to group his or her claims together with those of other, absent individuals in one lawsuit under certain circumstances and to obtain monetary or injunctive relief for the group. Because TILA and the other Federal consumer protection statutes discussed above permitted private rights of action, those private rights of action were enforceable through a class action, unless the statute expressly prohibited class actions.
Indeed, Congress affirmatively calibrated enforcement through private class actions in several of the consumer protection statutes by specifically referring to class actions and adopting statutory damage schemes that are capped by a percentage of the defendants' net worth.
The default rule in United States courts, inherited from England, is that only those who appear as parties to a given case are bound by its outcome.
The bill of peace was recognized in early United States case law and ultimately adopted by several State courts and the Federal courts.
That changed in 1966, when Federal Rule 23 was amended to create the class action mechanism that largely persists in the same form to this day.
A class action can be filed and maintained under Federal Rule 23 in any case where there is a private right to bring a civil action in Federal court, unless otherwise prohibited by law.
These and other requirements of Federal Rule 23 are designed to ensure
A certified class case proceeds similarly to an individual case, except that the court has an additional responsibility in a class case, pursuant to Federal Rule 23 and the relevant case law, to actively supervise classes and class proceedings and to ensure that the lead plaintiff keeps absent class members informed.
In addition to proceedings in Federal court, every State except Virginia and Mississippi has established procedures permitting individuals to file a class action; almost all of these States have adopted class action procedures analogous to Federal Rule 23.
Since the 1966 amendments, Federal Rule 23 has generated a significant body of case law as well as significant controversy.
For example, Congress passed the Private Securities Litigation Reform Act (PSLRA) in 1995. Enacted partially in response to concerns about the costs to defendants of litigating class actions, the PSLRA reduced discovery burdens in the early stages of securities class actions.
Federal courts have also shaped class action practice through their interpretations of Federal Rule 23. In the last five years, the Supreme Court has decided several major cases refining class action procedure. In
As described above at the beginning of Part II, arbitration is a dispute resolution process in which the parties choose one or more neutral third parties to make a final and binding decision resolving the dispute.
The use of arbitration to resolve disputes between parties is not new.
In 1920, New York enacted the first modern arbitration statute in the United States, which strictly limited courts' power to undermine arbitration decisions and arbitration agreements.
From the passage of the FAA through the 1970s, arbitration continued to be used in commercial disputes between companies.
One notable feature of these agreements is that they could be used to block class action litigation and often class arbitration as well.
Since the early 1990s, the use of arbitration agreements in consumer financial contracts has become widespread, as shown by Section 2 of the Study (which is discussed in detail in Part III.D below). By the early 2000s, a few consumer financial companies had become heavy users of arbitration proceedings to obtain debt collection judgments against consumers. For example, in 2006 alone, the National Arbitration Forum (NAF) administered 214,000 arbitrations, most of which were consumer debt collection proceedings brought by companies.
The increase in the prevalence of arbitration agreements coincided with various legal challenges to their use in consumer contracts. One set of challenges focused on the use of arbitration agreements in connection with debt collection disputes. In the late 2000s, consumer groups began to criticize the fairness of debt collection arbitration proceedings administered by NAF, which was the most widely used arbitration administrator for debt collection.
The American Arbitration Association (AAA) likewise announced a moratorium on administering company-filed debt collection arbitrations, articulating significant concerns about due process and fairness to consumers subject to such arbitrations.
A second group of challenges asserted that the invocation of arbitration agreements to block class actions was unlawful. Because the FAA permits challenges to the validity of arbitration agreements on grounds that exist at law or in equity for the revocation of any contract,
Before 2011, courts were divided on whether arbitration agreements that bar class proceedings were unenforceable because they violated a particular State's laws. Then, in 2011, the Supreme Court held in
As arbitration agreements in consumer contracts became more common, Federal regulators, Congress, and State legislatures began to take notice of their impact on the ability of consumers to resolve disputes. One of the first entities to regulate arbitration agreements was the National Association of Securities Dealers—now known as the Financial Industry Regulatory Authority (FINRA)—the self-regulating body for the securities industry that also administers arbitrations between member companies and their customers.
Since 1975, FTC regulations implementing the Magnuson-Moss Warranty Act (MMWA) have barred the use, in consumer warranty agreements, of arbitration agreements that would result in binding decisions.
More recently, the Department of Labor finalized a rule addressing conflicts of interest in retirement advice.
Congress has also taken several steps to address the use of arbitration agreements in different contexts. In 2002, Congress amended Federal law to require that, whenever a motor vehicle franchise contract contains an arbitration agreement, arbitration may be used to resolve the dispute only if, after a dispute arises, all parties to the dispute consent in writing to the use of arbitration.
Conservation and Energy Act of 2008; Suspension of Delivery of Birds, Additional Capital Investment Criteria, Breach of Contract, and Arbitration, 76 FR 76874, 76890 (Dec. 9, 2011).
As previously noted, Congress again addressed arbitration agreements in the 2010 Dodd-Frank Act. Dodd-Frank section 1414(a) prohibited the use of arbitration agreements in mortgage contracts, which the Bureau implemented in its Regulation Z.
State legislatures have also taken steps to regulate the arbitration process. Several States, most notably California, require arbitration administrators to disclose basic data about consumer arbitrations that take place in the State.
Today, the AAA is the primary administrator of consumer financial arbitrations.
Further, although virtually all arbitration agreements in the consumer financial context expressly preclude arbitration from proceeding on a class basis, the major arbitration administrators do provide procedures for administering class arbitrations and have occasionally administered them in class arbitrations involving providers of consumer financial products and services.
Section 1028(a) of the Dodd-Frank Act directed the Bureau to study and provide a report to Congress on “the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.” Pursuant to section 1028(a), the Bureau conducted a study of the use of pre-dispute arbitration agreements in contracts for consumer financial products and services and, in March 2015, delivered to Congress its
This Part describes the process the Bureau used to carry out the Study and summarizes the Study's results. Where relevant, this Part then sets forth comments received in response to the proposal that were specific to the Study and its results. The Bureau generally addresses the outcome of its Study, including analyses of the results of the Study, in Part VI, Findings, below. In some instances, the Bureau has elected to address issues related to both the Study and the Findings in Part VI.
At the outset of its work, on April 27, 2012, the Bureau published a Request for Information (RFI) in the
The feedback received through this process substantially affected the scope of the Study the Bureau undertook. For example, several industry trade association commenters suggested that the Bureau study not only consumer financial arbitration but also consumer financial litigation in court. The Study incorporated an extensive analysis of consumer financial litigation—both individual litigation and class actions.
In some cases, commenters to the RFI encouraged the Bureau to study a topic, but the Bureau did not do so because certain effects did not appear
In December 2013, the Bureau issued a 168-page report summarizing its preliminary results on a number of topics (Preliminary Results).
In February 2014, the Bureau invited stakeholders for in-person discussions with staff regarding the Preliminary Results, as well as the Bureau's future work plan. Several external stakeholders, including industry associations and consumer advocates, took that opportunity and provided additional input regarding the Study.
In the Preliminary Results, the Bureau indicated that it planned to conduct a survey of consumers. The purpose of the survey was to assess consumer awareness of arbitration agreements, as well as consumer perceptions of, and expectations about, dispute resolution with respect to disputes between consumers and financial services providers.
The Bureau ultimately focused on nine empirical topics in the Study:
1. The prevalence of arbitration agreements in contracts for consumer financial products and services and their main features (Section 2 of the Study);
2. Consumers' understanding of dispute resolution systems, including arbitration and the extent to which dispute resolution clauses affect consumer's purchasing decisions (Section 3 of the Study);
3. How arbitration procedures differ from procedures in court (Section 4 of the Study);
4. The volume of individual consumer financial arbitrations, the types of claims, and how they are resolved (Section 5 of the Study);
5. The volume of individual and class consumer financial litigation, the types of claims, and how they are resolved (Section 6 of the Study);
6. The extent to which consumers sue companies in small claims court with respect to disputes involving consumer financial services (Section 7 of the Study);
7. The size, terms, and beneficiaries of consumer financial class action settlements (Section 8 of the Study);
8. The relationship between public enforcement and consumer financial class actions (Section 9 of the Study); and
9. The extent to which arbitration agreements lead to lower prices for consumers (Section 10 of the Study).
As described further in each subsection below, the Bureau's research on several of these topics drew in part upon data sources previously unavailable to researchers. For example, the AAA voluntarily provided the Bureau with case files for consumer arbitrations filed from the beginning of 2010, approximately when the AAA began maintaining electronic records, to the end of 2012. Compared to data sets previously available to researchers, the AAA case files covered a much longer period and were not limited to case files for cases resulting in an award. Using this data set, the Bureau conducted the first analysis of arbitration frequency and outcomes specific to consumer financial products and services.
The results of the Study also broke new ground because the Study, compared to prior research, generally considered larger data sets than had been reviewed by other researchers while also narrowing its analysis to consumer financial products and services. In total, the Study included the review of over 850 agreements for certain consumer financial products and services; 1,800 consumer financial services arbitrations filed over a three-year period; a random sample of the nearly 3,500 individual consumer finance cases identified as having been filed over a period of three years in Federal and selected State courts; and all of the 562 consumer finance class actions identified in Federal and selected State courts of the same time period. The Study also included over 40,000 filings in State small claims courts over the course of a single year. The Bureau supplemented this research by assembling and analyzing all of the more than 400 consumer financial class action settlements in Federal courts over a five-year period and more than 1,100 State and Federal public enforcement actions in the consumer finance area.
Before doing so, one preliminary observation is in order. With rare exception, the commenters did not criticize the methodologies the Bureau used to assemble the various data sets used in the Study or the analyses the Bureau conducted of these data. Rather, to the extent commenters addressed the Study itself—as distinguished from the interpretation or significance of the Study's findings—in the main the commenters suggested that the Bureau should have engaged in additional analyses.
As explained in more detail below, in many instances the analyses that commenters suggested were not feasible given the limitations on the data available to the Bureau. For example, as discussed below, the Bureau did not have a feasible way of studying the actual costs that financial service providers incur in defending class actions or studying the outcomes of arbitration or individual litigation cases that were settled (or resolved in a manner consistent with a settlement) unless the case records reflected the settlement terms. In other instances, the analyses the commenters suggested—such as studying the satisfaction of the small number of consumers who file arbitration cases—were not, in the Bureau's judgment, relevant to determining whether limitations on arbitration agreements are in the public interest and for the protection of consumers. And, in other instances, resource limitations required the Bureau to deploy random sampling techniques or to limit the number of years under study while still obtaining representative data.
Beyond that, it is worth noting that it is the case with any research—even research as extensive and painstaking as the Study—that it is always possible, ex post, to think of additional questions that could have been asked, additional data that could have been procured, or additional analyses that could have been performed. The Bureau does not interpret section 1028's direction to study the use of arbitration agreements in consumer finance to require the Bureau to research every conceivably relevant question or to exhaust every conceivable data source as a precondition to exercising the regulatory authority contained in that section. As discussed in substantial detail below in Part VI, the Bureau believes that its extensive research provides ample evidence that the restrictions on the use of arbitration agreements contained in this Rule are in the public interest and for the protection of consumers.
Section 2 of the Study addressed two central issues relating to the use of arbitration agreements: How frequently such agreements appear in contracts for consumer financial products and services and what features such agreements contain. Among other findings, the Study determined that arbitration agreements are commonly used in contracts for consumer financial products and services and that the AAA is the primary administrator of consumer financial arbitrations.
To conduct this analysis, the Bureau reviewed contracts for six product markets: Credit cards, checking accounts, general purpose reloadable (GPR) prepaid cards, payday loans, private student loans, and mobile wireless contracts governing third-party billing services.
The Bureau's sample of credit card contracts consisted of contracts filed by 423 issuers with the Bureau as required by the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) as implemented by Regulation Z.
For GPR prepaid cards, the Bureau's sample included agreements from two sources. The Bureau gathered agreements for 52 GPR prepaid cards that were listed on the Web sites of two major card networks and a Web site that provided consolidated card information as of August 2013. The Bureau also obtained agreements from GPR prepaid card providers that had been included in several recent studies of the terms of GPR prepaid cards and that continued to be available as of August 2014.
The analysis of the agreements that the Bureau collected found that tens of millions of consumers use consumer financial products or services that are subject to arbitration agreements, and that, in some markets such as checking accounts and credit cards, large providers are more likely to have the agreements than small providers.
In addition to examining the prevalence of arbitration agreements, Section 2 of the Study reviewed 13 features sometimes included in such agreements.
In contrast, JAMS is specified in relatively fewer arbitration agreements. The Study found that the contracts specified JAMS as at least one of the possible arbitration administrators in 40.9 percent of the credit card contracts with arbitration agreements; 34.4 percent of the checking account contracts with arbitration agreements; 52.9 percent of the GPR prepaid card contracts with arbitration agreements; 59.2 percent of the storefront payday loan contracts with arbitration agreements; and 66.7 percent of private student loan contracts with arbitration agreements. JAMS was specified as the sole option in 1.5 percent of the credit card contracts with arbitration agreements (one contract); 1.6 percent of the checking account contracts with arbitration agreements (one contract); 63.0 percent to 72.7 percent of the GPR prepaid card contracts with arbitration agreements; and none of the payday loan or private student loan contracts the Bureau reviewed.
The Bureau's analysis also found, among other things, that nearly all the arbitration agreements studied included provisions stating that arbitration may not proceed on a class basis. Across each product market, 85 percent to 100 percent of the contracts with arbitration agreements—covering over 99 percent of market share subject to arbitration in the six product markets studied—included such no-class-arbitration provisions.
The Study found that most of the arbitration agreements contained a small claims court “carve-out,” permitting either the consumer or both parties to file suit in small claims court.
The Study analyzed three different types of cost provisions: Provisions addressing the initial payment of arbitration fees; provisions that addressed the reallocation of arbitration fees in an award; and provisions addressing the award of attorney's fees.
Aside from costs more generally, the Study found that many arbitration agreements permit the arbitrator to reallocate arbitration fees from one party to the other. About one-third of credit card arbitration agreements, one-fourth of checking account arbitration agreements, and half of payday loan arbitration agreements expressly permitted the arbitrator to shift attorney's fees to the consumer.
Further, most of the arbitration agreements the Bureau studied contained disclosures describing the differences between arbitration and litigation in court. Most agreements disclosed expressly that the consumer would not have a right to a jury trial, and most disclosed expressly that the consumer could not be a party to a class action in court.
The Study also examined whether arbitration agreements limited recovery of damages—including punitive or consequential damages—or specified the time period in which a claim had to be brought. The Study determined that most agreements in the credit card, payday loan, and private student loan markets did not include damages limitations. However, the opposite was true of agreements in checking account contracts, where more than three-fourths of the market included damages limitations; GPR prepaid card contracts, almost all of which included such limitations; and mobile wireless contracts, all of which included such limitations. A review of consumer agreements
The Study also found that a minority of arbitration agreements in two markets set time limits other than the statute of limitations that would apply in a court proceeding for consumers to file claims in arbitration. Specifically, these types of provisions appeared in 28.4 percent and 15.8 percent of the checking account and mobile wireless agreements by market share, respectively.
The Study assessed the extent to which arbitration agreements included contingent minimum recovery provisions, which provide that consumers would receive a specified minimum recovery if an arbitrator awards the consumer more than the amount of the company's last settlement offer. The Study found that such provisions were uncommon; they appeared in three out of the six private student loan agreements the Bureau reviewed, but, in markets other than student loans, they appeared in 28.6 percent or less of the agreements the Bureau studied.
Comments received regarding the scope of Section 2 are addressed in Part III.E below.
Section 3 of the Study presented the results of the Bureau's telephone survey of a nationally representative sample of credit card holders.
The consumer survey found that when presented with a hypothetical situation in which the respondents' credit card issuer charged them a fee they knew to be wrongly assessed and in which they exhausted efforts to obtain relief from the company through customer service, only 2.1 percent of respondents stated that they would seek legal advice or consider legal proceedings.
Respondents also reported that factors relating to dispute resolution—such as the presence of an arbitration agreement—played little to no role when they were choosing a credit card. When asked an open-ended question about all the factors that affected their decision to obtain the credit card that they use most often for personal use, no respondents volunteered an answer that referenced dispute resolution procedures.
As for consumers' knowledge and default assumptions as to the means by which disputes between consumers and financial service providers can be resolved, the survey found that consumers generally lacked awareness regarding the effects of arbitration agreements. Of the survey's 1,007 respondents, 570 respondents were able to identify their credit card issuer with sufficient specificity to enable the Bureau to find the issuer's standard credit card agreement and thus to compare the respondents' beliefs with respect to the terms of their agreements with the agreements' actual terms.
Respondents were also generally unaware of any opt-out opportunities afforded by their issuer. Only one respondent whose current credit card contract permitted opting out of the arbitration agreement recalled being offered such an opportunity.
An industry commenter suggested that the Bureau should conduct further analyses to gain a better understanding of consumer comprehension with respect to arbitration agreements. The commenter asserted that this was appropriate given statements from the Bureau that many consumers do not even know that they are bound by an arbitration agreement. A different industry commenter thought the Bureau should have asked consumers if they would decline to file a class action against their credit card issuer because the presence of an arbitration agreement would substantially lower their likelihood of classwide relief. This commenter also said that, rather than asking consumers hypothetical questions about what they would do if an improper charge appeared on their account in the future, the Bureau should have asked whether such a charge had appeared on a consumer's account in the past and, if so, what the consumer did about it. Relatedly, an industry commenter suggested that the Bureau should have surveyed consumers about their baseline level of understanding of other key provisions of their card agreements. With such a baseline, the commenter said that the Bureau could have evaluated whether consumers pay greater, less, or the same attention to dispute resolution clauses as to other clauses important to them—and why that might be so. Absent such data, the commenter said that the survey is meaningless.
A law firm commenter writing on behalf of an industry participant suggested that the Study's consumer survey was flawed because the Bureau only surveyed credit card consumers and that the Bureau should not draw general conclusions about consumers' understanding of dispute resolution systems from survey results in a single market in part because credit card agreements are often provided simultaneously with an access device rather than when a consumer applies for a card. This is because, the commenter suggested, that credit card contracts are unique, because consumers do not receive the complete loan agreement until they receive the card itself.
The Bureau disagrees with the commenter that suggested that the Bureau should have conducted further analyses of consumer comprehension. The Bureau, in Section 3 of the Study, explored in detail consumer comprehension issues with respect to arbitration agreements using a nationally representative telephone survey. As is discussed in the Study, among other findings, the Bureau determined that a majority of respondents whose credit cards include pre-dispute arbitration agreements did not know if they could sue their issuers in court. Nor does the Bureau agree that asking consumers about their likelihood to file a class action given an arbitration agreement would result in useful information. As the Study showed, the proposal and this final rule discuss, and several industry commenters acknowledged, regardless of the level of individual consumer awareness, arbitration agreements do in fact have the effect of blocking class actions that are filed and suppressing the filing of many more cases, consumers' awareness of this fact does not seem relevant. Insofar as cases are blocked, further focus on consumers' comprehension of this fact is unnecessary.
The Bureau acknowledges it did not develop a baseline of understanding of other key credit card agreement terms. However, the Bureau disagrees that the failure to do so renders the survey “meaningless.” The survey found that consumers do not shop for credit cards based on the type of dispute resolution process provided in the credit card agreement and that consumers do not understand the consequences of choosing a card with an arbitration provision. Whether consumers have greater or lesser understanding of other
Regarding the commenter that suggested that the survey of credit card customers cannot be extrapolated to other markets because credit card agreements are often provided simultaneously with an access device (and not at the time of application), the Bureau disagrees that this is a relevant reason not to extrapolate the results of the survey. Even if consumers do not receive the terms at the time of application, they do receive them before they activate a credit card. At that point, they are free to reject the credit card and its terms. The survey showed that few make that choice; the Bureau has no reason to believe that such a decision is different in other markets. Nor has this or any other commenter provided evidence to the contrary.
While the Study generally focused on empirical analysis of dispute resolution, Section 4 of the Study provided a brief qualitative comparison between the procedural rules that apply in court and in arbitration. Particularly given changes to the AAA consumer fee schedule that took effect March 1, 2013, the procedural rules are relevant to understanding the context from which the Study's empirical findings arise.
The Study's procedural overview described court litigation as reflected in the Federal Rules and, as an example of a small claims court process, the Philadelphia Municipal Court Rules of Civil Practice. It compared those procedures to arbitration procedures as set out in the rules governing consumer arbitrations administered by the two leading arbitration administrators in the United States, the AAA and JAMS. The Study compared arbitration and court procedures according to eleven factors: The process for filing a claim, fees, legal representation, the process for selecting the decision maker, discovery, dispositive motions, class proceedings, privacy and confidentiality, hearings, judgments and awards, and appeals.
Parties in court generally bear their own attorney's fees, unless a statute or contract provision provides otherwise or a party is shown to have acted in bad faith. However, under several consumer protection statutes, providers may be liable for attorney's fees.
A nonprofit commenter criticized the Bureau's analysis of arbitration procedures by noting that it is the shortest section of the Study and that the Bureau did not attempt to estimate the actual transaction cost for consumers in pursuing claims in court as compared to arbitration. A research center commenter suggested that the Bureau should have performed a more detailed analysis of how judges supervise arbitration and how many businesses have adopted provisions similar to that at issue in the
While the review of arbitration procedures was shorter than other chapters that report on the results of empirical analyses undertaken for the Study, the Bureau believes its analysis to be fulsome; the commenter—other than offering the transaction cost criticism as discussed in the rest of this paragraph—did not explain what more the Bureau's analysis could have done nor did it identify other specific topics for analysis. With regard to the comparison of costs, the Bureau notes that the Study provided a detailed discussion of the fees a consumer would need to pay in (a) Federal court; (b) small claims court, using Philadelphia Municipal Court as an example; and (c) arbitration, using the AAA and JAMS as examples.
As for the commenter that suggested that the Bureau should have looked at how judges supervise arbitration, the commenter did not explain what additional insights could be gained from such an analysis. As for the commenter's contentions regarding
Section 5 of the Study analyzed arbitrations of consumer finance disputes between consumers and consumer financial services providers. This section tallied the frequency of such arbitrations, including the number of claims brought and a classification of which claims were brought. It also examined outcomes, including how cases were resolved and how consumers and companies fared in the relatively small share of cases that an arbitrator resolved on the merits. The Study performed this analysis for arbitrations concerning credit cards, checking accounts, payday loans, GPR prepaid cards, private student loans, and automobile purchase loans. To conduct this analysis, the Bureau used electronic case files from the AAA.
The Study identified about 1,847 filings in total—about 616 per year—with the AAA for the six product markets combined.
Although claim amounts varied by product, in disputes involving affirmative claims by consumers, the average amount of such claims was approximately $27,000 and the median amount of such claims was $11,500.
Overall, consumers were represented by counsel in 63.2 percent of arbitration cases.
To analyze the outcomes in arbitration, the Bureau confined its analysis to claims filed in 2010 and 2011 in order to limit the number of cases that were pending at the close of the period for which the Bureau had data. The Bureau's analysis of arbitration outcomes was limited by a number of factors that are unavoidable in any review of dispute resolution.
With those significant caveats noted, the Study determined that in 32.2 percent of the 1,060 disputes filed during the first two years of the Study period (341 disputes) arbitrators resolved the dispute on the merits. In 23.2 percent of the disputes (246 disputes), the record showed that the parties settled. In 34.2 percent of disputes (362 disputes), the available AAA case record ended in a manner that was consistent with settlement—for example, a voluntary dismissal of the action—but the Bureau could not definitively determine that settlement occurred. In the remaining 10.5 percent of disputes (111 disputes), the available AAA case record ended in a manner that suggested the dispute is unlikely to have settled; for example, the AAA may have refused to administer the dispute because it determined that the arbitration agreement at issue was inconsistent with the AAA's Consumer Due Process Protocol.
As noted above, only a small portion of filed arbitrations reached a decision. The Study identified 341 cases filed in 2010 and 2011 that were resolved by an arbitrator and for which the outcome was ascertainable.
The Study found that consumers appealed very few arbitration decisions and companies appealed none. Specifically, it found four arbitral appeals filed between 2010 and 2012. Consumers without counsel filed all four. Three of the four were closed after the parties failed to pay the required administrator fees and arbitrator deposits. In the fourth, a three-arbitrator panel upheld an arbitration award in favor of the company after a 15-month appeal process.
The Study also found that very few class arbitrations were filed. The Study identified only two filed with AAA between 2010 and 2012. One was still pending on a motion to dismiss as of September 2014. The other file contained no information other than the arbitration demand that followed a State court decision granting the company's motion seeking arbitration.
The Study also found that, when there was a decision on the merits by an arbitrator, the average time to resolution was 179 days, and the median time to resolution was 150 days. When the record definitively indicated that a case had settled, the median time to settlement was 155 days from the filing of the initial claim.
An industry commenter criticized the Study's review of arbitration processes for its failure to assess whether the AAA due process protocol was effective in ensuring arbitrator neutrality. The commenter suggested that the Bureau could have reviewed decisions of individual arbitrators to see if they had a pattern of favoring the companies over consumers. This commenter further criticized the Bureau for making no effort to evaluate whether arbitrators' decisions were properly decided.
Similarly, a Congressional commenter expressed concern that the Study failed to thoroughly analyze and compare arbitration programs and program features. The commenter suggested that the Bureau should have reviewed whether certain features of arbitration programs produce better consumer outcomes and enhance the consumer experience as compared to others, but did not identify specifically which features warranted additional analysis.
An industry commenter took issue with the Bureau's assertion that the disputes it reviewed involving AAA represent substantially all consumer finance arbitration disputes that were filed during the Study period, noting that JAMS was named as the administrator at least 50 percent as often as AAA in the agreements reviewed by the Bureau.
Another industry commenter suggested that the Study's data regarding disputes reached on the merits were not representative of the sample because only 32 percent of cases had a judgment on the merits, while the rest remained dormant or settled on unknown terms.
With respect to the commenter that criticized the Bureau for not evaluating whether certain arbitration programs (such as those that limit consumer costs, allow for “bonus” awards,
As to the commenter that criticized the Bureau for not evaluating whether arbitrators deciding AAA consumer cases were biased, the Bureau notes that, for those cases that were resolved with a written opinion, the Study reported whether the decision favored the consumer or the financial institution and the amount of the award, if any. The Study also explored whether arbitrators favored parties that were repeat players before them.
With respect to the industry commenter that suggested the Study undercounted individual arbitration because it studied only those filed with the AAA and not JAMS, the Bureau noted in the Study and the proposal that JAMS appears to handle a relatively small number of consumer finance arbitrations per year. For example, it reported to the Bureau that it handled 115 consumer finance arbitrations in 2015
As for the commenter that contended that the decisions reached on the merits are not representative of the whole, the Bureau notes that it does not contend otherwise. It noted in the Study that a merits-decision occurred less frequently than other forms of resolution, such as settlement.
The Study's review of consumer financial litigation in court represented, the Bureau believes, the only analysis of the frequency and outcomes of consumer finance cases to date. While there is a large body of research regarding cases filed in court generally, preexisting studies of consumer finance cases either assessed only the number of filings—not typologies and outcomes, as the Study did—or focused on the frequency of cases filed under individual statutes.
The Bureau's class action litigation analysis extended to all Federal district courts. To conduct this analysis, the Bureau collected complaints concerning these six products using an electronic database of pleadings in Federal district courts.
The Study's analysis of putative class action filings identified 562 cases filed by consumers from 2010 through 2012 in Federal courts and selected State courts concerning the six products, or about 187 per year.
As with the Study's analysis of the arbitration proceedings noted above, the Study set out a number of explicit and inherent limitations to its analysis of litigation outcomes.
In addition to the limitations on comparing case outcomes, the Study also noted that even comparing frequency or process across litigation and arbitration proceedings was of limited utility.
An additional 24.4 percent of the class cases (137 cases) involved a non-class settlement and 36.7 percent (206 cases) involved a potential non-class settlement.
The Study also identified 3,462 individual cases filed in Federal court concerning the five product markets studied during the period, or 1,154 per year.
The Bureau reviewed outcomes in all of the individual cases from four of the five markets studied and a random sample of the cases filed in the fifth market, resulting in an analysis of 1,205 cases.
Individual cases generally resolved more quickly than class cases. Aside from cases that were transferred to MDLs, Federal class cases closed in a median of approximately 218 days for cases filed in 2010 and 211 days for cases filed in 2011. Class cases in MDLs were markedly slower, closing in a median of approximately 758 days for cases filed in 2010 and 538 days for cases filed in 2011. State class cases closed in a median of approximately 407 days for cases filed in 2010 and 255 days for cases filed in 2011.
Notwithstanding the inherent limitations noted above, the Bureau's large set of individual and class action litigations allowed the Study to explore whether motions seeking to compel arbitration were more likely to be asserted in individual filings or in putative class action filings. Across its entire set of court filings, the Study found that motions seeking to compel arbitration were much more likely to be asserted in cases filed as class actions. For most of the cases analyzed in the Study, it was not apparent whether the defendants in the proceedings had the option of moving to seek arbitration proceedings (
One industry lawyer commenter criticized the Bureau's review of class action filings for failing to evaluate the underlying merits of the class actions and whether they asserted substantive claims or instead alleged what the commenter considered technical violations, such as improperly worded disclosures. This commenter similarly suggested that the Bureau should have evaluated whether class action claims were meritorious or whether plaintiffs made frivolous claims to attract nuisance value settlements.
An industry commenter took issue with the fact that the Bureau studied 1,800 arbitrations but only a sample of the individual litigation cases and asserted that extrapolating from the latter but not the former provided an inaccurate picture of the individual litigation landscape. The commenter similarly opined that the State court class actions studied by the Bureau cannot be relied upon to be representative of such litigation nationwide because the Bureau, in the Study, acknowledged that they may not be representative of the entire country.
An industry commenter took issue with the small number of instances documented in the Study (12) where a dismissed class claim was re-filed in arbitration, contending that the Bureau did not research whether claims were filed in any arbitration forum other than the AAA.
Relatedly, an industry commenter expressed concern that the number of individual Federal court lawsuits reported in the Study was too low. Specifically, the commenter cited records of the Transactional Records Access Clearinghouse (TRAC), which is a data gathering and research organization at Syracuse University. The commenter asserted, based on the TRAC data, that there were 890 consumer credit lawsuits filed in Federal district court in May 2012 and 723 such suits filed in September 2012.
Regarding the industry lawyer commenter that criticized the Study's failure to explore whether class actions assert substantive or technical claims, the Bureau notes that the Study did report on the types of claims asserted in Federal class actions by statute.
As for the assertions that the Bureau's analysis undercounted the number of individual cases filed in Federal court, the Bureau does not believe that the figures cited by the commenters provide a basis on which to question the accuracy of the Bureau's data. As is explained in detail in Appendix L of the Study, the Bureau completed its analysis by first crafting a deliberately overbroad text search in the Courtlink database and then manually sorting through that data for cases that fit the relevant parameters. The Bureau filtered this data so that it could analyze individual claims filed in Federal court with respect to five consumer financial products (credit cards, GPR prepaid cards, checking accounts/debit cards, payday loans, and private student loans) and found approximately 1,200 per year. The TRAC and WebRecon sources referenced by the commenter did not, as the Bureau did, analyze each case to see whether it fell into one of the five product categories analyzed in that part of Section 6. Both databases appear to be based on initial case designations made upon filing by a plaintiff. Thus, many cases designated as “consumer credit” fall outside both the parameters of Section 6 and the Bureau's proposed rulemaking. For example, not every case filed under the FCRA or the FDCPA and reported by TRAC as a consumer credit case concerns a consumer financial product or service, and thus TRAC overstates the number of Federal individual claims concerning such products. Similarly and as the Bureau noted in the proposal, an unknown number of the cases reported by WebRecon also would not be covered by the Study or by the proposal rule because that database similarly includes all claims under FDCPA, FCRA and TCPA and have not been analyzed further. As evidence of the overbroad nature of these results, a separate study explained that more than 3,000 TCPA claims were filed in 2015 but many of these concerned marketing communications unrelated to consumer finance, such as those against a merchant or a company with whom the consumer has no relationship (contractual or otherwise).
As for the commenter concerned about the Bureau having extrapolating data on individual litigation, the Bureau notes that the Study did not purport to analyze all claims about consumer financial products filed in Federal court. Thus it agrees that the number of individual Federal lawsuits about all of the consumer financial products that would be covered by this rule is necessarily higher than 1,200. The Bureau knows of no reason to view the studied markets as materially different than other financial services markets, however, with regard to the level of Federal litigation overall, nor does the commenter suggest otherwise. As for extrapolating from Federal individual lawsuits, the Bureau disagrees that extrapolating data is inappropriate. Extrapolation is standard technique used in studies like the Bureau's and is typically only inappropriate if there is a reason that the data collected is unique. The Bureau does not believe such a reason exists regarding its Federal individual court records, nor did the commenter identify one.
As described above, Section 2 of the Study found that most arbitration agreements in the six markets the Bureau studied contained a small claims court “carve-out” that typically afforded either the consumer or both parties the right to file suit in small claims court as an alternative to arbitration. Commenters on the RFI urged the Bureau to study the use of small claims courts with respect to consumer financial disputes. The Bureau undertook this analysis, published the results of this inquiry in the Preliminary Results, and also included these results in Section 7 of the Study.
The Bureau believes that the Study's review of small claims court filings is the only study of the incidence and typology of consumer financial disputes in small claims court to date. Prior research suggests that companies make greater use of small claims court than consumers and that most company-filed suits in small claims court are debt collection cases.
The Bureau obtained the data for this analysis from online small claims court databases operated by States and counties. No centralized repository of small claims court filings exists.
The Study estimated that, in the jurisdictions the Bureau studied—with a combined population of approximately 87 million people—consumers filed no more than 870 disputes in 2012 against these 10 institutions
As the Study noted, the number of claims brought by consumers that were consumer financial in nature was likely much lower. Out of the 31 jurisdictions studied, the Bureau was able to obtain underlying case documents on a systematic basis for only two jurisdictions: Alameda County and Philadelphia County. The Bureau's analysis of all cases filed by consumers against the credit card issuers in its sample found 39 such cases in Alameda County and four such cases in Philadelphia County. When the Bureau reviewed the actual pleadings, however, only four of the 39 Alameda cases were clearly individuals filing credit card claims against one of the 10 issuers, and none of the four Philadelphia cases were situations where individuals were filing credit card claims against one of the 10 issuers. This additional analysis shows that the Bureau's broad methodology likely significantly overstated the actual number of small claims court cases filed by consumers against credit card issuers.
The Study also found that in small claims court credit card issuers were more likely to sue consumers than consumers were to sue issuers. The Study estimated that, in these same jurisdictions, issuers in the Bureau's sample filed over 41,000 cases against individuals.
One industry commenter asserted that the Bureau had only evaluated whether arbitration agreements contained small claims court carve-outs and requested that the Bureau re-conduct its Study to, among other things, critically analyze the use of small claims court as compared to arbitration or class action litigation. The commenter did not specifically address the Bureau's analysis in Section 7 of the Study or otherwise specify what further type of critical analysis would have been appropriate.
Another industry commenter asserted that the sample size used by the Bureau in its analysis of small claims court was too small and that this demonstrates a weakness of the Study that undermines the credibility of any assertion that consumers rarely proceed individually to obtain relief from legal violations. This commenter focused on the fact that the Bureau's review was limited to what it considered a small number of jurisdictions and only looked at claims against 10 large credit card issuers in 2012, asserting that the Bureau thus understated the total number of small claims cases. Relatedly, another industry commenter expressed concern about the Bureau's limited analysis of small claims court cases, emphasizing that the Bureau was able to review case documents in only two jurisdictions out of the thousands of counties in the United States. However, unlike the prior commenter, this commenter was concerned that the data reflected by the Bureau's methodology may overstate the number of small claims cases filed by consumers against credit card issuers.
The Bureau disagrees that its Study of small claims court was limited to an analysis of whether arbitration agreements contain class action carve-outs. As is discussed in detail above, the Bureau conducted the most fulsome analysis it could practicably conduct of consumers' use of small claims court to resolve disputes with their providers.
The Bureau disagrees with the commenter that asserted that the size of the sample and the nature of its review of small claims court data undermine the Bureau's conclusion that consumers rarely proceed in this venue. The commenter did not explain why, given that the Bureau analyzed small claims courts in jurisdictions with a combined population of approximately 87 million people and found only 870 suits in 2012 against these 10 largest credit card issuers, it should be expected to find a substantially higher incidence of suits in the other portions of the country or against other providers. As is explained in the Study's Appendix Q,
With regard to the other commenter's concern that the Bureau has overstated the number of small claims court cases in the jurisdictions it studied, the Bureau pointed out that the 870 cases identified in Section 7 constituted a likely upper limit to the number of consumer-filed small claims court cases against the identified credit card issuers.
Section 8 of the Study contained the results of the Bureau's quantitative assessment of consumer financial class action settlements. As described above, Section 6 of the Study, which analyzed consumer financial litigation, included findings about the frequency with which consumer financial class actions are filed and the types of outcomes reached in such cases. The dataset used for that analysis consisted of cases filed between 2010 and 2012 and outcomes of those cases through February 28, 2014.
To better understand the results of consumer financial class actions that result in settlements, for Section 8, the Bureau conducted a search of class action settlements through an online database for Federal district court dockets. The Bureau searched this database using terms designed to identify final settlement orders finalized from 2008 to 2012 in consumer financial cases. The selection criteria for this data set differed from many other sections in the Study, in that it was not restricted to a discrete number of consumer financial products and services.
The set of consumer financial class action settlements overlapped with the data set used for the analysis of the frequency and outcomes of consumer financial litigation (Section 6 of the Study) insofar as cases filed in 2010 through 2012 had settled by the end of 2012. The analysis of class action settlements was larger because it encompassed a wider time period (settlements finalized from 2008 through 2012), which, among other benefits, decreased the variance across years that could be created by unusually large settlements and allowed the Bureau to account for the impact of such events as the April 2011 Supreme Court decision in
As the Study noted, there were limitations to the Bureau's analysis. The Study understated the number of class action settlements finalized, and the amount of relief provided, during the period under study because the Bureau could not identify class settlements in State court class action litigation. (The Bureau determined it was not feasible to do so in a systematic way.
The Bureau identified 422 Federal consumer financial class settlements that were approved between 2008 and 2012, resulting in an average of approximately 85 approved settlements per year.
These 419 settlements included cash relief, in-kind relief, and other expenses
Sixty percent of the 419 settlements (251 settlements) contained enough data for the Bureau to calculate the value of cash relief that, as of the last document in the case files, either had been or was scheduled to be paid to class members. Based on these cases alone, the value of cash payments to class members was $1.1 billion. Again, this excludes payment of in-kind relief and any valuation of behavioral relief.
For 56 percent of the 419 settlements (236 settlements), the docket contained enough data for the Bureau to estimate, as of the date of the last filing in the case, the number of class members who were guaranteed cash payment because either they had submitted a claim or they were part of a class to which payments were to be made automatically. In these settlements, 34 million class members were guaranteed recovery as of the time of the last document available for review, having made claims or participated in an automatic distribution.
The Study also sought to calculate the rate at which consumers claimed relief when such a process was required to obtain relief. The Bureau was able to calculate the claims rate in 25.1 percent of the 419 settlements that contained enough data for the Bureau to calculate the value of cash relief that had been or was scheduled to be paid to class members (105 cases). In these cases, the average claims rate was 21 percent and the median claims rate was 8 percent.
The Study also examined attorney's fee awards. Across all settlements that reported both fees and gross cash and in-kind relief, fee rates were 21 percent of cash relief and 16 percent of cash and in-kind relief. Here, too, the Study did not include any valuation for behavioral relief, even when courts relied on such valuations to support fee awards. The Bureau was able to compare fees to cash payments in 251 cases (or 60 percent of the data set). In these cases, of the total amount paid out in cash by defendants (both to class members and in attorney's fees), 24 percent was paid in fees.
In addition, the Study included a case study of
The Overdraft MDL cases also provided useful insight into the extent to which consumers were able to obtain relief via informal dispute resolution—such as telephone calls to customer service representatives. As the Study noted, in 17 of the 18 Overdraft MDL settlements, the amount of the settlement relief was finalized, and the number of class members determined, after specific calculations by an expert witness who took into account the number and amount of fees that had already been reversed based on informal consumer complaints to customer service. The expert witness used data provided by the banks to calculate the amount of consumer harm on a per-consumer basis; the data showed, and the calculations reflected, informal reversals of overdraft charges. Even after controlling for these informal reversals, nearly $1 billion in relief was made available to more than 28 million class members in these MDL cases.
Several commenters, including industry commenters and a nonprofit commenter, criticized the Bureau's analysis of class action settlements. These commenters cited a working paper by one research center that critiqued use of what it called “aggregate averages” to evaluate the effectiveness of class action cases.
A nonprofit commenter, a research center commenter and several industry commenters also criticized the Study for not attempting to assess the underlying merit of consumer class actions that result in settlements and one of these industry commenters criticized the Bureau for not also analyzing the merits of all class actions, not just those that settled. The nonprofit commenter noted that the Study did not present data regarding which companies were more likely to settle nor did the Bureau offer details on what the commenter identified as key measures of class action performance. Without this information, contended the commenter, readers are unable to know if allowing more class actions would actually resolve a societal problem or instead would be used to extort settlements from companies for minor violations that do not harm anyone. One industry commenter focused on the fact that the Bureau did not calculate any actual injury to consumers belonging to a class and instead assumed that settlements reflect redress for legal violations even though most settlements do not include a finding of wrongdoing and some may be settlements to resolve nuisance suits. This commenter further expressed concern for, in its view, the Bureau's failure to determine if class action claims were meritless or frivolous. Relatedly, one of the industry commenters said that the Bureau should have evaluated whether class actions were brought to address consumer harm as opposed to being motivated by attorneys' desire to earn fees (and thus benefits to consumers were secondary).
An industry commenter suggested that Section 8 exceeded the Bureau's authority, noting that section 1028(a) required the Bureau to study pre-dispute arbitration agreements and did not expressly require the Bureau to study class actions and the use of arbitration agreements to block class actions.
Another industry commenter noted that the data set considered in this section was for a five-year period and not three years as was used in some of the other sections and asserted that this distorted the relative importance of class actions. The commenter further noted that the data was not restricted to specific consumer financial products and services. The commenter also stated that it was difficult to analyze unequal or dissimilar data sets and come to an accurate portrait of how they compare.
A research center commenter and an industry trade association both expressed concern that the analysis in this section of the Study excluded the sums that companies paid attorneys to defend class action claims and class actions that did not report payments to class members; in other words, they asserted that the Bureau did not present the “net cost” of class actions in the Study. The commenters argued that the Study accordingly substantially underestimated costs incurred by companies in connection with class actions. The research center commenter further asserted that the Bureau either systematically excluded or overstated the benefit of many claims-made settlements.
Finally, an industry commenter suggested that the Bureau's method for calculating attorney's fees artificially deflated the average amount of attorney's fees reported per case.
In response to the commenters that were concerned with the Bureau's use of aggregate averages, the Bureau notes that it did present Section 8's analyses of class action settlements in a number of different segments. This allows the public to avoid any confusion that could be caused by aggregating the entire set, and commenters to focus on whatever segments they believe to be most relevant. The Study also directly addressed potential confusion on aggregate averages by providing data on the number of settlements within various ranges of gross relief.
As for the related concern about the Bureau's inclusion of certain class actions that commenters thought should have been excluded, the Bureau
In response to the commenter that took issue with the Bureau's use and analysis of the Overdraft MDL case study, the Bureau believes that overdraft cases were not atypical in offering automatic payouts to class members.
As for the commenters that asserted that the Bureau did not review the merits of all class actions or just those that resulted in settlements, as noted above in connection with Section 6 of the Study, the Bureau notes that the Study analyzed the closest proxies for merit possible—the filing and disposition of summary judgment motions and motions to dismiss preceding final class action settlements.
With respect to the industry commenter concerned that the Bureau's Study was too expansive and exceeded its section 1028(a) authority—by studying class actions in addition to arbitration—the Bureau believes that its analysis is relevant to performance of its charge under section 1028(a) and notes that a number of responses by industry and consumer commenters alike to the Bureau's initial request for information strongly urged the Bureau to study class action litigation.
Regarding the Bureau's selection of a five-year period review of class actions, the Bureau studied the longest time periods practicable for the various individual components of the Study consistent with electronic data availability and other Bureau resource limitations. As it explained in the Study and the proposal, the fact that it was practicable to study a broader time range for Section 8 of the Study had a number of advantages, including the ability to account for significant background shocks such as the financial crisis and the Supreme Court's decision in
With regard to concerns raised by the research center commenter, as discussed further below in Part III.E, the Bureau notes that data about defense attorney costs is not publicly available. The Bureau further determined that it would be too difficult or impossible to gather additional information on any uniform basis about defense costs, given that at least some of this information may be considered subject to attorney-client privilege. The Bureau made clear that it was seeking to study “transaction costs in consumer class actions,” and firms that had been involved in defending class actions could have produced data on their transaction costs during the Bureau's Study process but did not. Nor has any such data been provided to the Bureau in response to the notice of proposed rulemaking.
Finally, with regard to the concern related to the method used to report attorney's fees, the Bureau notes that the
Section 9 of the Study explored the relationship between private consumer financial class actions and public (governmental) enforcement actions. As Section 9 noted, some industry trade association commenters (commenting on the RFI) urged the Bureau to study whether class actions are an efficient and cost-effective mechanism to ensure compliance with the law given the authority of public enforcement agencies. Specifically, these commenters suggested that the Bureau explore the percentage of class actions that are follow-on proceedings to government enforcement actions. Other stakeholders have argued that private class actions are needed to supplement public enforcement, given the limited resources of government agencies, and that private class actions may precede public enforcement and, in some cases, spur the government to action. To better understand the relationship between private class actions and public enforcement, Section 9 analyzed the extent to which private class actions overlapped with government enforcement activity and, when they did overlap, which types of actions came first.
The Bureau obtained data for this analysis in two steps. First, it assembled a sample of public enforcement actions and searched for “overlapping” private class actions, meaning that the cases sought relief against the same defendants for the same conduct, regardless of the legal theory employed in the complaint at issue.
Second, the Bureau essentially performed a similar search over the same period, but in reverse: The Bureau assembled a sample of private class actions and then searched for overlapping public enforcement actions. This sample of private class actions was derived from a sample of the class settlements used for Section 8 and a review of the Web sites of leading plaintiff's class action law firms. To find overlapping public enforcement actions (typically posted on government agencies' Web sites), the Bureau searched online using keywords specific to the underlying private action.
The Study found that, where the government brings an enforcement action, there is rarely an overlapping private class action. For 88 percent of the public enforcement actions the Bureau identified, the Bureau did not find an overlapping private class action.
Finally, the Study found that, when public enforcement actions and class actions overlapped, private class actions tended to precede public enforcement actions instead of the reverse. When the Study began with government enforcement activity and identified overlapping private class actions, public enforcement activity was preceded by private activity 71 percent of the time. Likewise, when the Bureau began with private class actions and identified overlapping public enforcement activity, private class action complaints were preceded by public enforcement activity 36 percent of the time.
Several industry commenters stated that, in their view, the Study was flawed because the Bureau did not properly consider the impacts its own enforcement activities have on providers. For example, one of these commenters stated that the Bureau only reviewed AAA arbitrations resolved during what it termed the Bureau's “formative stage” and asserted that the Study was therefore skewed because it did not take into account the Bureau's enforcement actions in later years. Another commenter criticized the Bureau for failing to account for the impact that other Bureau activities—interim final and other finalized rulemakings, amicus briefs, etc.—would have on providers, and asserted that further study of these impacts is warranted.
An industry commenter took issue with what it believed to be an overly narrow focus in this Section 9 of the Study that overlooked several key points. For example, this commenter said that the Bureau should have evaluated how many class actions are a result of other disclosures of wrongdoing (
As to the comments that criticized the scope of the Bureau's analysis of its own enforcement actions, noting that the Bureau increased its enforcement activity after 2012, such comments assume that the purpose of the analysis was to assess the overall level of public enforcement and compare it to the volume of class action activity. To the extent that there has been, and will continue to be, an increase in Bureau enforcement actions relative to the Study period, the Bureau knows of no reason to believe that the relationship between public and private enforcement will change, nor did any commenter suggest a basis for so believing.
Section 10 of the Study contained the results of a quantitative analysis which explored whether arbitration agreements affected the price and availability of credit to consumers. Commenters on the Bureau's RFI suggested that the Bureau explore whether arbitration agreements lower the prices of financial services to consumers. In academic literature, some hypothesize that arbitration agreements reduce companies' dispute resolution costs and that companies “pass through” at least some cost savings to consumers in the form of lower prices, while others reject this notion.
To address this gap in scholarship, the Study explored the effects of arbitration agreements on the price and availability of credit in the credit card marketplace following a series of settlements in
The Bureau performed a similar inquiry into whether the affected companies altered the amount of credit they offered consumers, all else being equal, in a manner that was statistically different from that of comparable companies. The Study noted that this inquiry was subject to limitations not applicable to the price inquiry, such as the lack of a single metric to define credit availability.
An industry commenter and a trade association dismissed the Bureau's findings in Section 10, asserting that the
A nonprofit commenter, citing to an academic working paper, contended that the Study failed to indicate whether the Bureau checked to ensure the validity of the econometric technique it used in evaluating price changes. This commenter also criticized the Bureau's method as valid only if prices had been
An individual commenter criticized the conclusions that the Bureau drew from its analysis, and asserted that footnote 34 in Section 10 of the Study demonstrated that the
An industry commenter noted that the Bureau's analysis in this section focused only on large banks and did not account for small institutions' practices, which the commenter suggested may be different. The commenter noted that the Study more generally found that larger institutions were more likely to use arbitration agreements and asserted that there may be a relationship between using arbitration and providing credit to many more consumers, especially those with poor credit (as large institutions may be more likely to do). The commenter concluded that this might mean that the class proposal could harm credit access for poorer consumers. A research center made a similar point, stating that empirical evidence shows that consumer finance companies do pass on changes in their costs but that banks are unlikely to adjust their deposit and loan rates quickly or fully to reflect only temporary changes in market interest rates. This commenter also suggested that firms in the consumer services sector adjust prices much more slowly in response to cost changes than do firms in the manufacturing sector, and large firms adjust prices more slowly than do small firms.
Another industry commenter stated that, in its view, there was not statistically significant empirical support to generalize the findings in this section beyond the specific
The purpose of Section 10 was to explore the suggestion by some that companies' use of arbitration agreements lowers prices for consumers. The analysis then conducted found no evidence to support that claim. As the Bureau explained in the Study, analyzing whether pre-dispute arbitration agreements lower the price of consumer financial products or services is extremely difficult. The Bureau continues to believe that it made sense to analyze the
With regard to criticism of the methodology, the Bureau notes that its regression analysis was designed to control for effects that could have impacted pricing if the credit card companies had changed their prices for any number of external factors.
As to the commenter that expressed concern that the Bureau had never ensured the validity of its econometric technique, the Bureau believes that the commenter misunderstood the nature of the difference-in-difference analysis used. In the analysis, the control group was neither companies with arbitration clauses nor was it companies that did not have arbitration clauses. Rather, the control group was companies that did not change their use of arbitration provisions, either because they used arbitration provisions through the entire period or they did not use arbitration provisions through the entire period. The treatment group was the
As to the nonprofit commenter's point that the Bureau's technique in this analysis was valid only if prices had been changing at the same rate prior to the settlement in
As to the individual commenter that expressed concern about other impacts on pricing and arbitration agreements beyond the
In response to this commenter's assertion that the Bureau did find a difference and buried it in footnote 34, the Bureau believes that the commenter was really disagreeing with the use of TCC as the appropriate metric.
The Bureau agrees, as an industry commenter noted, that its analysis in this section was limited to very large banks. The Bureau addresses cost concerns specific to small entities below. Regarding the commenter's theory regarding access to credit for those with poor credit, the Bureau reiterates, as is noted above, that it had a number of controls for consumer credit that would have detected a particular effect on subprime consumers. The Bureau also acknowledges that there are a number of factors, as one commenter identified, that impact when and how banks decide to adjust pricing mechanisms.
The Bureau disagrees with the contention that its definition of the control group was invalid. As was explained in the Study, the control group contained entities that had no change in their use of arbitration agreements; whether they did or did not use such an agreement was not relevant. This group was then compared to those entities required to withdraw arbitration agreements as a result of the
Finally, regarding the commenter that said that the conclusion of this section was at odds with other available evidence, the Bureau explains below in Part VI the relevance of this part of the Study to its overall findings in this rulemaking.
The Bureau notes that it received numerous comments from members of Congress, consumers, consumer advocates, academics, nonprofits, consumer lawyers and law firms, public-interest consumer lawyers, State legislators, State attorneys general, and others that expressed confidence in the Study and the Bureau's methods. Many of these commenters noted the Study's comprehensiveness; a few noted that it appeared to be the most comprehensive study of dispute resolution in connection with consumer financial services completed to date.
One nonprofit commenter challenged the Bureau's Study for its alleged failure to comply with the requirements of the Information Quality Act
Several other industry commenters criticized the Bureau for not soliciting public comments during the course of the Study process. In the view of one commenter, such a process could have enabled the Bureau to address defects and other problems with the Study before its conclusion. The industry commenters stated that the Bureau had never informed the public of the topics it had decided to study, never sought public comment on them, and never convened a public roundtable discussion on key issues. These
Several industry commenters stated that the Bureau should have studied consumer satisfaction with the arbitration process through, for example, interviews of consumers who have arbitrated claims and who had been involved in class actions. One of these commenters also stated that the Bureau should have evaluated consumer experience with arbitration in other areas, such as employment, where it has existed longer.
One industry commenter suggested that the Bureau should have also studied the impact on consumers and society if companies abandon arbitration as well as the costs to consumers and society of the additional 6,042 class actions that the proposal's Section 1022(b)(2) Analysis projected would be filed every five years. This commenter further noted that the Bureau did not study whether class actions are necessary as a deterrent given the impact of modern social media, explaining that in modern society providers have enormous incentive to ensure that their customers are satisfied and any disputes resolved fairly because dissatisfaction can be amplified on social media.
Another industry commenter challenged the Bureau's failure to survey market participants regarding their views on the deterrent effect of class action litigation.
A letter from some members of Congress urged the Bureau to gather more data on consumer outcomes.
Another industry commenter stated that, in its view, the Study could have been more comprehensive. This commenter listed a number of additional items that it contended the Bureau should have studied, including the evaluation of what it said were the advantages of arbitration in handling the most typical types of consumer complaints (which the commenter asserted were overcharges, duplicative charges, and other errors); in providing a less formal and more accessible forum to consumers; in the speedy resolution of claims; in actual monetary awards to claimants; and in aggregate cost to participants and related cost-savings; resolution of arbitrations without the involvement of counsel; and in consumer satisfaction. This commenter further criticized the Bureau for not making similar inquiries regarding class actions.
Several commenters, including an industry lawyer, a nonprofit, a group of State attorneys general, and two industry trade associations, criticized the Study (and the proposal) for drawing comparisons between
Several industry commenters criticized the Study for comparing data regarding arbitration awards for a two-year period (2010 through 2011) to class action settlements over a five-year period (2008 through 2012). One commenter noted that the Bureau compared the fact that 34 million consumer class members received $1.1 billion in compensation over those five years to only 32 arbitration awards to consumers (that the Bureau could verify) for a total of only $172,433. This comparison is misleading, suggested the commenter, because it omitted arbitrations that resulted in a confidential settlement. This commenter further asserted that the Study was misleading because it reported the
The Bureau received comments from several specific industry groups that variously asserted that the Study had omitted a fulsome analysis of their particular market or provider type. For example, a trade association commenter representing credit unions asserted that the Bureau studied only a small number of credit unions and criticized it for not engaging in more fulsome analyses of small entities more generally in its Study. A credit union commenter also expressed concern that most of the Bureau's analysis in Section 2 (prevalence) did not adequately represent products offered by credit unions and that there was limited evidence that credit unions use arbitration agreements. Relatedly, a trade association representing online lenders noted that its members were excluded from Section 2, although it acknowledged that its members almost uniformly used arbitration agreements and several installment lenders noted that both online and installment lenders were missing from Section 2.
A Tribal commenter asserted that the Bureau should have consulted with Tribal entities in order to understand how the Tribal governments resolve disputes and that the Bureau should have focused on Tribal businesses in various sections of the Study. Relatedly, a different Tribal commenter asserted that the Bureau did not examine Tribal dispute resolution and procedures or Tribal regulations that protect consumers.
Additionally, an industry trade association representing companies that are consumer reporting agencies (CRAs) said that the Bureau should have more fulsomely included CRAs in the Study in general and credit monitoring cases against CRAs and litigation pursuant to the Credit Repair Organizations Act (CROA) in particular. Although the commenter noted that the Bureau's analyses of class actions (in Section 8) included CRAs, it focused on the Bureau's failure to analyze individual disputes involving CRAs. The commenter further noted that credit reporting constituted one of the four largest product areas for class action relief but the Bureau did not define the scope of credit reporting class actions, and the Bureau only mentioned credit monitoring twice in its Study.
An industry trade association representing automobile dealers, asserted that the Bureau's Study contained virtually no information on automotive financing, and that what little evidence there was suggested that the Bureau did not understand the automotive finance industry. The commenter concluded that the Study's findings as to the automotive finance market were, at best, “murky.”
An industry commenter suggested that the Bureau should have, but did not, conduct an analysis of how arbitration and class actions operate in the “real world” and what the relative trade-offs are for consumers between each dispute resolution mechanism. Relatedly, the commenter expressed concern that the Study failed to balance adequately the actual benefits of the arbitration process against the costs of class-action lawsuits and the likely impacts of the proposal. An industry commenter criticized the Bureau for failing to study the impact of the proposal on online dispute resolution services and other methods of informal dispute resolution.
An industry commenter asserted that the Study did not adequately assess the role of consumer choice—presumably for products with or without arbitration agreements. This commenter also stated that the Study should be re-conducted to evaluate the economic impact on providers and consumers of regulations that prohibit the use of class action waivers.
In response to concerns about the Bureau's compliance with the Information Quality Act, the Bureau did comply with the IQA's standards for quality, utility, and integrity under the IQA Guidelines.
Although the Bureau did not engage in formal peer review, it did include with its report detailed descriptions of its methodology for assembling the data sets and its methodology for analyzing and coding the data so that the Study could be replicated by outside parties. The Bureau is not aware of any entity that has attempted to replicate elements of the Study; to the extent that the Bureau's analysis has been reviewed by academics and stakeholders those individual critiques are addressed above. The Bureau has monitored academic commentary in addition to the comments submitted and continues to do so.
With respect to the claim that the Bureau did not provide notice of the scope of the Study, the Bureau notes that, although not required to do so by Dodd-Frank section 1028(a), the Bureau did, in fact, issue a request for information before commencing the Study to solicit public input with respect to its scope and the sources of data to which the Bureau should look.
As for the commenters concerned that the Bureau did not conduct a study of consumer satisfaction with their consumer financial products and services, the Bureau believes that even if it were to find very high levels of satisfaction, that would not affect the assessment of the various alternative dispute resolution mechanisms, especially given the potential for claims to go undiscovered by consumers. With respect to the concern that the Bureau did not evaluate consumer satisfaction with the arbitration process, the Bureau notes that it did not do so for several reasons. First, given the small number of consumers who participated in arbitration proceedings, it would have been difficult and costly to construct a sample of such consumers and obtain statistically reliable results. Second, it would have been difficult to distinguish consumer satisfaction with the process from consumer satisfaction with the outcome in particular cases. Thus, if a consumer received a poor or no settlement or award in an arbitration, he or she might view the process unfavorably even if the underlying claim was objectively poor and merited little relief. The opposite would also be true.
With respect to the related argument that the Bureau should have conducted a survey comparing consumers' experiences in arbitration as compared to class actions, the Bureau believes that it would have been exceedingly difficult to find consumers who had experienced arbitration, and any comparison in consumer experiences with arbitration and a class action would have suffered from selection bias (
As to those comments that criticized the Study for failing to compare dispute resolution outcomes, the Bureau carefully explained why such a comparison was neither feasible (because of the large volume of settlements or potential settlements where the outcome could not be determined) nor meaningful (because of potential selection bias in the choice of forum and in the cases that did not settle.)
In response to the industry lawyer commenter's criticism that the Bureau did not consider the FTC's 2010 Study of debt collectors' use of arbitration and litigation, the Bureau did review the FTC's 2010 Study in the course of analyzing materials for the 2015 Arbitration Study and, in any case, the Bureau believes the FTC's 2010 Study to be relevant to this rulemaking in offering background information on the use of arbitration in debt collection disputes brought against consumers.
With respect to the claim that the Bureau should have further studied the value or necessity of class actions in deterring misconduct, the Bureau does not believe that a survey of companies or their representatives on this issue would have produced reliable information.
The Bureau believes that the review it undertook of how companies and their representatives respond to the filing and settlement of class actions, as discussed further below in Part VI, is much more probative than self-serving survey results. And, as set out below in Part VI.B, the Bureau believes that social media are insufficient to force companies to change company practices—because, among other reasons, many consumers do not know that they have valid complaints or how to raise their claims through social media. Further, in at least one study, companies ignored nearly half of the social media complaints consumers submitted, and when companies did respond, consumers were dissatisfied in roughly 60 percent of the cases.
Regarding the commenter that suggested that the Bureau should have evaluated whether there is a different level of compliance for companies that use arbitration versus those that can be sued in a class action and that such an analysis can be conducted by review of the Bureau's complaint database, the Bureau disagrees with the premise of the comment; simple comparisons across companies that use arbitration versus those that do not, cannot be made using complaint data. The Bureau also notes that the largest volume of complaints concerns debt collectors, whose ability to invoke arbitration agreements is derivative of the clients they serve; credit reporting companies, which may not have contracts or arbitration agreements with consumers; and mortgage lenders and servicers, who generally are not covered by arbitration agreements. Additionally, the Study found that in certain markets—including GPR prepaid cards, payday loans, private student lending, and mobile wireless third-party billing—arbitration agreements are so common that it would be all but impossible to make the comparisons suggested. In response to the dual suggestions that the Bureau's consumer complaints database could be used to benchmark the compliance of providers with consumer laws or that the Bureau's complaints mechanism itself could be used as a form of dispute resolution instead of class actions, the Bureau observes that some industry commenters had opposed the Bureau's publication of consumer complaint narratives on the grounds that the
As to whether class actions are superior methods of enforcing the law as compared to government enforcement, the Bureau does not believe this is a necessary subject of study. The more relevant question is the relative overlap between the two mechanisms and the extent to which class action cases pursue harms not otherwise addressed by government enforcement. Moreover, regardless of the outcome of this rulemaking, government enforcement will continue. The Bureau believes it more appropriate to compare, as the Study did, consumers' ability to achieve relief individually and as part of a class action. The question, analyzed in detail below, is whether government enforcement remedies all harms in the relevant markets or if class actions supplement government enforcement.
In response to comments that criticized the Bureau for comparing outcomes in arbitration obtained through arbitral decisions (but not settlements) to class action settlements, the Bureau notes that the Study specifically cautioned that the two types of data were derived from different sources and should not be compared as apples to apples.
The Bureau also disagrees that it overlooked the role of online dispute resolution. The Bureau had no direct way of studying the extent to which consumers were able to resolve disputes informally, and the Study specifically acknowledged that this is a means by which consumers may seek relief.
As to the commenters that said that the Bureau should not have compared two years of arbitration data to five years of class action data, the Bureau studied arbitration records for the longest period practical given electronic data limitations. Although the Bureau could have similarly confined its study of class actions, the Bureau believed that studying settlements over a longer time period would provide more robust data to support firmer findings. The differences between the number of consumers involved in arbitration actions and individual actions of any type as compared to the number of consumers that benefited from class actions and the damages awarded in each were so stark as to mitigate any concerns about the difference in the time periods studied.
Regarding the commenter that said that the Bureau was misleading by reporting percentage recovery in arbitration but not in class actions, the Bureau notes that it was only able to do the former because the AAA requires that the filing party specify the dollar amount of his or her claim in an arbitration.
Regarding the focus of the Bureau on providers in specific categories, such as Tribal lenders, credit unions, online lenders, providers of automobile financing, and CRAs (including credit monitoring), the Bureau included in the Study those products and services offered by these providers to the extent that data was available and that these providers were relevant to each section of the Study. For example, to the extent a credit monitoring class action settlement occurred during the Study period, it is included in the analysis in Section 8. With respect to the Study's approach to credit unions, the Bureau notes that its review of credit cards in Section 2 included agreements offered by credit unions to the extent that credit unions are represented in the credit card agreement database mandated under the CARD Act.
Regarding the comment that the Bureau should have conducted a “real world” analysis of arbitration and class actions and tradeoffs of each, the Bureau believes that the Study did attempt such an analysis. Specifically, it attempted to catalogue the cost, benefits, and efficacy (in terms of consumers involved) of each mechanism. Further, as is discussed in greater detail in the Section 1022(b)(2) Analysis below, the Bureau has considered the impacts on consumers and providers of the final rule it is adopting. To the extent that the commenter was concerned that the Study did not evaluate the relative merits of each mechanism, the Bureau believes that such an evaluation is better suited to the rulemaking process where it can consider the impacts of potential policy options.
The Bureau does not agree, as one industry commenter suggested, that Dodd-Frank section 1028(a) required it to study defense costs. In any event, as set out above in Section III.D, above, the Bureau determined that it would be too difficult to gather additional information on any uniform basis about defense costs, given that at least some of this information may be considered privileged by companies. Further, as set out above, the Bureau made clear that it sought “transaction costs in consumer class actions,” but the Bureau received no such data from firms during the Bureau's Study process or in response to the proposal.
The Bureau did attempt to project such costs based on the best data available to it, and discussed their significance in the sections of the proposal analyzing whether it was in the public interest and for the protection of consumers and the proposal's potential impacts on covered persons and consumers under section 1022 of the Dodd-Frank Act. To the extent that the commenter's primary objection was to the significance that the Bureau accorded defense costs in its analyses, those are discussed in Part VI.C below.
As to the commenter that urged the Bureau to study class arbitration, the Bureau notes that the Study addressed class arbitration in several ways. First, Section 2 addressed the percentage of arbitration agreements that allowed for class arbitration in the six product markets studied (the vast majority prohibit it).
As for the commenters that suggested that the Bureau should have studied informal dispute resolution, the Bureau notes that the Study did address informal dispute resolution in a number of contexts. For example, as noted above in the discussion of Section 8, the Bureau noted the impact of previously-resolved informal disputes on the overall amount paid out by the settling banks in the MDL overdraft litigation. The Bureau also considered the significance of the availability of informal dispute resolution mechanisms in both the proposal's Section 1028 proposed findings and Section 1022(b)(2) Analysis, and in their counterparts for the final rule below. In any event, the commenters did not specify what about informal dispute resolution the Bureau should have studied.
As for the commenter that asserted that the Bureau should have studied the role of consumer choice, the Bureau notes that
As noted, the Bureau released the Study in March 2015. After doing so, the Bureau held roundtables with key stakeholders and invited them to provide feedback on the Study and how the Bureau should interpret its results.
In October 2015, the Bureau convened a Small Business Review Panel (SBREFA Panel) with the Chief Counsel for Advocacy of the Small Business Administration (SBA) and the Administrator of the Office of Information and Regulatory Affairs with the Office of Management and Budget (OMB).
Prior to formally meeting with the SERs, the Bureau held conference calls to introduce the SERs to the materials and to answer their questions. The SBREFA Panel then conducted a full-day outreach meeting with the small entity representatives in October 2015 in Washington, DC. The SBREFA Panel gathered information from the SERs at the meeting. Following the meeting, nine SERs submitted written comments to the Bureau. The SBREFA Panel then made findings and recommendations regarding the potential compliance costs and other impacts of the proposal on those entities. Those findings and recommendations are set forth in the Small Business Review Panel Report (SBREFA Report), which is being made part of the administrative record in this rulemaking.
At the same time that the Bureau conducted the SBREFA Panel, it met with other stakeholders to discuss the SBREFA Outline and the impacts analysis discussed in that outline. The Bureau convened several roundtable meetings with a variety of industry representatives—including national trade associations for depository banks and non-bank providers—and consumer advocates. Bureau staff also presented an overview of the SBREFA Outline at a public meeting of the Bureau's Consumer Advisory Board (CAB) and solicited feedback from the CAB on the proposals under consideration.
In May 2016, in accordance with its authority u section 1028 and consistent with its Study, the Bureau proposed regulations that would govern agreements that provide for the arbitration of any future disputes between consumers and providers of certain consumer financial products and services. The comment period on the proposal ended on August 22, 2016.
The proposal would have imposed two sets of limitations on the use of pre-dispute arbitration agreements by covered providers of consumer financial products and services. First, it would have prohibited providers from using a pre-dispute arbitration agreement to block consumer class actions in court and would have required providers to insert language into their arbitration agreements reflecting this limitation. This proposal was based on the Bureau's preliminary findings—which the Bureau stated were consistent with the Study—that pre-dispute arbitration agreements are being widely used to prevent consumers from seeking relief from legal violations on a class basis, that consumers rarely file individual lawsuits or arbitration cases to obtain such relief, and that as a result pre-dispute arbitration agreements lowered incentives for financial service providers to assure that their conduct comported with legal requirements and interfered with the ability of consumers to obtain relief where violations of law occurred.
Second, the proposal would have required providers that use pre-dispute arbitration agreements to submit certain records relating to arbitral proceedings to the Bureau. The Bureau stated that it intended to use the information it would have collected to continue monitoring arbitral proceedings to determine whether there are developments that raise consumer protection concerns that would warrant further Bureau action. The Bureau stated that it intended to publish these materials on its Web site in some form, with appropriate redactions or aggregation as warranted, to provide greater transparency into the arbitration of consumer disputes.
The proposal would have applied to providers of certain consumer financial products and services in the core consumer financial markets of lending money, storing money, and moving or exchanging money. Consistent with the Dodd-Frank Act, the proposal would have applied only to agreements entered into after the end of the 180-day period beginning on the regulation's effective date. The Bureau proposed an effective date of 30 days after a final rule is published in the
The Bureau received over 110,000 comments on the proposal during the comment period. These commenters included consumer advocates; consumer lawyers and law firms; public-interest consumer lawyers; national and regional industry trade associations; industry members including issuing banks and credit unions, and non-bank providers of consumer financial products and services; nonprofit research and advocacy organizations; members of Congress and State legislatures; Federal, State, local, and Tribal government entities and agencies; Tribal governments; academics; State attorneys general; and individual consumers. In addition to letters addressing particular points raised by the Bureau in its preliminary findings, the Bureau received tens of thousands of form letters and signatures on petitions from individuals both supporting and disapproving of the proposal. As is discussed in greater detail in Part VI below, many thousands of consumers submitted comments generally disapproving of the Bureau's proposal (many of these comments were form comments) while many consumers submitted comments generally approving of the Bureau's proposal and, in many instances, urging a broader rule that prohibited arbitration agreements altogether in contracts for consumer financial products and services (many of these comments were form comments or petition signatures as well).
Since the issuance of the proposal, the Bureau has engaged in additional outreach. The Bureau held a field hearing to discuss the proposal and its potential impact on consumers and providers in Albuquerque, New
As discussed more fully below, there are two components to this final rule: a rule prohibiting providers from the use of arbitration agreements to block class actions (as set forth in § 1040.4(a)) and a rule requiring the submission to the Bureau of certain arbitral records and arbitration-related court records (as set forth in § 1040.4(b)). The Bureau is issuing the first component of this rule pursuant to its authority under section 1028(b) of the Dodd-Frank Act and is issuing the second component of this rule pursuant to its authority both under section 1028(b) and section 1022(b) and (c).
Section 1028(b) of the Dodd-Frank Act authorizes the Bureau to issue regulations that would “prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties,” if doing so is “in the public interest and for the protection of consumers.” Section 1028(b) also requires that “[t]he findings in such rule shall be consistent with the study.”
Section 1028(c) further instructs that the Bureau's authority under section 1028(b) may not be construed to prohibit or restrict a consumer from entering into a voluntary arbitration agreement with a covered person after a dispute has arisen. Finally, section 1028(d) provides that, notwithstanding any other provision of law, any regulation prescribed by the Bureau under section 1028(b) shall apply, consistent with the terms of the regulation, to any agreement between a consumer and a covered person entered into after the end of the 180-day period beginning on the effective date of the regulation, as established by the Bureau. As is discussed below in Part VI, the Bureau finds that its rule relating to pre-dispute arbitration agreements fulfills all these statutory requirements and is in the public interest, for the protection of consumers, and consistent with the Bureau's Study.
Section 1022(b)(1) of the Dodd-Frank Act authorizes the Bureau 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.” Among other statutes, title X of the Dodd-Frank Act is a Federal consumer financial law.
Dodd-Frank section 1022(c)(1) provides that, to support its rulemaking and other functions, the Bureau shall monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for such products or services. The Bureau may make public such information obtained by the Bureau under this section as is in the public interest.
The Bureau notes that commenters on the proposal made extensive comments on the Bureau's preliminary findings related to Dodd-Frank Act Section 1028(b), including its factual findings, its findings that the proposal would be for the protection of consumers, and its findings that the proposal would be for the protection of consumers. The bulk of these commenters did not identify whether their comments on particular topics were related to the preliminary factual findings (discussed below in Part VI.B), to the preliminary findings that the proposed rule would be for the protection of consumers (discussed below in Parts VI.C.1 and VI.D.1), or to the preliminary findings that it would be in the public interest (discussed below in Parts VI.C.2 and VI.D.2). Accordingly, for this final rule, the Bureau addresses each comment in the context of the finding it believes the comment was most likely addressing. There is significant overlap between the topics addressed in the final factual findings, the findings that the rule would be for the protection of consumers, and the finding that the rule would be in the public interest. The Bureau therefore incorporates each of its findings into the others, to the extent that commenters may have intended their comments to respond to a different preliminary finding or to more than one.
As discussed above in Part V, Dodd-Frank section 1028(b) authorizes the Bureau to “prohibit or impose conditions or limitations on the use of” a pre-dispute arbitration agreement between covered persons and consumers if the Bureau finds that doing so “is in the public interest and for the protection of consumers.” This Part sets forth the Bureau's interpretation of this standard including a summary of its proposed standard and a review of comments received on it.
As noted in the proposal, the Bureau can read this requirement as either a single integrated standard or as two separate tests (that a rule be both “in the public interest” and “for the protection of consumers”), and in order to determine which reading best effectuates the purposes of the statute, the Bureau exercises its expertise. The Bureau proposed to interpret the two
As discussed in the proposal, the Dodd-Frank section 1028(b) statutory standard parallels the standard set forth in Dodd-Frank section 921(b), which authorizes the SEC to “prohibit or impose conditions or limitations on the use of” a pre-dispute arbitration agreement between investment advisers and their customers or clients if the SEC finds that doing so “is in the public interest and for the protection of investors.” That language in turn parallels the Securities Act and the Securities Exchange Act, which, for over 80 years have authorized the SEC to adopt certain regulations or take certain actions if doing so is “in the public interest and for the protection of investors.”
But the proposal further explained that the Bureau believed that treating the two phrases as separate tests would ensure a fuller consideration of relevant factors. This approach would also be consistent with canons of construction that counsel in favor of giving the two statutory phrases discrete meaning notwithstanding the fact that the two phrases in section 1028(b)—“in the public interest” and “for the protection of consumers”—are inherently interrelated for the reasons discussed above.
The proposal explained that under this approach the Bureau believed that “for the protection of consumers” in the context of section 1028 should be read to focus specifically on the effects of a regulation in promoting compliance with laws applicable to consumer financial products and services and avoiding or preventing harm to the consumers who use or seek to use those products. In contrast, the proposal explained, under this approach the Bureau would read section 1028(b)'s “in the public interest” prong, consistent with the purposes and objectives of title X, to require consideration of the entire range of impacts on consumers and other relevant elements of the public. These interests encompass not just the elements of consumer protection described above, but also secondary impacts on consumers such as effects on pricing, accessibility, and the availability of innovative products. The other relevant elements of the public interest include impacts on providers, markets, and the rule of law, in the form of accountability and transparent application of the law to providers, as well as other related general systemic considerations.
The proposal also explained that the Bureau's proposed interpretations of each phrase standing alone were informed by several considerations. As noted above, for instance, the Bureau would look to the purposes and objectives of title X to inform the “public interest” prong. The Bureau's starting point in defining the public interest therefore would be section 1021(a) of the Act, which describes the Bureau's purpose as follows: “The Bureau shall seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.”
Accordingly, the Bureau proposed to interpret the phrase “in the public interest” to condition any regulation on a finding that such regulation serves the public good based on an inquiry into the regulation's implications for the Bureau's purposes and objectives. This inquiry would require the Bureau to consider benefits and costs to consumers and firms, including the more direct consumer protection factors noted above, and general or systemic concerns with respect to the functioning of markets for consumer financial products or services, as well as the impact of any change in those markets on the broader economy, and the promotion of the rule of law.
With respect to “the protection of consumers,” as explained above and in the proposal, the Bureau ordinarily considers its roles and responsibilities as the Consumer Financial Protection Bureau to encompass attention to the full range of considerations relevant under title X without separately delineating some as “in the public interest” and others as “for the protection of consumers.” However, given that section 1028(b) pairs “the protection of consumers” with the “public interest,” the latter of which the Bureau proposed to interpret to include the full range of considerations encompassed in title X, the proposal explained that the Bureau believed, based on its expertise, that “for the protection of consumers” should not be interpreted in the broad manner in which it is ordinarily understood in the Bureau's work.
The Bureau instead proposed to interpret the phrase “for the protection of consumers” as used in section 1028(b) to condition any regulation on a finding that such regulation would serve to deter and redress violations of the rights of consumers who are using or seek to use a consumer financial product or service. The focus under this prong of the test, as the Bureau proposed to interpret it, would be exclusively on the impacts of a proposed regulation on the level of compliance with relevant laws, including deterring violations of those laws, and on consumers' ability to obtain redress or relief. For instance, a regulation would be “for the protection of consumers” if it adopted direct requirements or augmented the impact of existing requirements to ensure that consumers receive “timely and understandable information” in the course of financial decision making, or to guard them from “unfair, deceptive, or abusive acts and practices and from discrimination.”
The proposal stated that the Bureau provisionally believed that giving separate meaning and consideration to the two prongs would best ensure effectuation of the purpose of the statute. This proposed interpretation would prevent the Bureau from acting solely based on more diffuse public interest benefits, absent a meaningful direct impact on consumer protection as described above. Likewise, the proposed interpretation would prevent the Bureau from issuing arbitration regulations that would undermine the public interest as defined by the full range of factors discussed above, despite some advancement of the protection of consumers.
Several commenters—a nonprofit, an industry trade association, two industry commenters, and an individual—supported the Bureau's proposal to interpret the legal standard as including two separate but related tests. A trade association of consumer lawyers argued for treating the legal standard as a single test given that other similar standards have traditionally been treated as unitary and that the Bureau's two proposed tests would have significant overlap.
One nonprofit commenter acknowledged that the phrase “public interest” is susceptible to multiple interpretations, but also stated that the Bureau's proposed interpretation of the legal standard includes factors that should not be considered. This commenter explained that, in its view, the Bureau should interpret the phrase in the context of the FAA and the longstanding Federal policy that encourages use of arbitration as an efficient means of resolving disputes. The commenter further suggested that section 1028 requires the Bureau to find that a regulation is in the public interest for reasons uniquely applicable to consumer financial products or services rather than for reasons that could apply to other types of products or services. Furthermore, this commenter contended that in enacting section 1028, Congress was not concerned with under-enforcement of laws because there is no specific reference to such considerations in that section of the statute or its brief legislative history. The commenter therefore asserted that the Bureau should not consider increased deterrence or enforcement in determining whether a regulation is “in the public interest and for the protection of consumers.”
Several commenters identified additional specific factors that, in their view, the Bureau should consider in its determination of whether the rule is in the public interest and for the protection of consumers. A group of State attorneys general and an industry commenter suggested that the legal standard should include the public's interest in the freedom of contract. The industry commenter also stated that the public interest standard should consider individuals' ability to choose whether to participate in class action litigation or to be bound by class action judgments. A group of State legislators argued that the Bureau should consider States' rights as a factor in its determination of whether the rule is in the public interest. The group stated that class waivers in arbitration clauses undermine States' ability to pass laws that will be privately enforced, measure the efficacy of those laws, or observe their development, and that the legal standard should account for such effects.
A group of State attorneys general argued that the proposed “protection of consumers” standard is incomplete because it is limited to providers' compliance with the law and consumers' ability to obtain relief. The commenters maintained that the Bureau should also consider consumers'
The Bureau is not persuaded by the nonprofit commenter that the standard should be treated as a single test on the ground that other similar standards have been treated as unitary and the Bureau's two proposed tests will have significant overlap. As explained in the proposal, the statutory standard is ambiguous, and while it is useful and relevant for the Bureau to consider how other similar standards have been applied, there are persuasive reasons, as set forth in the proposal, for the Bureau to adopt a different interpretation here in the context of section 1028.
The Bureau also disagrees with the nonprofit commenter that stated that the proposed interpretation includes factors that should not be considered. With regard to the commenter's contention that section 1028 requires the Bureau to find that a regulation is in the public interest for reasons uniquely applicable to consumer financial products or services rather than for reasons that could apply to other types of products or services, the Bureau notes that section 1028 contains no such limitation. As explained above, the proposed interpretation of the legal standard is guided by the Bureau's purposes and objectives as laid out in title X of the Dodd-Frank Act. The commenter did not identify a basis in the text of title X or the statute's underlying purposes for excluding factors derived from title X simply because they could apply to other products and services. In any event, the Bureau's findings are specific to consumer financial products and services and are based on an empirical study required by Congress that is specific to consumer financial products and services.
Further, as noted above, the Bureau looks to the purposes and objectives of title X to inform the section 1028 standard, and the FAA is not referenced in those purposes and objectives. To the extent that Federal law encourages arbitration through the FAA, the Bureau notes that, as Congress has limited pre-dispute arbitration agreements in other contexts, Congress, through Section 1028, has granted the Bureau express authority to prohibit or otherwise limit the use of such agreements.
The Bureau also disagrees with the commenter's contention that increased deterrence or enforcement should not be considered because section 1028 and its brief legislative history
A variety of commenters identified additional factors that they thought should be considered in the legal standard. The Bureau notes that the standard already encompasses the types of considerations suggested by these commenters, and thus, disagrees that it should specifically list these factors as a part of the legal standard. As the Bureau explained in the proposal, it interprets the public interest standard to include consideration of “benefits and costs to consumers and firms.” The standard thus accounts for impacts that a rule may have on consumers' “freedom of contract” and their ability to determine whether or not to participate in class actions. Likewise, both the public interest standard and the protection of consumers standard account for the extent to which laws are actually enforced. This includes the extent to which State laws that States intend to be privately enforced are actually enforced in this manner.
Finally, the Bureau also disagrees with the State attorneys general that suggested that the “protection of consumers” specifically (as opposed to the section 1028 standard generally or “the public interest” prong) should include consideration of a rule's impact on the general flourishing of the economy. As explained in the proposal, the Bureau generally views consumer protection holistically in its approach to fulfilling its mandate in accordance with the broad range of factors it considers under title X of Dodd-Frank. But in the context of section 1028, which pairs “the protection of consumers” with “the public interest,” the Bureau continues to believe that systemic impacts should be considered under the public interest standard rather than the protection of consumers standard. As such, the Bureau considers a variety of factors related to competition and the flourishing of the economy under the public interest
For these reasons and those stated in the proposal, the Bureau is adopting the interpretation of the section 1028 standard largely as proposed, with minor wording changes for clarification, as restated below.
The phrase “in the public interest and for the protection of consumers” in section 1028 is ambiguous. The Bureau interprets it as comprising two separate but related standards.
The Bureau interprets the phrase “in the public interest” to condition any regulation under section 1028 on a finding that such regulation serves the public good based on an inquiry into the regulation's implications for the Bureau's purposes and objectives. This inquiry requires the Bureau to consider the benefits and costs to consumers and firms, including the more direct factors considered under the protection of consumers standard, and general or systemic concerns with respect to the functioning of markets for consumer financial products or services, as well as the impact of any changes in those markets on the broader economy and the promotion of the rule of law, in the form of accountability and transparent application of the law to providers.
The Bureau interprets the phrase “for the protection of consumers” as used in section 1028 to condition any regulation on a finding that such regulation will serve to deter and redress violations of the rights of consumers who are using or seek to use a consumer financial product or service. The focus under this prong of the test is exclusively on the impacts of a regulation on the level of compliance with relevant laws, including deterring violations of those laws, and on consumers' ability to obtain redress or relief. Under the Bureau's interpretation, the Bureau does not consider more general or systemic concerns with respect to the functioning of the markets for consumer financial products or services or the broader economy as part of section 1028's requirement that the rule be “for the protection of consumers.” Rather, the Bureau considers these factors under the public interest prong.
The Study provides a factual predicate for assessing whether particular proposals would be in the public interest and for the protection of consumers. This part sets forth the factual findings that the Bureau has drawn from the Study and from the Bureau's additional analysis of arbitration agreements and their role in the resolution of disputes involving consumer financial products and services. The Bureau finds that all of the factual findings in this Part VI.B are consistent with the Study.
As noted in Part IV.E, above, the Bureau received many comments on the class proposal. In addition to letters addressing particular points raised by the Bureau in its preliminary findings, the Bureau received tens of thousands of letters and signatures on petitions from individuals both supporting and disapproving of the class proposal.
The Bureau received letters from industry, including banks, credit unions, non-bank providers of consumer financial product and services, trade associations, academics, members of Congress, nonprofits, consumers, and others expressing disapproval of the Bureau's class proposal. The specifics of these letters are discussed in relevant part below. The majority of the letters criticizing the proposal expressed general disapproval rather than specific concerns with provisions of the proposed regulation. Many of these letters recited facts derived from the Study, such as the amount of payments received per consumer in class action settlements, the amount of relief received by consumers who obtained arbitral awards in their favor, the amount of fees paid to plaintiff's attorneys in class actions, and the proportion of class cases that do not result in classwide relief. Many of these comments expressed concerns that the proposal would raise the cost to consumers of financial services and that only plaintiff's attorneys would benefit from the class proposal because of the large fees that plaintiff's attorneys often receive when class action cases are settled. These urged the Bureau not to adopt the proposal.
The Bureau also received many comments from consumers, consumer advocates, nonprofits, public-interest consumer lawyers, consumer lawyers and law firms, academics, members of Congress, State attorneys general, State legislators, local government representatives, and others that expressed broad support for the class proposal. The specifics of these letters are also discussed in relevant part below. These commenters explained that, in their view, the proposal is in the public interest, for the protection of consumers and, if finalized, would be consistent with the Study. Many of these letters recited facts derived from the Study and cited by the Bureau in the proposal that support these findings. For example, many emphasized the need for class actions by comparing the benefits provided to consumers in individual arbitration and litigation with those provided in class actions. These letters also stated that forcing arbitration on consumers by means of form contracts is not in the public interest. Many asserted that consumers should never have to give up constitutional protections, such as the right to bring a case in court. A petition signed by many thousands of consumers asked the Bureau to restore consumers' right to join together to take companies to court. Other commenters urged the Bureau to adopt the class proposal because it would generally enhance consumer rights vis-à-vis financial institutions.
As explained in the proposal, the benefits and drawbacks of arbitration as a means of resolving consumer disputes have long been contested. The Bureau stated there that it did not believe that, based on the evidence currently available to the Bureau as of the time of the proposal, it could determine whether the mechanisms for the arbitration of individual disputes between consumers and providers of consumer financial products and services that existed during the Study period are more or less fair or efficient in resolving these disputes than leaving these disputes to the courts.
Numerous industry, research center, and State attorneys general commenters disagreed with the Bureau's preliminary assessment that a comparison of the relative fairness and efficiency of individual arbitration and individual litigation is inconclusive. Instead, many of these commenters stated their belief that arbitration is a superior form of dispute resolution than individual litigation for consumers because it is less expensive, faster, and does not require the consumer to retain an attorney. For example, commenters stated that the informal nature of arbitration allows for a more streamlined process; that overburdened courts slow resolution of individual litigation; that arbitration hearings can be held via telephone or other convenient means, and that the lack of procedural complexity in arbitration minimizes the need for a consumer to have an attorney.
A group of State attorneys general commenters, a nonprofit commenter, many individual commenters, and Congressional, consumer advocate, academic, and consumer law firm commenters also disagreed with the Bureau's preliminary findings about the relative fairness of individual arbitration and individual litigation, but for reasons opposite those described above. Instead, these commenters stated that individual arbitration was so unfair relative to individual litigation that the Bureau should have protected individual consumers by banning outright the use of pre-dispute arbitration agreements. For example, several consumer advocate commenters and many individual commenters (including thousands of individuals who had signed petitions) argued that any arbitration proceeding that occurs pursuant to a pre-dispute arbitration agreement is “forced” and therefore unfair, and that arbitration agreements are contracts of adhesion that should not be permitted in any context. Other commenters argued that consumer arbitration cannot be neutral because it naturally favors repeat players—the providers who repeatedly hire arbitrators and select administrators—over consumers, who may only be involved in an arbitration once. One public-interest consumer lawyer commenter argued that only a complete ban on pre-dispute arbitration agreements would help consumers because consumers cannot find legal representation for arbitrations and few consumers file arbitrations in any case. Academic commenters stated that consumers should never be deprived of the right to go to court. A Congressional commenter noted that arbitral filing fees can be tens of thousands of dollars and thus are unaffordable to many consumers, particularly when compared to filing fees in court which vary but in some courts are as low as a few hundred dollars. Finally, another public-interest consumer lawyer commenter observed that many resources exist to help individual litigants use the court system—such as volunteer attorneys, offices that offer legal advice, publications, standardized pro se forms, videos, etc.—but that comparable resources do not exist to help individuals navigate arbitration proceedings.
As noted in the proposal and explained in the Study, the Bureau believes that the predominant administrator of consumer arbitration agreements is the AAA, which has adopted standards of conduct that govern the handling of disputes involving consumer financial products and services. Commenters did not disagree with this preliminary finding. The Study showed that AAA arbitrations proceeded relatively expeditiously relative to litigation, that companies often advance consumer filing fees in arbitration, which does not occur in litigation, and that at least some consumers proceeded without an attorney. The Study also showed that those consumers who did prevail in arbitration obtained substantial individual awards—the average recovery by the 32 consumers who won judgments on their affirmative claims was nearly $5,400.
At the same time, the Study showed that a large percentage of the relatively small number of AAA individual arbitration cases were initiated by the consumer financial product or service companies or jointly by companies and consumers in an effort to resolve debt disputes. The Study also showed that companies prevailed more frequently on their claims than consumers
In light of these results and in consideration of the comments received, the Bureau continues to believe that the results of the Study were inconclusive as to the benefits to consumers of individual arbitration versus individual litigation during the Study period. Nevertheless, because arbitration procedures are privately determined, the Bureau finds that they can under certain circumstances pose risks to consumers. For example, as discussed above in Part II.C and in the proposal, until it was effectively shut down by the Minnesota Attorney General, the National Arbitration Forum (NAF) was the predominant administrator for certain types of arbitrations. NAF stopped conducting consumer arbitrations in response to allegations that its ownership structure gave rise to an institutional conflict of interest. The
As first stated in the proposal, the Bureau remains concerned about the potential for consumer harm in the use of arbitration agreements in the resolution of individual disputes. Among these concerns is that arbitrations could be administered by biased administrators (as was alleged in the case of NAF), that harmful arbitration provisions could be enforced, or that individual arbitrations could otherwise be conducted in an unfair manner. The Bureau is therefore, as set out below at length in Part VI.D and the section-by-section analysis of section 1040.4(b), adopting a system that will allow it and the public, to review certain arbitration materials in order to monitor the fairness of such proceedings over time.
However, the Bureau disagrees with the consumer advocate and individual commenters that any arbitration proceeding pursuant to a pre-dispute arbitration agreement is necessarily “forced” and unfair, and that arbitration is not neutral. The Bureau recognizes that, with rare exception, contracts for consumer financial services are contracts of adhesion offered on a take-it-or-leave-it basis. In some markets, consumers may, in theory, be able to choose a provider that does not require pre-dispute arbitration but the Study found that credit card consumers generally do not understand the consequences of entering into a pre-dispute agreement or shop on that basis and the Bureau has no reason to believe that consumers in other markets are any different.
Nonetheless, the Bureau does not agree that the fact that consumers are largely unaware of these agreements means that the resulting arbitration proceedings are inherently unfair. As is discussed above, the Bureau finds that the Study did not provide any basis for evaluating whether individual arbitration proceedings resulted in demonstrably worse outcomes than individual litigation proceedings in a manner that warrants a more substantial intervention. The Bureau also disagrees with the comment that the Study identified a clear-cut repeat-player effect favoring of industry participants over consumer participants. As noted above, the Study showed that arbitration cases proceeded relatively expeditiously relative to individual litigation because companies often advance filing fees, the cost to consumers of arbitral filing fees was modest relative to individual litigation and at least some consumers proceeded without an attorney. The Study also showed that those 32 consumers who did prevail in arbitration obtained substantial individual awards.
The Bureau acknowledges that an arbitration agreement, by definition, deprives consumers of the right to bring disputes to court since an arbitration agreement permits a company to force any dispute it does not wish to litigate in court to an arbitral forum. On the other hand, an arbitration agreement gives consumers a new right—the right to force a company to resolve a dispute in arbitration. Absent such an agreement, consumers could proceed to arbitration only if the company is willing to arbitrate a particular dispute. Given the inconclusive nature of the evidence concerning the relative fairness or efficacy of individual litigation and arbitration in resolving consumer disputes, the Bureau is not prepared at this time to ban arbitration agreements.
Whatever the relative merits of individual proceedings pursuant to an arbitration agreement compared to individual litigation, the Bureau preliminarily concluded in the proposal, based upon the results of the Study, that individual dispute resolution mechanisms are an insufficient means of ensuring that consumer financial protection laws and consumer financial product or service contracts are enforced.
The Study showed that consumers rarely pursued individual claims against companies they dealt with based on its survey of the frequency of consumer claims, collectively across venues, in Federal courts, small claims courts, and arbitration. First, the Study showed that consumer-filed Federal court lawsuits are quite rare compared to the total number of consumers of financial products and services. As noted above, from 2010 to 2012, the Study showed that only 3,462 individual cases were filed in Federal court concerning the five product markets studied during the period, or 1,154 per year.
As discussed in the proposal's preliminary findings, a similarly small number of consumers filed consumer financial claims in arbitration. The Study showed that from the beginning of 2010 to the end of 2012, consumers filed 1,234 individual arbitrations with the AAA, or about 400 per year across the six markets studied.
Collectively, as set out in the Study, the number of all individual claims filed by consumers in individual arbitration, individual litigation in Federal court, or small claims court was relatively low in the markets analyzed in the Study compared to the hundreds of millions of consumers of various types of financial products and services.
The Bureau also preliminarily concluded that the relatively low number of formally filed individual claims may be explained by the low monetary value of the claims that are often at issue.
As stated in the proposal, even when consumers are inclined to pursue individual claims, finding attorneys to represent them can be challenging. Attorney's fees for an individual claim can easily exceed expected individual recovery.
For all of these reasons, the Bureau preliminarily found that the relatively small number of arbitration, small claims, and individual Federal court cases reflects the insufficiency of individual dispute resolution mechanisms alone to enforce effectively the relevant laws, including the Federal consumer financial laws and consumer finance contracts, for all consumers of a particular provider.
As discussed in the proposal, some stakeholders claimed that the low total volume of individual claims found by the Study in litigation or arbitration was attributable not to inherent deficiencies in the individual formal dispute resolution systems but rather to the success of informal dispute resolution mechanisms in resolving consumers' complaints. Under this theory, the cases that actually are litigated or arbitrated are outliers—consumer disputes in which the consumer either bypassed the informal dispute resolution system or the system somehow failed to produce a resolution. The Bureau preliminarily explained why it did not find this argument persuasive. As stated in the proposal, the Bureau preliminarily found that informal dispute resolution was not sufficient because—as with pursuing claims through more formal mechanisms—consumers may not know that their provider is acting in a way that harms them or that violates the law. Moreover, even when consumers recognize problematic behavior and decide to complain to their providers informally, companies exercise their discretion about whether they provide relief to particular consumers. The Bureau pointed out, for example, that a company could decide whether to provide relief to a consumer based on the customer's profitability, rather than based on the merit of the complaint. And in the Bureau's experience, even if companies resolve some disputes in favor of customers who complain, companies do not generally volunteer to provide relief to other affected customers who do not themselves complain.
On the other hand, numerous consumer advocate, public-interest consumer lawyer, and consumer lawyer and law firm commenters validated the Bureau's preliminary finding in this regard. Among the reasons given, one consumer advocate explained that consumers often do not know they are injured in the first place given the complexity of consumer finance products and the Federal and State laws and regulations governing those products. Similarly, a consumer law firm explained that their clients were often unaware of claims that they might be able to bring. Even when they are harmed, the commenter stated that consumers may not know that they may be entitled to a remedy, particularly when statutory damages are available. For example, a consumer may be frustrated by telephone calls from a debt collector but not know that the calls violate the Telephone Consumer Protection Act and that he or she is entitled to statutory damages. On the other hand, some industry commenters suggested that there are few individual consumer finance claims because public enforcement sufficiently remedies all violations of consumer finance laws.
With respect to the Bureau's preliminary findings that consumers may not pursue individual claims because they are small, at least one industry commenter and one research center commenter agreed with the Bureau that consumer finance claims are often for small amounts and that it would not be rational for a consumer to pursue a very small claim, such as one for less than $200. Consumer advocates and other nonprofits commenters similarly agreed. However, other industry and research center commenters disagreed, asserting that consumer finance claims under laws
Numerous consumer advocate, individual consumer, consumer protection clinic law professors, academic, nonprofit, public-interest consumer lawyer, and consumer lawyer and law firm commenters agreed with the Bureau's preliminary finding that consumers do not pursue individual claims for many reasons, including their relative size and the difficulties inherent in bringing such claims on an individual basis. In support of the Bureau's findings in this regard, many consumer lawyers, individual consumers, and public-interest consumer lawyer commenters cited to specific examples from their own experiences with clients who were unable to pursue claims against providers of consumer financial products and services because of lack of time relative to the potential size of the claim. Similarly, a group of academic commenters concluded, based on their experience and expertise, that individual arbitrations are not and realistically never will be a sufficient substitute for consumer class actions because individual claims are worth small amounts of money and it is not worth consumers' time (or an attorney's time) to pursue them. In these commenters' view, even when consumers are motivated to do so it is hard to find legal representation, and individual consumers are often unaware of the claim in any event.
The same group of academic commenters further cited to a study looking at a broader array of consumer arbitration claims that found less than 4 percent of the claims were brought for $1,000 or less, which in their view confirms that consumers rarely bring small claims in arbitration.
An organization of public-interest lawyers also commented that in its experience, low-income consumers often have claims of no more than a few hundred dollars. While that money may be critical for low-income consumers, they are unable to invest the time and money necessary to pursue an uncertain recovery (
One consumer advocate commenter noted that the threat of extensive litigation prior to receiving a hearing on the merits of a claim discourages legitimate claims. This same commenter also noted that filing fees could discourage some claims. Relatedly, a consumer law firm commenter stated that, in its view, most consumers find the prospect of litigating (in small claims court or arbitration) pro se against a well-represented corporate entity to be far too intimidating and risky to be considered a legitimate avenue.
One public-interest consumer law firm commenter explained that, in its experience, it is hard to bring claims of fraud, unfair, or deceptive practices in individual consumer financial services cases because the value of such claims is small. A consumer law firm commenter stated that, in its experience, individual actions are inefficient because damages can be low or hard to quantify and that these challenges impact consumers' and attorneys' risk-reward calculus. Another consumer lawyer commented that the laws underlying consumer finance are complicated and often impenetrable to laypersons. As an example, this commenter cited to complicated judicial interpretations of New York's usury law that are based on precedents over one hundred years old.
A nonprofit commenter provided the Bureau with data from its own survey of consumers that found that most consumers know it is not practical to take legal action when the harm against them is relatively small.
With respect to the Bureau's preliminary finding that it is difficult for consumers to find attorneys to file small claims, few commenters disagreed. However, an industry commenter and a research center commenter stated their belief that consumers should be able to find attorneys for small claims asserting violations of statutes that provide for recovery of attorney's fees. On the other hand, several industry, consumer advocate, public-interest consumer lawyer, and consumer lawyer and law firm commenters agreed with the Bureau's preliminary findings that it is difficult for consumers to find attorneys for small individual claims. One industry commenter cited a study that showed that attorneys are unlikely to accept contingency fee cases for claims below $60,000.
This research center commenter also cited studies showing that companies do provide informal relief to some consumers who complain. For example, the commenter cited a 2014 survey of 983 credit card users, in which 86 percent of consumers who asked their credit card company to reverse a late fee were successful and further asserted that success is likely not correlated to socioeconomic status because unemployed customers had about the same rate of success as those who were employed.
In contrast, many commenters agreed with the Bureau's preliminary findings as to the role of informal dispute resolution. A consumer advocate and a public-interest consumer lawyer commenter both explained that low-income consumers are significantly less likely to raise concerns directly with a company because they have limited time, resources, or confidence in their rights. Relatedly, a public-interest consumer lawyer commenter stated that it is much easier for low-income consumers to access justice through the courts than it is arbitration because arbitration lacks many of the procedural safeguards available in court. A different public-interest consumer lawyer commenter asserted that profitability models impact companies' treatment of consumers and thus low-income consumers who may be less profitable are less likely to be treated favorably.
Like the public-interest consumer lawyer commenter referred to above, a consumer law firm commenter agreed with the Bureau's preliminary finding that consumers may experience varied amounts of success through informal dispute resolution even when similarly situated. This commenter suggested that a particular consumer's sophistication, language skills, socioeconomic status, and tenacity all play important roles in determining whether the company will remedy the problem. Several commenters suggested that low-income consumers particularly benefit from class actions because these consumers are less likely than others to pursue relief individually. According to one consumer advocate, limited time, resources, or confidence may explain why low-income consumers are substantially less likely to advocate for their interests by complaining informally to a company or by pursuing formal relief. A public-interest consumer lawyer commenter suggested that low-income and vulnerable consumers may not realize that they have been the victim of unlawful predatory practices. Thus, the commenter asserted, class actions represent the only reasonable, private means for such consumers to obtain relief. Two commenters suggested that the specific characteristics of consumer financial services class action settlements make them favorably structured to provide consumers with meaningful relief. For example, one of these commenters noted that damages usually can be calculated with precision (
With respect to the Bureau's preliminary finding that informal dispute resolution is not sufficient because a company can choose to respond (or not) to any consumer complaint, industry, research center, and a group of State attorneys general commenters asserted that companies with arbitration agreements have stronger incentives to provide relief to consumers who complain. For example, an industry and a research center commenter both asserted that companies have strong incentives to resolve complaints informally because companies' arbitration agreements typically require them to pay all of the filing fees for arbitration, which can be as high as $1,500, plus all expenses, and that this is a feature unique to arbitration. Therefore, these commenters contended that companies would rationally settle any claim raised by a consumer that was under $5,000, which the commenters asserted is the approximate cost to the company of any single arbitration. These commenters further noted that there is even greater incentive for companies to resolve claims informally when the arbitration agreements include “bonus provisions” requiring companies to pay consumers double or triple the company's highest settlement offer if the consumer wins on his or her arbitration claim in an amount that exceeds that settlement offer.
At least one research center commenter agreed with the Bureau's assertion that a consumer's profitability could factor into the provider's decision on how to resolve a dispute with that consumer, citing data that credit scores can influence whether providers decide to waive fees for particular consumers while also asserting that the Bureau cited faulty or incomplete data to support the theory that providers decide how to handle complaints based on consumer profitability.
Other industry commenters and a research center commenter stated that there is sufficient incentive for providers to change general practices in response to informal complaints because it is time-consuming for providers to respond to complaints one by one, and thus they would prefer to change their practices wholesale with respect to all consumers for the sake of efficiency. For this reason, these commenters disagreed with the Bureau's assertion that companies are unlikely to globally change practices for all consumers when only a fraction of consumers complain. Offering a different opinion, a consumer law firm commenter stated that, in its experience, only hard-fought litigation can get a company to change its underlying practices; piecemeal, informal, individual complaints are too small and too easily ignored by most companies.
Additionally, several commenters, including industry, research center, and State attorneys general commenters, contended that consumers do not file formal individual claims because they prefer instead to move their business to other companies. The State attorneys general commenters and an industry commenter cited data from the Bureau's consumer survey that they contend shows a small number of consumers
Second, even if a consumer is aware that he or she was harmed, the availability of statutory damages and attorney's fees (or even particularized types of relief like restitution and rescission available under certain State's laws, as one commenter suggested) could only incentivize filing a claim over a small harm if the consumer were aware of those statutory provisions. While there may be some well-informed consumers who are aware and thus seek out an attorney to pursue such claims, the Bureau believes—based on its expertise and experience with consumer financial markets and as was noted by several commenters—that those consumers are likely in the minority. Indeed, the consumer survey conducted as part of the Study, as well as the nonprofit's survey noted above, is indicative of how unlikely consumers are to pursue claims even when they are confident they have been wronged and contradicts industry comments suggesting otherwise.
Third, even if a consumer is both aware of a wrong and aware of the availability of statutory damages and attorney's fees, the statutory damages or attorney's fees may be insufficient motivation for the consumer or his or her attorney given the uncertainty of recovery and the potential size of such recovery relative to the time required to pursue the claim even if the potential value of that claim is larger than the consumer's actual damages.
A research center commenter also suggested that small claims are more commonly filed in arbitration with respect to non-consumer financial
Even assuming for the sake of argument that the low use of arbitration were attributable to awareness levels, the Bureau is skeptical as to whether it is realistic to believe that all or most consumers could be educated about the terms of arbitration agreements to significantly improve consumer attitudes or awareness. Indeed, even if every consumer subject to an arbitration agreement received education about arbitration, understood the agreement's terms and had a positive attitude toward arbitration—and even if every arbitration agreement provided for company-paid filing fees and minimum award amounts—it still would be the case that use of the arbitration system would be limited by consumers' lack of awareness of potential legal violations, reluctance to pursue formal claims, and the low value of their claims relative to the time required to pursue their claims.
For all these reasons, the Bureau finds that there are structural and behavioral factors that prevent individual dispute resolution systems—including both arbitration and litigation—from providing an adequate or effective means of assuring that harms to consumers are redressed.
As noted in the proposal and discussed further above, for a variety of reasons, many consumers may not be aware of whether a company they deal with is complying with the law or not. Furthermore, consumers may not even think about a company's customer service function as a way of seeking redress for certain types of wrongs. For example, the Bureau believes, based on its experience and expertise, that consumers are unlikely to know when they have received inadequate disclosures and, even if they do, they are unlikely to call a customer service department over such an issue. Similarly, the Bureau is not aware of informal dispute resolution successfully resolving complaints of discrimination, systematic miscalculations of interest rates, certain types of deceptive advertising,
Further, none of the evidence cited by commenters refuted the Bureau's preliminary finding that companies can and do choose—for any reason—
One research center commenter agreed with the Bureau's preliminary findings in this regard and stated its belief that a company should deny informal relief to less profitable consumers in order to maintain reasonable fees for other more profitable consumers. The Bureau agrees that in the context of informal complaint handling systems—which do not adjudicate the merits of claims but rather exist to enhance a company's business interests—it is rational for a company to forgive a fee charged to a profitable consumer and not to do so for an unprofitable consumer. But that is precisely the point: in the eyes of the law, wrongful fees should be reimbursed without regard to the profitability of the customer incurring the fee. This commenter's argument thus illustrated one of the limitations of informal dispute resolution as a method of enforcing the consumer protection laws. In this realm, a company can choose which complaints it wishes to resolve for which consumers, and that choice is likely to be very different than the decision made by a neutral judge after a consumer has filed a claim alleging violations of the law.
As noted in the proposal, the Study's discussion of the Overdraft MDL provided an example of the limitations of informal dispute resolution and the important role of class litigation in more effectively resolving consumers' disputes.
As to commenters' arguments that companies with arbitration agreements have strong incentives to resolve complaints in consumers' favor in order to avoid the cost of arbitral fees and the risk of paying a “bonus” award, the Bureau acknowledges that companies with arbitration agreements have at least some incentive to resolve informal disputes with consumers especially when the company suspects that the consumer, if unsatisfied, will file an arbitration case and cause the company to incur filing fees. It is also true that companies without arbitration agreements have an incentive to resolve informal disputes with consumers when they suspect that litigation will otherwise result, since litigation can result in defense costs which exceed the costs of arbitral fees or of arbitral defense. It is unclear, at best, whether arbitration agreements create greater incentives to resolve a complaint informally than the risk of litigation and commenters did not provide data or evidence to show otherwise.
With respect to the comments that suggested that there were few individual claims because companies will change practices that harm consumers when consumers complain on social media, the Bureau believes that social media are insufficient to force companies to change company practices and, by extension, to enforce the consumer protection laws for the same primary reason that informal dispute resolution is insufficient—because many consumers do not know that they have valid complaints or how to raise their claims through social media. Further, companies can choose either to ignore or resolve such complaints at their own option especially in markets where consumers cannot take their business elsewhere; and companies can resolve complaints on a one-off basis with the individual complainant. Indeed, as discussed above in Part II.E, at least one study of social media complaints found that companies ignored nearly half of the complaints consumers submitted and that when companies did respond, consumers were dissatisfied in roughly 60 percent of the cases.
Thus, while informal dispute resolution systems may provide some relief to some consumers, the Bureau finds that these systems alone are inadequate mechanisms to resolve potential violations of the law that broadly apply to many customers of a particular company for a given product or service. The Bureau further finds that the prevalence of these systems cannot and does not explain the low volume of individual cases pursued through arbitration, small claims courts, and in Federal court.
The Bureau preliminarily found, based on the results of the Study and its further analysis, that the class action procedure provides an important mechanism to remedy consumer harm. More specifically, the Bureau preliminarily found, consistent with the Study, that class action settlements are a more effective means than individual arbitration (or litigation) for assuring that large numbers of consumers are able to obtain monetary and injunctive relief for wrongful conduct, especially for claims over small amounts.
As noted in the preliminary findings, in the five-year period studied, the Bureau was able to analyze the results of 419 Federal consumer finance class actions that reached final class settlements. These settlements involved, conservatively, about 160 million consumers and about $2.7 billion in
Based on its experience and expertise—including its review and monitoring of these settlements and its enforcement of Federal consumer financial law through both enforcement and supervisory actions—the Bureau also preliminarily found that behavioral relief could be, when provided, at least as important for consumers as monetary relief. Indeed, prospective relief can provide more relief to more affected consumers, and for a longer period, than retrospective relief because a settlement period is limited (and provides a fixed amount of cash relief to a fixed number of consumers), whereas injunctive relief lasts for years or may be permanent and may apply to more than just the defined class.
In the discussion that follows, the Bureau reviews comments on these two preliminary findings, addresses concerns raised in those comments, and makes its final findings on these issues. At the outset, the Bureau notes that the bulk of the critical comments it received on these preliminary findings concern the actual cash compensation to consumers in class action settlements and other related concerns commenters have about class actions, with far fewer commenters addressing behavioral relief despite its relative importance to the Bureau's preliminary findings. Thus, while the bulk of the discussion focuses on the former preliminary finding, the Bureau emphasizes below the non-monetary benefits of class actions.
Numerous consumer advocates, academics, consumer law firms and research center commenters agreed with the Bureau's preliminary finding that class actions provide substantial monetary relief to consumers. Many of these commenters highlighted the sums reported by the Bureau in the Study—that at least 160 million class members were eligible for relief via class action settlements over the five-year period studied; that those settlements totaled $2.7 billion in cash, in-kind relief, and attorney's fees and expenses; and that consumers actually received at least $1.1 billion in those cases. The commenters stated that, in their view, these are substantial sums and that if many providers had not used pre-dispute arbitration agreements, these sums would have been substantially higher. The academic commenters, citing the Study, concluded that class actions are a powerful tool that can help consumers vindicate their rights under Federal and State law. They cited both funds returned to consumer and the deterrent effect of class actions.
Numerous consumer advocates, public-interest consumer lawyer, and
Other industry and research center commenters suggested that consumers do not obtain significant relief from class actions because settlements often require consumers to file claims to obtain relief, which most consumers do not do. For example, many industry commenters noted that in settlements requiring consumers to file a claim to obtain relief, the Study showed that only 4 percent of consumers filed a claim.
Several industry and research center commenters further criticized the Bureau's reliance on the Study to support its findings that class actions provide significant relief to consumers on the basis that certain cases should have been excluded from the analysis. For example, one research center commenter asserted that a large settlement involving a credit reporting agency should have been excluded as distorting the overall effect because it provided $575 million of “in-kind” relief rather than actual cash relief. A number of others commented that the Study's findings on the overall amount of relief provided in class actions was not representative of consumer finance class actions generally because the Overdraft MDL class-action settlements included in the Study were atypically large and unlikely to recur. A research center commenter also noted that if those large settlements were excluded from the Study's data, the average payment to an individual consumer from a class action settlement analyzed in the Study would be $14, a significant reduction from the $32 per consumer average payment for the Study as a whole.
One research center commenter contended that the value of the overdraft settlements should be discounted because the settlements do not make customers of those providers better off, overall. This commenter hypothesized that most of the overdraft fee refunds went to low-income consumers and that the defendant banks likely perceived those customers as less profitable following the settlements (since they could no longer assess as many overdraft fees). The commenter posited that, in the event such customers become unprofitable, the settling banks will screen those low-income customers from their customer base in the future, resulting in higher fees for the customers who remain. This commenter stated that after the Overdraft MDL settlements, minimum balance requirements to avoid checking account fees have generally increased and asserted that this may be linked to class action liability, though that link has not been empirically established.
In contrast, many consumer advocate, consumer law firm and nonprofit commenters agreed with the Bureau's assertion that companies often change their behavior in ways that benefit consumers as the result of class action settlements. One such commenter emphasized the fact that many class action settlements include injunctive relief, such as requiring companies to stop harmful practices that led to the class action, to agree to outside monitoring to ensure that further misconduct does not occur, or to provide increased training or other safeguards to improve future compliance with the law. As an example, one nonprofit commenter cited a class action settlement involving two money transmission companies that agreed to not only compensate consumers but also to halt their use of unfavorable exchange rates, provide better disclosures, and develop a community fund. As another example, a consumer law firm commenter explained how a class action was able to provide complete relief to all affected consumers. This relief included not only cash compensation for their injuries but also injunctive relief that was able to resolve the problem permanently and for all affected in a way that an individual action would not have been able to do. Other commenters provided similar examples.
One industry commenter cited further studies indicating that only a fraction of cases filed as class actions ultimately result in classwide relief to consumers.
Some industry commenters challenged the Bureau's preliminary finding that non-class settlements in putative class action cases do not undermine the benefits of those cases that do result in classwide settlements. For example, one commenter disagreed with the Bureau's finding that putative class members could pursue subsequent claims after a case was settled on a non-class basis because the putative class members would not be bound by the non-class settlement. In this commenter's view, there is no evidence that such follow-on claims are actually brought and, in any event, the commenter asserted that such claims would likely lack merit and thus that it would be difficult for putative class members to find attorneys to assert them on a class basis.
Another industry commenter contended that the Study's data that dispositive motions were granted before class settlement in 10 percent of the class actions studied is not relevant to whether the allegations in those cases were meritorious because defendants may choose to settle a case even after winning a dispositive motion to avoid the costs of litigation and appeal. The commenter stated that the low frequency of classwide judgments for consumers and plaintiffs who prevailed on dispositive motions suggests that the underlying claims in putative class cases lack merit or are frivolous. Some industry commenters expressed their view that class action litigation is inferior to other forms of dispute resolution, such as arbitration, because class action cases do not reach decisions
A State attorney general commenter noted that, in his State, class action plaintiffs seeking to pursue a claim of consumer fraud were required to get approval from his office that the putative claim was not frivolous before it could be filed in court.
Several industry commenters noted that the Study found that consumers filed more individual arbitrations per year (411) than they did Federal class actions (187) and asserted that the Bureau should not have counted putative class members in those class actions as supporting its finding that class actions benefited more consumers than individual arbitration or litigation.
First, in assessing the relevance of the small size of the average relief obtained, it is important to compare that to the alternative in which these consumers obtain no relief at all—because, as discussed above in Part VI.B.2, virtually none of them will pursue their individual claims. The Bureau finds that relief of $32 (or even $14, as some commenters suggest is a more accurate figure reflecting their attempts to exclude the overdraft settlements from the Bureau's data) is a better result for harmed consumers than no relief at all. As noted above, there were only about 25 disputes a year involving affirmative claims in arbitration by consumers for $1,000 or less.
Further, the Bureau agrees with some consumer advocate commenters that stated that consumers who are unaware that they have been harmed nonetheless can benefit from a class action. For these reasons, the Bureau finds that consumers who fall victim to legally risky practices are better protected by receiving relatively small amounts from a class action settlement than being relegated to a system in which their only alternative is to pursue relief individually which, in practice, will result in most of them receiving nothing. This is especially true given that class members invest little (and in many cases none) of their own time or money to receive relief in a class action. The Bureau finds that the overall relief provided by class actions, coupled with the large number of consumers that receive payments as part of this relief, are the correct measure of their efficacy and that overall relief is not undermined by the fact that each of these individuals may receive relatively small monetary amounts.
The Bureau also finds that commenters' comparison between the average payment to consumers in a class action (around $32) to the average individual consumer award in arbitration (around $5,000) is not apt. Many commenters have made this comparison to contend that consumers fare better in individual arbitration than in class litigation and, by extension, that class actions do not provide significant relief to consumers. This is an apples-to-oranges comparison. As discussed above, there is not much money at stake in the typical claim of a putative member of a class action, and thus there is little incentive for an individual to devote time and money to litigating the claim. In contrast, the Study found the average claim amount demanded in an arbitration to be $29,308, and the median to be $17,008.
With respect to the view asserted by an automobile industry commenter that class actions are not necessary for claims related to that industry because claims are typically for $1,000 or more, the Bureau does not find it to be supported that claims in that industry are typically for $1,000 or more (
Furthermore, even if it were true that automobile loans claims are typically for $1,000, the Bureau does not believe that the existence of a $1,000 claim is sufficient incentive to encourage large numbers of consumers to file individual claims, for all of the reasons discussed above in Part VI.B.2, nor did the commenter cite evidence to the contrary. Indeed, multiple consumer lawyer and law firm commenters noted that it is economically unfeasible for them to represent consumers who have claims of this magnitude on an individual basis; such claims are only viable when they can be aggregated. For these reasons, the Bureau finds that the availability of class actions concerning automobile financing benefits consumers notwithstanding the possibility that the average claims amount in those cases in the Study may be higher than in some other markets.
Many industry and research center commenters criticized the efficacy of class actions because the settlements often require consumers to submit claims to obtain relief and consumers frequently do not do so. The Bureau disagrees that the low claims rate in claims-made settlements undermines the conclusion that significant relief is provided to consumers from class actions generally. Most of the commenters ignored the fact that in many consumer finance class actions, the company's records make it possible to identify the class members entitled to relief and the amount of relief to which they are entitled, thus obviating the need for a claims process. The Study identified 24 million consumers who received automatic payouts in the 133 class settlements that identified the number of class members paid.
The Bureau acknowledges that, in the 105 class settlements analyzed in the Study requiring claims where there was data on the potential class size and claims rates, the unweighted average claims rate was 21 percent and the weighted average was 4 percent. While these figures may understate the percentage of consumers actually eligible for relief who submitted claims (since the claims rate is sometimes calculated based on the number of potential members of a class, and since additional class members may have submitted claims after the Study's release), the figures do indicate that a large majority of consumers potentially entitled to claim relief from class actions do not file a claim when one is required.
With respect to the paper that commenters cited for the proposition that consumers receive only about 9 percent of the settlement amounts in class actions, the paper cited does not state the number of settlements that it analyzed that required consumers to submit claims as compared to the number of settlements that provided automatic relief, if any. Instead, the paper reached that 9 percent conclusion by estimating a 15 percent claims rate rather than through any substantive analysis.
Further, the paper's author limited the settlements analyzed to a subset of class action cases under particular statutes the author classified as “no-injury.”
Many commenters pointed to the fact that in the Study, a small number of settlements—specifically, those that occurred as part of the Overdraft MDL litigation—accounted for a large portion of the relief obtained and a large portion of the consumers obtaining relief. The Bureau notes that, rather than indicating a problem with the Study, this simply reflects the fact that the distribution of class action settlement amounts is right-skewed. Such distributions are commonplace in business and finance: For instance, a small number of banks represent a large fraction of all depository accounts, and a relatively small proportion of individuals hold a majority of household wealth.
Insofar as these commenters have suggested that this makes the results observed in the Study unrepresentative of the benefits that class actions can provide in other time periods, the Bureau does not agree. The Bureau believes that the large overdraft settlements reflect, in part, that there was an industry-wide practice in a very large market that harmed many consumers. While class actions concerning such industry-wide practices may not occur every year, they do occur from time to time and can provide significant relief for consumers.
The Bureau thus finds that the body of class actions, when taking into account their overall results, including both the large and small settlements, provides significant relief to consumers. Some commenters suggested that given the existence of the Bureau, in the future public enforcement can be expected to substitute for large class action settlements so that settlements of the magnitude of those that occurred in the Overdraft MDL litigation are unlikely to occur. However, an analysis of the complaints in the overdraft cases indicates that many of the claims were predicated on State law and on the terms of the consumers' contracts, and thus may not have been claims that the Bureau could have brought. Moreover, while it may seem easy, in hindsight, to identify “big” cases and assert that these are cases that public authorities like the
Moreover, even if it were appropriate to disregard the overdraft cases in assessing the Study's findings, the relief provided to consumers by the class action settlements analyzed in the Study that was unrelated to overdraft is itself significant. Indeed, the Study breaks out the relief provided to consumers through class settlements by product and that relief includes at least four large settlements of more than $50 million in markets other than checking and savings accounts (where the settlements concerning overdraft occurred).
Further, many of the settlements analyzed in the Study were for cases alleging violations of statutes for which the recovery in a single case is capped, such as the FDCPA which is capped at the smaller of $500,000 or 1 percent of the defendant's net worth.
As to commenters' criticisms of the Bureau's inclusion of the overdraft settlements in the Study because the Bureau did not attempt to assess the extent to which companies in those settlements provided informal relief to consumers, the Bureau did in fact address that issue in the Study and in the proposal, and discussed above in Part VI.B.2.
With respect to the contention that consumers were not made better off by the overdraft settlements because the effect of the agreements to cease maximizing overdraft revenue through reordering drove up the price on all consumer checking accounts, the Bureau acknowledges that to the extent class actions succeed in curtailing unlawful practices that generate revenue for financial institutions, the institutions may respond by changing their pricing structures. Even if the effect of the overdraft litigation was to cause banks to substitute transparent, upfront fees on checking accounts for back-end fees paid by a small percentage of vulnerable consumers,
No commenters took significant issue with any of these findings; to the extent that some industry commenters were dismissive of behavioral relief based on the Study's stating that it occurred in only 13 percent of cases, they appeared to overlook the fact that the Bureau was using a very narrow definition for this determination. Accordingly, in addition to cash relief provided, the Bureau finds that the behavioral relief—understood broadly—provided by class action settlements is a significant component of the relief provided to consumers. Indeed, as the Bureau noted in the proposal, the Bureau believes that this form of relief is often more meaningful to consumers than monetary recovery in individual class actions, an opinion echoed by several consumer advocate commenters. In resolving a class action, many companies stop potentially illegal practices either as part of the settlement or because the class action itself informed them of a potential violation of law and of the risk of future liability if they continued the conduct in question. Any consumer affected by that practice—whether or not the consumer is in a particular class—benefits from the enterprise-wide change. For example, if a class settlement only involved consumers who had previously purchased a product, a change in conduct by the company might benefit consumers who were not included in the class settlement but who purchase the product or service in the future. The Study found 53 class settlements in which defendants agreed to change their behavior to the benefit of at least the 106 million class members, including, for example agreeing to improve disclosures or stop charging certain fees.
One example of this appears to have occurred with respect to overdraft practices. In
With respect to commenters' criticisms of coupon settlements that they contended provide little tangible relief to consumers and to one commenter's criticism of a large settlement included in the Study, the Bureau notes that its analysis of class action settlements in the Study specifically separated such “in-kind” or “coupon” relief from cash relief and that the data discussed above regarding cash relief provided to consumers does not include the value of in-kind relief.
The Bureau believes, as it stated in the proposal, that the best measure of the effectiveness of class actions for all consumers is the absolute relief they provide in light of the number of
The Bureau acknowledges that when a case is filed as a putative class action and settled individually, the defendant may incur higher defense costs than if the case had been filed individually. Further, while the purpose of the class rule is to preserve the ability for there to be class mechanisms to compensate consumers when they are harmed, the prospect of which deters companies from further harming consumers as discussed in more detail below in Part VI.C.1, the Bureau agrees that the putative class cases that do not end in class settlement may not themselves further this purpose. Nevertheless, it would not be possible for a rule to allow the filing of only such cases that would ultimately end in class settlement or favorable judgments for consumers because the purpose of litigation is to sort such outcomes. Accordingly, while the Bureau considers the prevalence of these outcomes and the cost of defending these cases further below in discussing whether the proposed rule is for the benefit of consumers and in the public interest (and in its Section 1022(b)(2) Analysis below in Part VIII as well), it does not believe these outcomes detract from the Bureau's finding that class actions provide an effective means of providing consumer relief.
Many of the commenters also suggested that the high proportion of putative class cases that resulted in individual settlements or potential individual settlements (around 60 percent) demonstrates that the underlying claims were not meritorious. Even if that were true, it still would not suggest that the class action mechanism as a whole is ineffective as a means of redressing harm to consumers for the reasons discussed above. But the Bureau also notes that there is no way to know with certainty whether the putative class cases settled on an individual basis had merit or involved potentially classable claims; the commenters did not provide evidence to support their assertions that those cases are, on the whole, meritless. Settlement between parties to a lawsuit is an everyday occurrence. Parties may choose to settle a putative class case on an individual basis for any number of reasons, such as because the defendant threatened to move the case to arbitration or offered the named plaintiff full relief on his or her individual claim, which a company may do in litigation in an effort to avoid defense costs or to avoid providing broader relief to other affected consumers. Indeed, there are numerous factors that go into any defendant's decision to settle, including the legal framework of the claims asserted, the facts underlying the allegations, and the costs of defense. When a consumer files an action in court alleging the consumer's individual claims affect a class of other consumers, the rules of civil procedure generally allow that consumer to conclude the action by resolving their individual claims before a court certifies the case is a class action. Sometimes, a consumer who has filed a putative class action may be unwilling to pursue that case if the company decides to make the consumer whole, while in other cases, the law may not have allowed the class claims to proceed if the company offered full relief to the named plaintiffs.
In addition, the Bureau finds that individual settlements in putative class cases, when they occur, typically occur relatively early in the class action process. The Study's data on time to resolution of putative class cases suggested that defense costs are likely much lower for putative class cases that result in individual settlement than for a putative class case that reaches classwide settlement. The Study obtained information on the amount of time to resolution for the cases it analyzed and the Bureau expects that a company's defense costs likely increase as the time to resolution of the case increases. This data showed that the median number of days to close for a case filed as a class case but that resulted in a known individual settlement was 193 days; for such a case that resulted in a potential individual settlement, the median days to close was 130 days.
Further, the Study showed that certification in a class case almost invariably occurs coincident with a settlement, and thus that certification is not typically the force that drives settlement. The Study further found that, not infrequently, settlements follow a decision by a court rejecting a dispositive motion (
The Study analyzed these data in two different case sets: Class action filings in State and Federal courts in six consumer finance markets, and cases with Federal class action settlements across consumer finance markets more generally. Among class action filings in the six markets, the Study found that companies filed dispositive motions in 37.9 percent of the 562 cases analyzed, and that courts granted such a dispositive motion and dismissed at least one company party entirely from the case in only 10 percent of the same cases.
With respect to commenters that hypothesized that defendants could nevertheless agree to enter into a class action settlement after winning a dispositive motion, the Bureau notes that these commenters cited no examples, and this did not happen in the class action filings analyzed in the Study.
Given the mechanisms within the litigation process for testing the relative merit of allegations short of trial, the Bureau does not agree with commenters that suggested that the dearth of trials in class action cases suggests that the merit of these cases go untested.
With respect to Tribal commenters that asserted that frivolous class action settlements threaten Tribal treasuries, the Bureau notes that Tribal governments are generally immune from private lawsuits and therefore that class actions should not affect their Tribal coffers, as discussed in detail below in the section-by-section analysis of § 1040.3(b)(2) in Part VII. Further, the Bureau clarifies in § 1040.3(b)(2) of this Final Rule that any Tribal government or an arm of such government that is immune from private suit is exempt from the class rule.
With respect to one industry commenter's argument that each class action lawsuit should be counted as one filing (despite covering claims of many consumers) and compared to single individual filings in either litigation or arbitration, the Bureau disagrees that that is the relevant comparison. Instead, the Bureau maintains that because there are thousands or even millions of consumers who benefit from class action settlements, the relevant comparison when analyzing individual and class action suits is the number of consumers who ultimately benefit from the suit, rather than the number of consumers who file the suit.
For these reasons, the Bureau finds that the class action mechanism is a more effective means of providing relief for violations of law or contract affecting groups of consumers than other mechanisms available to consumers, such as individual formal adjudication (either in court or arbitration) or informal efforts to resolve disputes.
In the proposal, the Bureau made a number of preliminary findings regarding the impact that arbitration agreements have on consumers and, in particular, consumers' ability to pursue relief on a classwide basis. Specifically, the Bureau preliminarily found, based upon the Study, that arbitration agreements are frequently used by providers of consumer financial products and services, that the agreements have the effect of blocking a significant portion of class action claims that are filed. Indeed, the Study found nearly 100 putative class action cases that were blocked by arbitration agreements.
For instance, for the 46 class cases identified in the Study in which a motion to compel arbitration was granted, there was only an indication of 12 subsequent arbitration filings in the court dockets or the AAA Case Data, only two of which the Study determined were filed as putative class arbitrations.
The Bureau also preliminarily found that the existence of arbitration agreements suppresses the filing of class action claims in the first place, citing in support of this proposition a survey of consumer lawyers who had declined to file class cases concerning products covered by an arbitration agreement.
On the other hand, consumer advocates, public-interest consumer lawyers, consumer lawyers and law firms, and several nonprofits asserted that arbitration clauses frequently block and chill the filing of class action cases. In many instances, commenters proffered examples from their personal experiences. For example, one consumer law firm commenter provided two examples of class actions that could not proceed due to the existence of an arbitration agreement—one case was voluntarily dismissed (and thus would not be counted in the Bureau's Study) and one in which arbitration was compelled upon appeal. Another stated that he had turned away over 100 cases involving arbitration agreements. A different consumer lawyer contrasted her experience with a series of automobile finance class actions involving what she characterized as plainly unlawful behavior; the commenter noted three cases that defendants had successfully blocked by invoking an arbitration agreement and contrasted those to others in which she had successfully recovered damages for a class where there was no arbitration agreement. Another consumer law firm commenter stated that it had turned away 27 cases in the prior year because it lacked the resources to try each of these cases individually, although it would have had the resources and an interest in pursuing them as class actions if there had not been arbitration agreements prohibiting class proceedings. Several public-interest consumer lawyer commenters said that one of the first questions they ask is whether consumers have disputes that may be governed by arbitration agreements and, if so, that they turn down those clients.
A group of Congressional commenters cited the example of a large bank whose employees opened millions of unauthorized accounts in the names of the bank's existing customers over a period of years. The bank successfully used arbitration agreements in its agreements with customers for the authorized accounts to block lawsuits by customer's asserting violations of the law with respect to the unauthorized accounts.
Several consumer advocates, nonprofits, and consumer law firms and lawyers agreed with the Bureau's finding. Specifically, one consumer lawyer stated that in his experience individual claims are never filed when class claims are stayed or dismissed. Two public-interest consumer lawyer commenters explained that, in most cases, only the named plaintiff even knows that a claim exists, and even that individual might not have an incentive to pursue the claim in arbitration if there is no promise of benefitting others who are similarly situated given the relative size of the claim and the costs of pursuing it further.
As set out above in Part II.C, the public filings of some companies confirmed that the effect—indeed, often the purpose—of arbitration agreements is to allow companies to shield themselves from class liability.
The Study showed that defendants were not reluctant to invoke arbitration agreements to block putative class actions and were successful in many cases.
As just one example, the Bureau notes that in the matter discussed above in Part VI.B.3 involving a large bank that opened unauthorized accounts on behalf of millions of customers in violation of the law, that bank relied on arbitration agreements in its contracts with customers for the authorized accounts to block many of those customers from pursuing classwide relief in court with respect to the unauthorized accounts. Plaintiffs filed two putative class action lawsuits in 2015 against the bank for opening unauthorized accounts, and both lawsuits were later dismissed in response to the bank's motions pursuant to its arbitration agreements.
Moreover, while the Bureau was unable to determine in what percentage of all class action cases analyzed defendants had arbitration agreements and were in a position to invoke an arbitration agreement, in a sample of class action cases against credit card companies known to have arbitration agreements, motions to compel arbitration were filed 65 percent of the time and, when filed, they were successful 61.5 percent of the time.
The Study further indicated that companies were at least 10 times more likely to move to compel arbitration in a case filed as a class action than in a non-class case.
The Bureau's case study of opt-outs from settlements in the Preliminary Results of the Study further demonstrated this.
The Bureau admittedly cannot quantify this effect because there are no records of cases that were never filed in the first instance. Nevertheless, stakeholders that surveyed attorneys found that respondents reported frequently turning away cases—both individual and class—when arbitration agreements were present.
For all of these reasons, the Bureau finds that arbitration agreements block class actions and suppress the filing of others.
In the proposal, the Bureau preliminarily concluded, based upon the results of the Study and its own experience and expertise, that public enforcement is not itself a sufficient means to enforce consumer protection laws and consumer finance contracts. This conclusion was based upon several findings: Consumer protection statutes explicitly provide for both public and private enforcement; the market for consumer financial products and services is enormous and public enforcement resources are limited; the Study results supported a conclusion
Consumer advocate commenters, on the other hand, agreed with the Bureau's preliminary findings regarding public enforcement. Specifically, these commenters referenced examples of strained public resources for consumer protection. One public-interest consumer lawyer commenter suggested that private enforcement of some claims saves taxpayers money because such activity allows public enforcement agencies to concentrate their resources on cases that private claims cannot reach or that are more appropriate cases for public enforcement. One consumer advocate noted that industry commenters were inconsistent in arguing that the public enforcement by the Bureau provides a sufficient deterrent given that these same commenters are asking Congress and others to substantially reduce or eliminate altogether the Bureau's enforcement powers.
Another industry commenter criticized the Study's finding that class actions are often filed without a corresponding public enforcement action as simply wrong. The commenter suggested that most class actions are “copycats” of government enforcement actions, citing law review articles supporting this theory.
Consumer advocates and public-interest consumer lawyers disagreed. For example, one consumer advocate asserted that companies know that public enforcers cannot police every instance of financial fraud and that companies therefore make compliance decisions accordingly. A separate nonprofit commenter stated that legislatures designed laws to have both public and private enforcement; where the latter is effectively blocked, the laws' intended effect cannot be achieved. Another nonprofit commenter contended that private class actions are a necessary supplement to public enforcement in the areas of fair lending and equal credit and that this was the view of Congress in passing the nation's fair lending laws. This commenter also noted that individually, privately filed cases can spur subsequent public enforcement actions.
A group of State attorneys general charged with enforcing the laws in their States expressed similar concerns about the inability of public enforcement authorities—including themselves—to enforce all of consumer protection law. They noted that, in their experience, public enforcement is benefited when consumers can also take advantage of private enforcement. The commenters noted that many States' unfair competition and consumer protection laws expressly permit private enforcement, often through class actions. As an example, they quoted a decision by the Massachusetts Supreme Judicial Court finding that that State's law had been amended to allow private enforcement specifically because the public enforcement agency lacked capacity to handle the complaints it was receiving.
A nonprofit organization commented that private enforcement was important because it may advance more aggressive legal theories and seek more substantial remedies as compared to government agencies. Other public-interest consumer lawyer commenters similarly emphasized that, in their view, public enforcement is insufficient. A public-interest consumer lawyer commenter opined that public enforcement agencies are unlikely to have the resources to uncover all instances of unlawful conduct and that these agencies can be subject to political pressures and limitations by the executive or legislative branches of government.
Academic commenters explained that, in their view, the United States legal system depends in large part on private enforcement of the laws. This comment letter contrasted the American system with those of other countries that invest more in public enforcement. They also noted, and cited the Study, that consumer class actions provide relief for injuries that are not the focus of public enforcers. An individual consumer noted in her letter that class actions, unlike increased public enforcement budgets, do not increase government bureaucracy. Relatedly, another individual consumer commenter and a nonprofit both suggested that while class actions should be generally available, they especially should be available for claims brought pursuant to statutes that expressly provide for classwide civil liability.
With respect to commenters that believe the amount of relief that the Bureau has provided to consumers through its enforcement cases demonstrates that the Bureau has sufficient resources to enforce the relevant consumer protection laws with respect to all potential wrongdoers, the Bureau acknowledges that it has provided significant relief to consumers since 2012. At the same time, the Bureau is also aware that its enforcement and supervision efforts have not been able to examine the conduct of every provider subject to its jurisdiction under every law that it enforces.
Furthermore, as several consumer advocate commenters noted, the Bureau does not have jurisdiction to enforce all violations of the law pertaining to consumer finance. Specifically, the Bureau cannot enforce claims for violation of State statutes, or claims arising in tort (which includes claims sounding in fraud) or those that allege breach of contract. The Bureau also cannot pursue claims against depository institutions and credit unions with less than $10 billion in assets. For all of these reasons, the Bureau finds that its enforcement authority alone is insufficient to remedy all violations of the law and deter future violations.
With respect to the quantity of relief the Bureau has provided to consumers, for the years of 2013 through 2016, the Bureau brought 165 enforcement actions or an average about 41 enforcement actions per year. This is significantly fewer than the 85 class action consumer finance settlements on average identified in the Study per year (a figure that the Bureau's Section 1022(b)(2) Analysis predicts will be 165 per year once this rule takes effect). And while the number of Bureau enforcement cases has increased year-over-year in the near past, the number of cases that the Bureau brings every year is subject to change, as some commenters noted. Further, only some of these enforcement actions and a portion of the approximately $11 billion in relief provided by the Bureau through its enforcement actions over the past four years concern claims that would be covered by this rule. For example, over $2.5 billion of that relief concerned mortgages, a product not covered by this rule.
The Bureau acknowledges, as several commenters noted, that the Bureau's enforcement actions provided, on average, more relief per consumer than did class action settlements. This reflects the fact that Bureau enforcement may target higher value cases. It may also reflect the fact that the Bureau may be able to pursue cases more effectively than private class actions because, for example, the Bureau has authority to issue civil investigative demands, the Bureau does not need to cover its costs out of recoveries, does not need to certify a class, and can pursue certain claims unavailable to private litigants.
With respect to commenters that contended that public enforcement actions are better avenues to address violations of the law because public enforcers are not motivated by their own self-interest to bring cases, the Bureau disagrees that differing motives, if they exist, are relevant. Whatever the motivations of plaintiff's attorneys to bring cases, the Bureau has observed that public enforcers do not have the resources to bring sufficient cases to remedy all violations of the law, and thus that private enforcement of such violations is necessary. Further, as discussed more fully in Part VI.C.2, the Bureau does not agree that the motivation of private plaintiff's attorneys determines whether class action settlements benefit consumers. Indeed, the prospect of fee awards is specifically designed to incentivize plaintiff's attorneys to bring class action cases that individuals might not otherwise pursue, and courts monitor attorney's fee awards to ensure that they are fair and reasonable.
The Bureau notes that most of the commenters critical of the Bureau's preliminary findings regarding public enforcement focused on the Bureau's own enforcement authorities and accomplishments, and to a large extent did not address enforcement by other Federal and State regulators. Most of these other regulators, as the comment letter from the group of State attorneys general noted, enforce not only consumer protection laws but also many other laws and must allocate their enforcement resources accordingly. In addition, as several commenters noted, these regulators, like the Bureau, must manage general budgetary constraints, changing legislative priorities, and
Finally, the Bureau notes that if the commenters were correct in claiming that public enforcement is sufficient to address all misconduct in the covered consumer finance markets and secure relief for those affected, the Bureau would expect to see a low incidence of class action litigation due to incentives facing plaintiff's attorneys. Further, the Bureau would expect to see small settlements given that settlements are generally a function of the expected value of the claims. As discussed above, the evidence with respect to number, size, and relief obtained in class actions belies the claim that public enforcement is sufficient to fully vindicate consumers' rights under the consumer protection laws.
In response to commenters that asserted that this still left significant amounts of overlap between private and public cases, the Bureau notes that where there was overlap, private class actions appear to have preceded public enforcement actions roughly two-thirds of the time. Moreover, when there are private cases that follow public enforcement, courts can and do take the earlier public case into account when approving settlements and calculating attorney's fees. For example, one commenter noted cases where the FTC filed an amicus brief requesting that the court reduce plaintiff's attorney fees for a class action settlement that followed a public enforcement matter on the same facts.
In the proposal, the Bureau preliminarily found, in light of the Study and the Bureau's experience and expertise, that precluding providers from blocking consumer class actions through the use of arbitration agreements would better enable consumers to enforce their rights under Federal and State consumer protection laws and the common law and obtain redress when their rights are violated. Allowing consumers to seek relief in class actions, in turn, would strengthen the incentives for companies to avoid legally risky or potentially illegal activities and reduce the likelihood that consumers would be subject to such practices in the first instance. The Bureau further preliminarily found that because of these outcomes, allowing consumers to seek class action relief was consistent with the Study and would be in the public interest and for the protection of consumers. The Bureau made this preliminary finding after considering costs to providers as well as other potentially countervailing considerations, such as the potential impacts on innovation in the market for consumer financial products and services. In light of all these considerations, the Bureau preliminarily found that the statutory standard was satisfied.
The sections below discuss the bases for the preliminary findings, comments received, and the Bureau's further analyses and final findings in support of the class rule in the reverse order, beginning with a discussion of the protection of consumers and then addressing the public interest. As discussed further below, the Bureau recognizes that creating incentives to comply with the law and causing companies to choose between increased risk mitigation and enhanced exposure to liability imposes certain burdens on providers. These burdens are chiefly in the form of increased compliance costs to prevent violations of consumer financial laws enforceable by class actions, including the costs of forgoing potentially profitable (but also potentially illegal) business practices that may increase class action exposure, and in the increased costs to litigate putative class actions themselves, including, in some cases, providing relief to a class and payment to its attorneys. The Bureau also recognizes that providers may pass through some or all of those costs to consumers, thereby increasing prices. Those impacts are delineated and, where possible, quantified in the Bureau's Section 1022(b)(2) Analysis below in Part VIII and, with regard in particular to burdens on small financial services providers, discussed further below in Part VII in the section-by-section analysis to proposed § 1040.4(a) and in the final Regulatory Flexibility Analysis below in Part IX.
In the proposal, the Bureau preliminarily found that the class rule, by changing the status quo, creating incentives for greater compliance, and restoring an important means of relief and accountability, would be for the protection of consumers.
To the extent that laws cannot be effectively enforced, the Bureau explained in the proposal that it believed that companies may be more likely to take legal risks,
As discussed in the proposal's Section 1022(b)(2) Analysis, economic theory supports the Bureau's belief that the availability of class actions affects compliance incentives. The standard economic model of deterrence holds that individuals who benefit from engaging in particular actions that violate the law will instead comply with the law when the expected cost from violation,
The preliminary finding that class action liability deters potentially illegal conduct and encourages investments in compliance was confirmed by the Bureau's own experience and its observations about the behavior of firms and the effects of class actions in markets for consumer financial products and services. The Bureau analyzed a variety of evidence that, in its view, indicates that companies invest in compliance to avoid activities that could increase their exposure to class actions.
First, the Bureau stated that it was aware that companies monitor class litigation relevant to the products and services that they offer so that they can mitigate their liability by changing their conduct before being sued themselves. This effect was evident from the proliferation of public materials—such as compliance bulletins, law firm alerts, and conferences—where legal and compliance experts routinely and systematically advise companies about relevant developments in class action litigation,
Relatedly, where there is class action exposure, companies and their representatives will seek to focus more attention and resources on general proactive compliance monitoring and management. The Bureau stated in the proposal that it had seen evidence of this motivation in various law and compliance firm alerts. For example, one such alert, posted shortly after the Bureau released its SBREFA Outline, noted that the Bureau was considering proposals to prevent arbitration agreements from being used to block class actions. In light of these proposals, the firm recommended several “Steps to Consider Taking Now,” including, “Evaluate your consumer compliance management system to identify and fill any gaps in processes and procedures that inure to the detriment of consumers under standards of unfair, deceptive, and abusive acts or practices, and that could result in groups of consumers taking action.”
The Bureau also stated in the proposal that while it believed that such monitoring and attempts to anticipate litigation affect the practices of companies that are exposed to class action liability, the impacts can be hard to document and quantify because companies rarely publicize changes in their behavior, let alone publicly attribute those changes to risk-mitigation decisions. The Bureau, however, identified instances where it believed that class actions filed against one or more firms in an industry led to others changing their practices, presumably in an effort to avoid being sued themselves. For example, between 2003 and 2006, 11 automobile lenders settled class action lawsuits alleging that the lenders' credit pricing policies had a disparate impact on minority borrowers under ECOA. In the settlements, the lenders agreed to restrict interest rate markups to no more than 2.5 percentage points. Following these settlements, a markup cap of 2.5 percent became standard across the industry even with respect to companies outside the direct scope of the settlements.
As another example, the Bureau noted in the proposal that since 2012, 18 banks have entered into class action settlements as part of the Overdraft MDL,
The proposal noted a third example of companies responding to class actions by changing their practices to improve their compliance with the law that relates to foreign transaction fees and debit cards.
As the proposal explained, these are a few examples of industry-wide change in response to class actions that the Bureau believed support its preliminary
As discussed in more detail in the proposal's Section 1022(b)(2) Analysis, the Bureau did not believe it possible to quantify the benefits to consumers from the increased compliance incentives attributable to the class proposal due in part to the difficulty of measuring the value of deterrence in a systematic way. Nonetheless, the Bureau preliminarily found that increasing compliance incentives would be for the protection of consumers.
The Bureau recognized that some companies may decide to assume the resulting increased legal risk rather than investing more in ensuring compliance with the law and foregoing practices that are potentially illegal or even unlawful. Other companies may seek to mitigate their risk but may miscalibrate and underinvest or under comply. To the extent that this happens, the Bureau preliminarily found that the class proposal would enable many more consumers to obtain redress for violations than do so now while companies can use arbitration agreements to block class actions. As set out in the proposal's Section 1022(b)(2) Analysis, the amount of additional compensation consumers would be expected to receive from class action settlements in the Federal courts varies by product and service—specifically, by the prevalence of arbitration agreements in those individual markets—but is substantial nonetheless and in most markets represents a considerable increase.
Furthermore, the Bureau preliminarily found that through such litigation consumers would be better able to cause providers to cease engaging in unlawful or legally risky conduct prospectively than under a system in which companies can use arbitration agreements to block class actions. Class actions brought against particular providers can, by providing behavioral relief into the future to consumers, force more compliance where the general increase in incentives due to litigation risk are insufficient to achieve that outcome.
The Bureau offered the Overdraft MDL as an example to help illustrate the potential ongoing value of such prospective relief. A 2015 study by an academic researcher based on the Overdraft MDL settlements offered rare data on the relationship between the settlement relief offered to class members compared to the sum total of injury suffered by class members that has important implications for the value of prospective relief. The analysis reviewed settlement documents and found that the value of cash settlement relief offered to the class constituted between 7 and 70 percent (or an average of 38 percent and a median of 40 percent) of the total value of harm suffered by class members from overdraft reordering during the class period.
This sum—$2.6 billion—can also be used as a basis for determining the potential
For all of these reasons, the Bureau stated in the proposal that it believed that the class proposal would increase compliance and increase redress for non-compliant behavior and thus would be for the protection of consumers. To the extent that the class proposal would affect incentives (or lead to more prospective relief) and enhance compliance, consumers seeking to use particular consumer financial products or services would more frequently receive the benefits of the statutory and common law regimes that legislatures and courts have implemented and developed to protect them. Consumers would, for example, be more likely to receive the disclosures required by and compliant with TILA, to benefit from the error-resolution procedures required by TILA and EFTA, and to avoid the unfair, deceptive, and abusive debt collection practices proscribed by the FDCPA and the discriminatory practices proscribed by ECOA.
The Bureau also discussed in the proposal that some stakeholders had predicted during the SBREFA phase and other early outreach that pursuing a class rule would lead them to remove arbitration agreements, either because arbitration agreements served no purpose if they did not operate to block class actions or because the costs of individual arbitration to providers were substantial enough that providers would want to eliminate that dispute resolution channel in the absence of offsetting benefits from blocking class actions.
For example, the Bureau noted that while some companies may have to pay fees to the arbitration administrators that they would not have to pay in court, the empirical evidence indicates that the absolute number of cases in which these fees are incurred is low (and that the total fees in any one case are also low).
Many of these industry, research center, and individual commenters contended that class actions do not deter violations of the law because they exert pressure on companies to settle whether or not the claims asserted have merit. The commenters asserted that such risk is unavoidable regardless of an entity's compliance efforts, and that companies will therefore not in fact increase such efforts. The pressure to settle exists in part, the commenters asserted, because defendant companies must bear high discovery and defense attorney costs and must consider the risk, no matter how small, of a large judgment in a case that is certified as a class action. The commenters asserted that providers are not willing to tolerate the risk that such a judgment would involve substantial payouts to each member of the class, even if the likelihood of the judgment occurring is low. These commenters contended that the pressure to settle regardless of the merit of the claims means that class actions do not deter wrongdoing, they are simply a “cost of doing business.”
One trade association commenter representing defense lawyers held the opposite view: class actions do deter violations of the law and in fact, they create “over-deterrence.” In this commenter's view, many class actions in the financial services market involve ambiguities and uncertainties in the law, rather than clear violations. Thus, when companies settle class actions without final adjudication of these uncertain legal issues and change their behavior to cease the conduct at issue, the commenter asserted that the companies may be avoiding behavior that is lawful, creating over-deterrence. Relatedly, another industry commenter stated its view that class action settlements are unfair when the law is ambiguous or uncertain and thus companies cannot predict that their conduct may violate the law and subject them to a class action. A nonprofit commenter also agreed that class actions deter wrongdoing, but contended that compliant providers are more likely to be sued in class actions than “bad actor” providers because the latter are likely judgment proof. In the commenter's view, this fact creates an imbalance wherein compliant providers are more deterred from bad behavior than non-compliant ones.
In the Study, the Bureau found that class action settlements typically occur in conjunction with class certification,
Some industry commenters agreed that the threat of class action liability deters at least some violations of the law, but contended that its deterrent effect is imprecise and inefficient because of statutes that provide for recovery of attorney's fees and double or treble damages. In these commenters' view, these remedy features incentivize attorneys to bring claims under statutes that have them (as opposed to bringing claims under other statutes or common law without those features) in order to maximize their own profit. One commenter asserted that the lawsuits themselves therefore bear no relation to the merit of the claims and thus do not deter wrongdoing.
On the other hand, a consumer advocate commenter, quoting Judge Richard Posner, contended that this is precisely the point:
Society may gain from the deterrent effect of financial awards. The practical alternative to class litigation is punitive damages, not a fusillade of small-stakes claims. The deterrent objective of [EFTA] is apparent in the provision of statutory damages, since if only actual damages could be awarded, the providers of ATM services . . . might have little incentive to comply with the law.
One research center commenter cited the Overdraft MDL settlements as an example of massive liability where consumers were not actually harmed and thus disagreed with the Bureau's reliance in the preliminary findings on those settlements as evidence of deterrence. The commenter asserted that banks lose money on free checking accounts and that overdraft fees were therefore necessary in order for banks to subsidize free checking accounts for consumers. The commenter therefore believed that the overdraft settlements did not remedy harm to consumers, but actually caused harm by decreasing the likelihood that banks will offer free checking accounts going forward. The same commenter criticized the Bureau's inclusion of the overdraft settlements as an example of litigation that prompted companies to change behavior because some banks continue to reorder consumer overdrafts in such a way as to maximize the fees charged to the consumer, despite that settlement. The commenter agreed, however, that the percentage of banks that employ this practice has diminished since the overdraft class action litigation began. An industry commenter asserted that the Bureau's examples of deterrence were misplaced because they concerned settlements, not actual findings or admissions that the defendants had broken the law and thus the Bureau lacked examples of illegal conduct being deterred. Asserting a similar concern, another industry commenter contended that to the extent that the class actions affect change in business practices, private class action settlements are not an efficient policymaking tool. One industry commenter further contended that because it views class actions as inefficient, the Bureau could more efficiently deter violations of the law by deciding which practices are unfair or deceptive and then informing companies of them.
Several industry commenters disagreed with the Bureau's preliminary finding that class actions deter wrongdoing because they believe that the threat of public enforcement from the Bureau, other Federal agencies, or State attorneys general is more likely to deter companies from violating the law than any class action could. A group of State attorneys general similarly asserted that State consumer protection laws and the threat of State public enforcement are sufficient to deter violations of the law. Other industry commenters contended that companies are more likely to be deterred from violating the law by the threat of individual lawsuits or the threat that consumers will take their business elsewhere once they learn of the companies' violations; one of these commenters cited the Study's survey data on the likelihood of this occurring. A Tribal commenter stated its belief that consumers who obtain products or services from Tribes are sufficiently protected through Tribal regulation and enforcement of those regulations and thus there is no need for the deterrent effect of class actions with respect to Tribes.
Several industry commenters asserted that even if class actions do deter wrongdoing, the deterrence they provide is not necessary because companies already comply fully with the law. In support, a credit union commenter provided data on the amount credit unions already spend to comply with regulations ($6.2 billion) and what it asserted was a similar additional financial impact of those
Some industry commenters stated their belief that class actions were not necessary to deter violations of the law with respect to providers of certain products or services because the markets for these products or services have particular features which, in their view, encouraged full compliance by providers.
A few commenters challenged the examples the Bureau cited in the proposal (and summarized above in this Part VI.C.1) of companies that monitor class action lawsuits and adjust their conduct accordingly as supporting the Bureau's preliminary finding that class actions deter violation of the law. However, none of the commenters disagreed with the general observation that companies monitor class action litigation to minimize their class action exposure and at least one industry commenter agreed that doing so is a prudent business practice. One commenter criticized the Bureau's consideration of law firm alerts about class action cases concerning ATM fee notices pursuant to EFTA as evidence that class actions create deterrence because those cases were not analyzed as part of the class action litigation filings in the Study and because Congress has since amended EFTA such that the conduct at issue in those cases is no longer unlawful. That same commenter criticized the Bureau's citation to foreign currency litigation, contending that the only behavioral change companies made in response to that litigation was to add more consumer disclosure, which, in the commenter's view did not benefit consumers because disclosure is ineffective.
In contrast, numerous individuals, consumer advocates, public-interest consumer lawyers, nonprofits, and consumer lawyers and law firms agreed with the Bureau's findings that class action exposure deters wrongdoing and encourages others to comply with the law. One of these consumer advocate commenters suggested, as the Bureau preliminarily found, that the deterrent effect of class actions is their most potent benefit. Several of these commenters remarked that the public nature of class actions and class settlements deter wrongdoing. One consumer law firm commenter noted that companies often require notification to upper management and boards of directors about class actions because of their potentially large liability, emphasizing that such senior leaders are capable of changing the underlying policies at issue. By contrast, the commenter stated that individual actions are often resolved at lower levels of the company and that upper management may not be made aware of the problem. Academic commenters suggested that many named plaintiffs pursue classwide relief not so that they can be compensated but to prevent the company from harming similarly situated consumers in the future. Similarly, a public-interest consumer lawyer and consumer advocate suggested that class action exposure deters bad behavior and prevents harm to victims other than the named plaintiff. A consumer law firm commenter explained that class actions deter misconduct in ways that individual actions cannot. Similarly, a consumer advocate commenter stated that class actions are critically important not only for compensating victims of corporate law-breaking but also for the deterrent effect of civil litigation.
Commenters also provided specific examples, from their personal experience, of deterrence. For example, two public-interest consumer lawyer commenters described class actions involving automobile dealer markups that resulted in an industry-wide agreement to put in place caps on compensation so as to avoid future litigation over this issue. A consumer advocate commenter cited examples of deterrence in the auto-lending, payday loan, deposit account, and credit card industries.
Commenters offered various explanations for why, in their view, class actions deter violations of the law. For example, a consumer advocate
A consumer law firm cited to the
With respect to the Bureau's preliminary finding that precluding providers from using arbitration agreements to block class actions would better enable consumers to enforce their rights and obtain redress when their rights are violated by providers, many consumer advocate and consumer law firm commenters agreed. By contrast, many industry commenters asserted that the rule would lead companies to remove arbitration agreements from their contracts which would make it more difficult for consumers to obtain relief in arbitration, a forum that the commenters viewed as superior to litigation. As discussed above, however, some industry, research center, and State government and State attorneys general commenters asserted that consumers have adequate alternative means of obtaining relief, whether through the informal dispute resolution channel, pursuing individual disputes via litigation or arbitration or enforcement. Consumer advocate and nonprofit commenters disagreed with these assertions.
This lack of evidence is particularly important because the Bureau stated in the proposal that it was skeptical that the class rule would cause providers to incur significant additional costs by maintaining “two tracks” of dispute resolution (arbitration and court) given that many providers already maintain two tracks for dispute resolution in small claims court and arbitration and that few companies compel arbitration when an individual consumer first files in court. Several industry commenters explained why, in their view, the class rule would impose significant additional costs and why providers currently permit small claims court filings and rarely move to compel arbitration in individual litigation. A few industry commenters asserted that litigating disputes in both arbitration and small claims court is not substantially more burdensome for providers than litigating disputes only in arbitration, because small claims courts have many of the same streamlined procedures as arbitration, such as limits on discovery and individualized proceedings. Consequently, in the commenter's view, the fact that businesses litigate disputes
In response to the Bureau's skepticism in the proposal as to whether the costs of individual arbitration will cause providers to remove arbitration agreements if the class rule is finalized, other industry commenters noted that many arbitration agreements include “anti-severability provisions,” which state that if the agreement's no-class provision is held unenforceable, the entire arbitration agreement is unenforceable as well.
Many of these same industry, research center, and State attorneys general commenters noted that individual disputes filed in arbitration are, on average, resolved more quickly than those filed in individual litigation. One industry commenter noted that arbitrations analyzed in the Study were resolved in a median of four to seven months, depending on whether the consumer appeared at the hearing and whether that hearing was in person or by telephone. By contrast, the commenter noted that the average time to reach trial for an individual suit filed in Federal court was 26.7 months.
Many industry and research center commenters also stated their belief that arbitration is a better forum for consumers to resolve their disputes with consumer finance companies than individual litigation in court because consumers may proceed without an attorney in arbitration. These commenters believe that arbitration's streamlined process, which does not typically include motions or discovery practice common to litigation and has simpler pleading requirements, allows consumers to pursue their own claims without an attorney and are far lower than what one industry commenter asserted is the astronomical cost of litigation. Indeed, these commenters noted that the Study showed that unrepresented consumers more often received favorable decisions from arbitrators than did consumers represented by attorneys. On the other hand, one industry commenter asserted that when consumers do have an attorney in an arbitration, that attorney is likely to have prior arbitration experience. Some industry commenters and a group of State attorneys general noted that arbitration hearings were typically held in locations that were convenient for consumers and often occurred via telephone, Skype or email without the consumer having to appear in person. In contrast, these commenters noted that litigation typically requires consumers to appear in person and often during the day, requiring them to miss work. An industry and research center commenter and a group of State attorneys general noted that the arbitration process is simpler than litigation and therefore easier for consumers to navigate. Relatedly, an industry commenter noted that fees are modest and disclosed in arbitrations and that arbitrators may waive or reduce them further. An industry commenter asserted that arbitration is better than litigation because consumers can play a role in choosing their arbitrator, while they cannot choose a judge. An industry commenter and several State attorneys general asserted that arbitration benefits consumers because they are more likely to receive a decision on the merits as compared to class actions, where the Study showed no trials occurred in class actions.
Many of the industry and research center commenters noted that the Study showed that consumers prevailed on their claims in arbitration at least as much as they did in litigation. They noted, for example, that the Study showed that consumers received a favorable decision from an arbitrator 6 percent of the time and settled with companies 57 percent of the time in arbitration (appearing to reflect data from the Study that identified known and likely settlements), while consumers received a favorable judgment in 7 percent of their claims in individual litigation and settled 48 percent of claims filed in court (appearing to reflect data from the Study that identified known settlements only). Many industry commenters and a group of State attorneys general further contended that successful consumers won significant amounts in arbitration; according to the Study, the average consumer who received a favorable award received more than $5,000 and a group of State attorneys general noted that arbitration agreements rarely limit consumers' recovery.
Several of these same commenters also asserted that arbitration is at least as fair for consumers as litigation because the major arbitration administrators, AAA and JAMS, each have due process standards that require arbitrators to handle claims fairly. An industry commenter and a research
Some industry and research center commenters asserted that individual arbitration is frequently and successfully used by both consumers and companies in other areas of the law, such as in employment, securities, and medical malpractice. They further contended that, given time, consumer finance arbitration can achieve the same levels of success.
Several industry and research center commenters stated that the loss of individual arbitration as an option for consumers is particularly problematic because, in their view, most injuries suffered by consumers in consumer finance cases are individualized and therefore could not be remedied through class action lawsuits, which are the focus of the Bureau's class rule. These commenters cited, as examples, cases in which an individual consumer had a deposit not properly credited at an ATM machine, was improperly charged a fee, or had incorrect interest calculations on his or her account when other consumers did not. One of these commenters stated that, in its opinion, such individualized non-classable claims are a significant majority of all consumer claims. However, the commenters did not provide any empirical evidence for their assertions that most injuries to consumers occur because of unique or individualized harms.
Many of these same industry and research center commenters noted that without arbitration, many consumer finance claims may be filed in court. Specifically, they contended that small claims courts are not an adequate forum for these claims that would have been resolved in arbitration. While small claims courts ostensibly allow consumers to pursue low-value claims more simply than in State courts of general jurisdiction or in Federal court, these commenters cited evidence suggesting that small claims courts are overcrowded or closing as a result of budget cuts in some jurisdictions (citing examples in parts of California, Alabama, and Texas). The commenters further contended that to the extent that small claims courts are over-crowded (or non-existent), they are slow in providing relief to consumers who are injured or do not provide relief at all. These commenters also pointed out that small claims courts typically require consumers to appear in person during standard working hours, which can be difficult for many consumers who cannot take time off from their jobs.
Some industry commenters stated their belief that arbitration was particularly useful, as compared to litigation, for claims concerning certain products or services. For example, a debt collection industry trade association stated that in debt collection disputes, consumers place a particularly high value on confidentiality, which it believed arbitration better preserves. It also stated that debt collection claims are simpler to adjudicate, and thus suited to a simpler process, which it believed arbitration offers.
On the other hand and as noted above in Part VI.B.2, consumer advocates, consumer lawyers, trade associations of consumer lawyers, public-interest consumer lawyers, consumer law firms, nonprofits, and many individual commenters commented at length as to why, in their view, litigation in court of individual disputes along with the availability of class actions was far preferable to pursuing the same claims in arbitration. Several of these commenters stated that industry preferred to funnel all disputes into individual arbitration not to benefit consumers but instead to insulate themselves from class actions and that they did not have consumers' best interest in mind when suggesting that arbitration was preferable.
As discussed above in Part VI.B.1, many of these commenters further stated that individual arbitration was so unfair relative to individual litigation that the Bureau should have protected individual consumers by banning outright the use of pre-dispute arbitration agreements. For example, some commenters argued that consumer arbitration outcomes cannot be consistently fair because arbitration naturally favors providers, as repeat players, over consumers, who may only face an arbitration once. One public-interest consumer lawyer commenter argued that individual arbitration is necessarily worse for consumers than litigation because consumers cannot find legal representation and few consumers file arbitrations in any case. Accordingly, these commenters did not agree that a loss of individual arbitration, if it occurred in response to the Bureau's rule, would negatively impact consumers. Instead, many of these commenters thought that consumers would be better off without it.
One industry commenter challenged an argument it believed was raised by some consumer advocates who it claims have asserted that the widespread
The Bureau has carefully considered the comments received on these aspects of the proposal and further analyzed the issues raised in light of the Study and the Bureau's experience and expertise. Based on all of these sources and for the reasons discussed above in Part VI.B, in the proposal, and further below, the Bureau finds that precluding providers from blocking consumer class actions through the use of arbitration agreements would substantially strengthen the incentives for companies to avoid legally risky or potentially illegal activities, thereby reducing the likelihood that consumers would be subject to such practices in the first instance. To the extent that companies nonetheless engage in unlawful conduct, permitting class actions would also better enable consumers to enforce their rights under Federal and State consumer protection laws and the common law and obtain redress when their rights are violated. For these reasons and those discussed below, the Bureau finds that both of these results are for the protection of consumers.
An example of this deterrent effect can be found in comments from a credit reporting agency that provides credit monitoring and a consumer data trade association representing providers of credit monitoring. These commenters contended that two Federal appellate courts have improperly interpreted CROA to apply to at least one credit monitoring product.
As another example, debt collector commenters noted that debt collectors do not underinvest in compliance because the presence of class action waivers does not provide enough certainty to them that they will be always able to minimize class action liability. The Bureau believes that one corollary of this argument is that some debt collectors could be encouraged to spend less on compliance if they had more certainty about their ability to block class actions. To the extent this is true, the Bureau believes that debt collectors would be less deterred if they were more certain that they could block class actions, and conversely would be more deterred if they knew with certainty that they could not block class actions.
As for the commenter that criticized the behavioral relief in the foreign currency fee litigation as worthless because disclosures provided about these fees are ineffective, the Bureau first notes that Congress believes in the importance of timely and understandable disclosures for
With these examples, as well as the EFTA ATM “sticker” litigation example discussed in the proposal and above,
Indeed, the Bureau notes that while some industry commenters resisted the premise that potential class action liability produces deterrent effects, other industry, individual, and research center commenters agreed with the Bureau's finding and supplied additional evidence in support of it. One such individual commenter (who otherwise strongly opposed the proposal) agreed that class actions have the ability to “prompt `enterprise-wide change' ” in providers. Similarly, one of the studies cited by industry and research center commenters that analyzed the results of class action lawsuits included interviews of corporate representatives regarding class action liability in which those representatives acknowledged that “damage class action lawsuits have played a regulatory role by causing them to review their financial and employment practices.”
Affected companies should use this time, before implementation, to mitigate class action claims that previously might have been subject to arbitration. Companies should consider a review of all consumer-facing documents to confirm language complies with applicable federal and state law. Additionally, internal policies and procedures must be reviewed to ensure that product origination and servicing is consistent with all legal requirements. Likewise, vendor agreements must be reviewed in relation to applicable law—including, most importantly, principal-agency theories. It is imperative that companies anticipate ways to limit liability and manage future class action risks now—as class action defense litigation spending is anticipated to surge in every consumer finance sector.
One industry commenter asserted that class actions create over-deterrence because class settlements may encourage companies to avoid behavior that is legally ambiguous but not necessarily unlawful.
Moreover, as discussed in more detail in Part VI.B.3 above, there is a relationship between the likelihood of success on class action claims and the amount of the settlement. For this reason, the Bureau believes, all else equal, that a class action that asserts legally ambiguous but not clearly unlawful claims is likely to result in a smaller settlement, if any, than a class action that asserts a clear violation of the law. As a result of a smaller settlement amount, the deterrent effect of a settlement with regard to a legally ambiguous or uncertain claim would be correspondingly smaller than the deterrent effect of a larger settlement. In other words, class action settlements involving ambiguous or uncertain violations of the law may deter some lawful conduct at the margins, but the Bureau does not believe this deterrent effect would be significant. And, even if there is some small impact from these settlements on legally ambiguous but not unlawful behavior, the Bureau believes that, on balance, that it would be a reasonable cost to achieve the benefits of the class rule for the public and for consumers.
With respect to the industry commenters that contended that statutes providing for statutory damages or double and treble damages compound the pressures to settle and thus create a deterrent effect that is imprecise or inefficient, the Bureau does not dispute that the existence of statutory damages or attorney's fee provisions may encourage lawsuits under those statutes. Some commenters contended this is “imprecise” or “inefficient.” It is nevertheless a direct consequence of the statutory regime adopted by Congress and the States and, if anything, is evidence that lawmakers chose to emphasize the need for compliance with these laws. As for the commenter that suggested that class actions are an inefficient policymaking tool, the Bureau disagrees that class actions constitute policymaking themselves. Rather, the Bureau believes that class action settlements occur only because Federal and State legislatures had already adopted policy choices by enacting particular statutes or the common law had developed to reflect certain policy judgments. In response to the commenter that suggested that the Bureau should determine which conduct is unfair or deceptive because that would be more efficient than class actions, the Bureau's resources are limited, for all of the reasons discussed above in Part VI.B.5. For this reason, even if such a practice were more efficient than unfettered class actions, the Bureau has many competing priorities and likely would not be able to identify and communicate every type of unfair or deceptive practice for the many thousands of products or services within its jurisdiction.
As for commenters that contended that statutory damages were designed to incentivize individual claims and are misapplied when asserted in class actions, the Bureau does not agree that the class action liability that results under statutes that provide for statutory damages is unintended or accidental. Instead, and as discussed more fully in Part II.C, Congress has repeatedly enacted measures to address the interaction of statutory damages and the class action mechanism, as evidenced by its adoption of classwide damages caps for many statutes.
Similarly, commenters that criticized the underlying statutes as incentivizing private lawsuits when the commenters claim there is “no harm to deter” are, in essence, either claiming that courts will allow the lawsuits to proceed despite the absence of an in injury-in-fact (which the Constitution requires for Federal court litigation
With respect to CROA, as discussed below, since 2005, there have been a number of efforts in Congress to determine whether CROA could be improved by clarifying the CROA credit monitoring coverage issue that commenters raised here. No consensus has been reached to date and the FTC has twice expressed concern about the difficulty in structuring a revision to CROA to address this concern. This history suggests that the author of CROA (Congress) and its enforcer (the FTC) are not certain CROA should be revised, or how. In any event, with respect to CROA and all statutes, it is Congress that sets the remedies and determines coverage for its statutory regimes. Further, though some providers may currently be able to block class actions under these statutes through their use of arbitration agreements, these statutes nevertheless govern providers' conduct and those providers who violate the law may be subject to individual claims. In short, to the extent that commenters believe class actions provide outsized liability under particular statutes without requiring proof of any real harm to consumers, courts, Congress, and State legislatures are presumptively the proper branches of government to address this concern.
Relatedly, one research center commenter cited the Overdraft MDL class settlements as examples of violations of the law where consumers were not harmed. In fact, in the commenter's view, consumers received a benefit from the violations, because the fees generated by those overdraft practices enabled the banks to offer free checking accounts to its customers. Whether those overdraft policies generated revenue from overdrafters that subsidized free checking accounts for consumers generally is beside the point; when companies violate the law, the consumers who are victims of the wrong are better protected and accountability is improved when there is an effective remedy, regardless of how the company may have invested the profits from those violations. If companies were excused from violating the law because doing so allowed them to charge lower prices, they could, for example, justify charging higher prices to a certain race or gender in order to subsidize lower prices to other groups. The Bureau does not believe such a result would protect consumers and likewise does not agree that the overdraft settlements harmed consumers in the way the commenter suggested. To the contrary, the Bureau believes that consumers benefitted from these aspects of the overdraft settlements, which resulted in more transparent upfront pricing that facilitates comparison shopping by consumers.
For all of the reasons stated, the Bureau finds that class action settlements are not wholly random and are sufficiently correlated to merit to deter wrongdoing. The Bureau also does not agree that the deterrence provided by class actions is limited to those cases that result in class settlements or even those that are filed at all. Mere exposure to the potential to be sued for a meritorious class action, in the Bureau's view, creates an incentive to refrain from the conduct that would give rise to that action. As one commenter noted, the exposure to potential liability based on cases filed against other companies often put upper management and boards of directors on notice of widespread misconduct in a way that individual cases are unlikely to do. To appreciate the potential for such a suit, it is not necessary for a company to be aware that another company engaged in the same conduct and was sued.
In response to commenters that contended that there is no need for the deterrence provided by class actions because companies are fully deterred from violating the law by the threat of public enforcement, the threat of individual litigation, the threat of consumers taking their business elsewhere, or by Tribal regulation and enforcement, the Bureau explained why each of these is insufficient in enforcing the law above in Part VI.B. To the extent these other mechanisms do not allow for sufficient enforcement of the law they also do not sufficiently deter companies from violating the law. As discussed there, the Bureau finds these avenues both individually and jointly insufficient to fully enforce the consumer protection laws.
Moreover, the Bureau has observed, through its experience and expertise that there is not full compliance with the law. Indeed, despite the Bureau's creation and subsequent work, it continues to receive thousands of complaints per month and regularly uncovers wrongdoing that has not been deterred simply by the existence of the Bureau or the threat of individual dispute resolution, whether formal or informal. Further, the Bureau does not believe that the wrongdoing it uncovers is the only wrongdoing that exists, in part because the markets for consumer financial products and services are numerous and often large, and the Bureau's work is necessarily limited by its resources. Thus, the Bureau finds that the commenters' assertion that all providers comply fully with all applicable laws to be unsupported.
As for those commenters that suggested that specific types of providers—such as debt collectors, credit unions, and community banks—have sufficient incentives because of the nature of their particular product or service to comply fully with the law, the Bureau does not find evidence that these entities are sufficiently deterred from violation in a way that warrants their exclusion from the class rule. With respect to debt collectors, commenters noted that whether debt collectors can rely on arbitration agreements is uncertain. This, they contend, means that they already sufficiently invest in compliance. Accordingly, while debt collectors may have more incentive to comply with the law than providers that are certain that they can block class actions, debt collectors still have less incentive to comply than providers that
Moreover, in the period since the Bureau released the proposal, several more large-scale violations of consumer finance law have become public. In one example discussed above, the Bureau fined a large bank $100 million for widespread illegal practices related to the opening of thousands of unauthorized accounts on behalf of its customers.
Another example involved a large money transmitter that recently agreed to a $586 million settlement with several public enforcement agencies, including the FTC and the Department of Justice. In that settlement, the money transmitter admitted to criminal and civil violations of the law involving aiding and abetting massive wire fraud by its agents.
In general, the Bureau disagrees with commenters that stated that the Bureau should have further studied current levels of compliance in the marketplace. The Bureau's supervision function has the purpose of assessing compliance and remedying non-compliance either through supervisory resolutions or through referral of cases for public enforcement actions. The Bureau's enforcement function investigates cases where there is reason to believe violations are occurring and pursues those where the evidence warrants doing so. It would not be practical to somehow study compliance levels independent of the work the Bureau does on an ongoing basis through supervision and enforcement, nor would the Bureau expect companies to be forthcoming with evidence of non-compliance were the Bureau to attempt such a study.
With respect to the Bureau's preliminary finding that precluding providers from using arbitration agreements to block class actions would better enable consumers to enforce their rights and obtain redress, some commenters suggested that the other means do sufficiently remedy all violations of law. Those comments are discussed in above in Part VI.B. Otherwise, no commenters disagreed with the Bureau's findings in this regard and the Bureau adopts these findings with respect to the final class rule.
Insofar as the Bureau believes that the cost of individual arbitration is minimally different from litigation, it remains skeptical that this is the reason that will cause companies to remove arbitration agreements from their contracts. Specifically, the Bureau is unpersuaded that providers incur significant net costs in connection with maintaining pre-dispute arbitration agreements today. As the commenters indicated, providers generally pay the bulk of the filing fees, hearing fees, and arbitrator compensation in individual consumer financial arbitrations. In consumer arbitrations conducted by AAA, the provider is responsible for a filing fee of $1,700 to $2,200; a hearing fee of between $0 and $500; and arbitrator compensation of between $750 per case and $1,500 per day, depending on the type of arbitration.
The commenters' arguments that they incur significant net costs in connection with individual arbitration are further undermined by the fact that most providers face no arbitrations and those that do, face very few. The Study identified about 616 AAA consumer arbitrations per year for six large consumer financial markets, about 411 of which were filed by consumers.
The Bureau also remains skeptical that providers would be unwilling to litigate individual disputes in both arbitration and court once the Bureau's rule goes into effect because providers already litigate disputes in both fora today. Providers with arbitration agreements also must litigate in State and Federal court to the extent they are sued by individuals with whom they do not have contractual relationships or to the extent that consumers sue them in Federal or State court and the provider does not move to compel arbitration (which the Study showed occurred in nearly all individual cases filed in Federal court).
With respect to some industry commenters' contention that anti-severability provisions in arbitration agreements show that providers would choose to remove arbitration agreements if this rule were finalized, the Bureau understands that providers have adopted anti-severability provisions for the purpose of preventing cases from proceeding as class arbitrations if a court were to find a no-class provision to be unenforceable in a particular case.
For the reasons described above, the Bureau does not believe that commenters set forth persuasive reasons for concluding that the costs of individual arbitration would cause them to remove their arbitration agreements once the class rule becomes effective.
In any event, even if consumers do not have access to arbitration for individual claims those still can be filed in court, including small claims court.
Because the Bureau believes that preserving consumers' right to participate in a class action is for the protection of consumers even if providers will no longer include arbitration agreements in their consumer contracts, it is not necessary to address each individual argument cited by commenters about why arbitration is a superior forum for dispute resolution than litigation. However, the Bureau notes that there is reason to be skeptical of those arguments. For example, while many industry commenters asserted that arbitration is less expensive for consumers to pursue than litigation because filing fees are generally less, the Bureau notes that one-third of the arbitration agreements analyzed in the Study required consumers to reimburse fees and expenses paid by the company if the consumer loses the arbitration.
Moreover, some of the commenters that addressed the cost of arbitration only compared it to the cost of litigating in Federal court. The Bureau believes that many of the consumers who would otherwise choose arbitration will pursue their claims in small claims courts or courts of general jurisdiction if arbitration is not available going forward. Filing fees in these courts are frequently quite reasonable and almost always far lower than Federal court.
As to the comments that noted that consumers often succeeded in arbitration claims without an attorney and thus did not need attorneys in arbitration, the Bureau notes that consumers likewise do not need attorneys to pursue claims in small claims court, which is the most apt comparison to arbitration because it offers streamlined procedures similar to those available in arbitration.
As for the commenters' assertion that most harms that are suffered by consumers are individualized and not classable, the Study showed that there are millions of consumers who suffer group harms, as reflected by the number of consumers who obtained relief in class actions (60 million per year), and the Bureau's experience and expertise in supervision and enforcement is consistent with this conclusion. Most consumer financial products and services involve products offered on the same terms to all customers, so it stands to reason that when these terms violate the law, they harm all consumers bound by them. While there was no dispute that some consumers suffered individualized harms, commenters did not put forth any data that both contradicted the Bureau's Study and supported commenters' assertion that most harms were individualized and not classable.
Some industry commenters have argued that more consumers would use arbitration if only they understood the process more, if arbitration agreements were drafted more clearly, or if consumers were properly educated to the benefits of arbitration (whether by the Bureau or by providers or both), thereby reducing the disparity between the number of consumers who use arbitration and the number who obtain relief in class actions. The Bureau is not persuaded that the presence of education or promotional materials would, for dispute resolution, materially alter the dynamics that result in so few individual arbitrations for all of the reasons discussed above at Part VI.B.2. The alternatives offered by commenters are addressed in detail in the Section 1022(b)(2) Analysis below at Part VIII.G.
In the proposal, the Bureau also preliminarily found that the class rule would be in the public interest. This preliminary finding was based upon several considerations which individually and collectively supported that finding. First, as discussed extensively above, the Bureau believed that its preliminary finding that the class proposal would protect consumers also contributed to a finding that the class proposal would be in the public interest.
Second, the Bureau preliminarily found that the proposal was in the public interest because of the effect it would have on leveling the playing field in markets for consumer financial products and services. The Bureau preliminarily found that the class proposal would create a more level playing field between providers that concentrate on compliance and providers that choose to adopt arbitration agreements to insulate themselves from being held to account by the vast majority of their customers and, as the Study showed, from virtually any private liability.
Third, the Bureau preliminarily found that the class proposal was in the public interest because it would have the effect of achieving greater compliance with the law which creates additional benefits beyond those noted above with respect to the protection of individual consumers and impacts on responsible providers. Federal and State laws that protect consumers were developed and adopted because many companies, unrestrained by a need to comply with such laws, would engage in conduct that is profit-maximizing but that lawmakers have determined disserves the public good by distorting the efficient functioning of these markets. These Federal and State laws, among other things, allow consumer financial markets to operate more transparently and to operate with less invidious discrimination, and for consumers to make more informed choices in their selection of financial products and services. Thus, the Bureau believed that by creating enhanced incentives and remedial mechanisms to enforce compliance, the class proposal could improve the functioning of consumer financial markets as a whole. First, enhanced compliance would, over the long term, create a more predictable, efficient, and robust regime. Second, the Bureau also believed enhanced compliance and more effective remedies could also reduce the risk that consumer confidence in these markets would erode over time as individuals, faced with the non-uniform application of the law and left without effective remedies for unlawful conduct, may be less willing to participate in certain sections of the consumer financial markets. For all of these reasons, the Bureau stated in the proposal that it believed that promoting the rule of law—in the form of accountability under transparent application of the law by providers of consumer financial products or services—would be in the public interest.
In the proposal, the Bureau also addressed several reasons stakeholders had given during both the SBREFA process and ongoing outreach to support their belief that the class rule was not in the public interest. These stakeholders had expressed concern that the class rule would, among other things, cause providers to remove arbitration agreements from their contracts thereby negatively impacting the means available to consumers to resolve individual disputes formally and informally, impose costs on providers that would be passed through to consumers, and reduce incentives for innovation in markets for consumer financial products and services. In the proposal, the Bureau addressed concerns regarding whether the class rule would cause providers to remove arbitration agreements from their contracts in the context of its public interest finding; however, for this final rule, the Bureau addresses those comments above in Part VI.C.1 in connection with its finding that the class rule is for the protection of consumers. The Bureau does so because many commenters contended that the loss of individual arbitration would harm concerns because arbitration is a superior form of dispute resolution than individual litigation. The Bureau notes, however, that if providers choose to remove arbitration agreements from their contracts, that the loss of individual arbitration as a form of dispute resolution arguably impacts both providers and the public interest. Accordingly, the Bureau incorporates that discussion with respect to its public interest findings as well.
With respect to pass-through costs, the Bureau preliminarily found that the class rule would still be in the public interest, even if some costs of the rule may be passed through to customers. First, the Bureau stated in the proposal its belief that compliance, litigation, and remediation costs generally are a necessary component of the broader private enforcement scheme, and that certain costs are vital to uphold a system that vindicates actions brought through the class mechanism. Thus, the Bureau preliminarily found that the specific marginal costs that would be attributable to the class rule are similarly justified, even if some of those costs are passed through to consumers. Second, the Bureau preliminarily found that given hundreds of millions of accounts across affected providers, the hundreds or thousands of competitors in most markets, and the numerical estimates of costs as specified in the Section 1022(b)(2) Analysis, the Bureau did not believe that the expenses due to the additional class settlements that would result from the class rule would result in a noticeable impact on access to consumer financial products or services. Similarly, the Bureau preliminarily found that the potential cost impacts on small providers, and individual providers more generally are not as large as some stakeholders have suggested based on the detailed analysis in the Section 1022(b)(2) Analysis that factors in the likelihood of litigation, recovery rates, and other considerations.
With respect to innovation, the Bureau noted that some stakeholders suggested that the class rule would discourage innovation in that providers would refrain from developing or offering products and services that benefit consumers and are lawful due to concerns that the products may pose legal risk, for instance because they are novel. The Bureau preliminarily found that some innovation can disserve the public and that deterring such innovation would actually be in the public interest. The Bureau noted examples of such innovation in the mortgage market that were a major cause of the financial crisis and led to the introduction of a set of high-risk
Conversely, the Bureau preliminarily found that some innovation is designed to mitigate risk. For example, many banks and credit unions are experimenting with “safe” checking accounts (accounts that do not allow consumers to overdraft) and these products are designed to reduce overdraft risks to consumers. Similarly, some credit card issuers have experimented with products with fewer or no penalty fees as a means of reducing risk to consumers. The Bureau believed that to this extent the class proposal would affect positive innovations of this type—it would tend to facilitate them. The Bureau further preliminarily found that even if the class rule deterred some positive innovation on the margins, the benefits of the class proposal justified any such impact on innovation.
The Bureau preliminarily found that the class proposal would protect consumers for all of the reasons described above in Part VI.C.1, level the playing field in the market for consumer financial products and services, and that compliance with the law generally benefits the public interest. Commenters that opposed this preliminary finding on the public interest generally did not dispute the affirmative points made by the Bureau in the proposal, but rather cited several reasons that the commenters believed led to the conclusion that the class proposal was not in the public interest (at least some of which the Bureau had preliminarily addressed in the proposal). These arguments are discussed in detail below. Many consumer advocate and individual commenters agreed with the Bureau's preliminary findings that the class proposal is in the public interest because it would level the playing field between providers and produce other benefits through enhanced compliance with the law. For example, a consumer advocate commenter agreed with the Bureau's preliminary finding that pre-dispute arbitration agreements harm competition and put providers that do follow the law at a competitive disadvantage. An individual commenter that was formerly the FINRA Director of Arbitration also agreed that the rule was in the public interest and cited the long-term success of FINRA's similar rule as applied to broker-dealers and their customers.
In contrast, some commenters were supportive of the Bureau's preliminary finding acknowledging that some costs of the rule may be passed on to consumers, but concluded that this effect did not negate the impacts of the rule that advanced the public interest. For example, two commenters questioned whether providers would in fact pass through costs to consumers. A public-interest consumer lawyer stated that, in its view, assertions of pass-through costs have not been supported by credible economic data or studies. Similarly, a research center stated that the Bureau's Study supported the conclusion that any cost savings from arbitration agreements are not, in fact, passed on to consumers. A few consumer advocate commenters and a public-interest consumer lawyer commenter stated their belief that there is no evidence that companies pass- through savings from pre-dispute arbitration agreements to customers and thus conversely no evidence that the class rule would increase costs for consumers.
An individual commenter contended that higher prices passed on to consumers may force some consumers out of particular credit markets that the consumers could have afforded if the Bureau's proposal were not finalized. Several automobile dealers commented that the class rule will raise the price of automobile loans significantly, even pricing some credit-challenged customers out of automobiles, although the commenters provided no specific calculations or details. A group of automobile dealers also asserted that the cost of a motor vehicle could increase. Several other automobile dealers further asserted that costs may be passed on by the indirect automobile lenders to the dealers through indemnification obligations. An individual commenter further noted that, although Section 10 of the Study found no statistically significant increase in the total cost of credit (whether for consumers overall or any sub-segment) in analyzing credit card pricing patterns after some issuers temporarily dropped their arbitration agreements, the Study found an increase in Annual Percentage Rate (APR) for consumers with lower credit scores and an increase in annual fees for all customers. In the view of this commenter, this data suggests that the card issuers' goal was not necessarily to
An industry association representing small-dollar lenders and a commenter in this industry asserted that because many States limit not only the interest rates but also the fees that small-dollar lenders can charge consumers, those lenders may not be able pass through such costs onto consumers. These commenters contended that the class rule would therefore pose a particular threat to the business model for small-dollar lenders, who are lenders of last resort for consumers. The commenters predicted that the class rule could force consumers to resort to unlawful lenders if the rule forced small-dollar lenders out of business. Similarly, a Tribe that operates a small-dollar lender stated that the class rule would harm the underbanked in particular. Several credit union and credit union trade association commenters noted that credit unions are member-owned and thus the cost on providers to defend additional class actions is passed on to their members directly even in the absence of higher fees. A credit union trade association also cited a survey of its members as indicating that almost half expected to need to raise the cost of credit as a result of the class rule.
Generally, comments about the impacts on innovation did not touch on particular products. The Bureau did receive comments from a credit reporting agency and an industry trade association that raised concerns regarding the impact the class rule could have on their ability to offer credit monitoring and related credit education products they may develop due to potential for new exposure to CROA class actions, as discussed more fully above in Part VI.C.1 above. The Bureau explains below in the section-by-section analysis of § 1040.3(a)(4) in Part VII why it finds an exemption for these products not to be in the public interest. A research center commenter also stated its belief that the rule would have a devastating effect on peer-to-peer lending and financial technology products because individuals lending money through these platforms may no longer be able to do so if they are subject to class action lawsuits and have to bear that risk.
One industry commenter appeared to agree with the Bureau's preliminary finding that some types of innovation can harm consumers and the public interest while noting that some types of innovation fall in a “gray area” between benefitting and harming the public interest. A consumer advocate commenter agreed with the Bureau's preliminary finding, asserting that valuing unbridled innovation over compliance with the law is inappropriate.
Relatedly, many industry commenters criticized the Study for reporting on the percentage of attorney's fees compared to the total settlement amount available to consumers, rather than compared to the amount actually paid to consumers. These commenters stated that this was misleading because consumers in class settlements often do not file claims in those cases that require it and thus consumers rarely receive the full settlement amount. Accordingly, these commenters believe that the proportion of the settlement payments that are paid to attorneys is significantly higher than reflected in the Study. One research center commenter suggested that the Bureau should have considered whether the total amount of money paid to plaintiff's attorneys from class action settlements analyzed in the Study—$424,495,451—is an acceptable cost. This commenter also noted that the Study showed that attorney's fees were a significantly higher proportion of smaller class action settlements than of larger settlements. For example, the commenter noted that attorney's fees
Some industry commenters questioned the accuracy of the Bureau's Study with respect to the amounts paid to plaintiff's attorneys from class action settlements because those amounts were lower than found in other studies. For example, whereas the Bureau's Study found that the combined plaintiff's attorney fees over all of the 419 class action settlements analyzed were 16 percent of gross relief made available, and 21 percent of the combined payments made to consumers, one research center commenter cited a study of class action settlements in cases filed in one Federal district court concerning both consumer financial and other products under a limited number of Federal statutes that found plaintiff's attorney fees were rarely less than 75 percent of the total amount paid to the class.
Several consumer advocate commenters explained that in many cases attorney's fees are awarded after a settlement is reached and that, therefore, they do not impact consumers' recovery; one commenter also provided several examples. A consumer advocate commenter explained that courts typically calculate fees as a reasonable percentage of the value of the settlement and, therefore, attorneys receive fees only when they have created value for class members. This commenter noted that Federal Rule 23(h) empowers judges to determine reasonable compensation for attorneys in class actions. Several commenters noted that various factors, including results achieved, risk, and the age and difficulty of the case may impact a court's fee award. A letter from a coalition of consumer advocates further disputed claims that attorney's fees are excessive in class actions. Several comments cited to the Study and noted that fees were a reasonable 21 percent of cash compensation paid to consumers and only 16 percent of all relief awarded. One of these commenters cited to another study that showed that attorney's fees may be even lower than found in the Study—only 15 percent of awards in an analysis of 688 Federal class actions.
Several industry commenters criticized the Bureau's preliminary finding that class actions are in the public interest because they contend that the class action mechanism primarily benefits plaintiff's attorneys who abuse the mechanism for their own financial gain. One such industry commenter contends that attorneys file putative class claims out of self-interest, rather than to benefit consumers. That same industry commenter cited instances from the mid-2000s where courts or prosecutors found plaintiff's attorneys had made improper payments to individuals to recruit potential plaintiffs. The commenter further contended that class action settlements are typically structured to benefit the plaintiff's attorneys rather than the absent plaintiffs because the named plaintiffs have almost no involvement in the case. Indeed, the commenter argued that because plaintiff's attorney fees are based on the total amount of the settlement, attorneys have an incentive to negotiate a high settlement amount, but have no incentive to structure the settlement such that absent class members actually receive that amount. This commenter further asserted that plaintiff's attorneys often enter into “clear sailing” agreements with defense counsel in class cases, through which defendants agree not to object to awards of attorney's fees below a certain amount. In the commenter's view, these agreements benefit plaintiff's attorneys at the expense of absent class members because the plaintiff's attorneys have no incentive to negotiate for better compensation for class members when they know that they will receive high fees through the settlement. One industry commenter added together the amounts awarded to plaintiff's attorneys in the Study and the Bureau's estimate of costs to defend class actions from the Section 1022(b)(2) Analysis below in Part VIII and contends that the combined totals indicate that attorneys (whether plaintiff's attorneys or defense attorneys) benefit more from the rule than do consumers.
The same industry commenter further contended that courts do not adequately supervise class action settlements to ensure that they are fair to absent class members, notwithstanding the court's obligation to do so under the Federal Rules of Civil Procedure and analogous State rules. The commenter, citing a law review article that refers to the legislative history leading to the adoption of CAFA, asserted its belief that courts face pressure to approve settlements in class action cases to clear their dockets and thus do not adequately supervise settlements.
A consumer advocate commenter disputed the relevance of attorney's fees, noting that they often come from a common fund, meaning that the cost of litigation is paid out of the common fund created by the settlement, and that attorneys only receive fees when they have created value for class members. Other commenters, including consumer advocates, consumer law firms, law
In contrast to these comments, a consumer advocate commenter stated its belief that arbitration agreements in consumer contracts are contracts of adhesion because consumers lack bargaining power with their providers and do not negotiate the contracts. An individual commenter asserted that this rule does not implicate freedom of contract because consumers are powerless to refuse terms imposed upon them.
A group of State regulators contended that the class rule will harm the public interest because they predicted that the rule would create legal uncertainty in various ways, thereby amplifying the risk of litigation exposure for consumer financial service providers. For example, the commenter asserted that it is unclear how a class rule would affect future cases following
The Bureau has carefully considered the comments received on the proposal and further analyzed the issues raised in light of the Study and the Bureau's experience and expertise. Based on all of these sources, the Bureau reaffirms its preliminary findings that the class rule is in the public interest because it will benefit consumers (for the reasons discussed above at Part VI.C.1), will level the playing field in the market for consumer financial products and services, and will promote the rule of law—in the form of accountability under and transparent application of the law to providers of consumer financial products or services. As noted, no commenters disagreed with the Bureau's findings with respect to leveling the playing field in the market or promoting the rule of the law. The Bureau addresses commenters' other arguments challenging the Bureau's public interest finding below.
Furthermore, the Bureau disagrees that the general risk of pass-through costs necessitates a conclusion that the class rule is not in the public interest. Rather, the Bureau believes, as it stated in the proposal, that complying with laws has costs, because exposure to class litigation deters non-compliance (or incentivizes compliance), these additional costs are justified. To incentivize such compliance there must be meaningful consequences for non-compliance. Given the Bureau's findings, as discussed above, that few consumers will invoke individual remedies (either through litigation or arbitration) and that public enforcement is not sufficient to enforce the relevant laws in light of the size of these markets and the limitations on public resources, exposure to class action litigation will serve as an effective compliance incentive. Accordingly, litigation and remediation costs generally are a necessary component of the success of the broader private enforcement scheme.
Thus, in the Bureau's view, the specific marginal costs that are attributable to the class rule are justified and in the public interest because of the resulting benefits in the form of protection of consumers (chiefly deterrence, and where non-compliance has not been deterred, remediation of consumer harm along with a more level playing field). The Bureau finds that the class rule would bring about better compliance and make more remedies for non-compliance available to consumers. Both of these may result in increased costs, but the Bureau finds that the costs are necessary to make covered products generally safer and fairer for consumers.
It is possible that, in certain markets, a particular provider may increase its pricing so as to make its products unaffordable for persons of more limited means, or otherwise change its pricing structure to attract fewer of these customers. Commenters raised concerns along these lines related to certain credit and deposit products, for example. However, the Bureau does not believe that overall pricing across providers in these markets would be so affected as to limit access to products or services. In several of the markets covered by the Bureau's Study, the Bureau found that many providers do not use arbitration agreements today. As demonstrated by the information gathered to estimate prevalence in those markets for the Bureau's impacts analysis in Part VIII below, the Bureau believes the same is likely to be true of many other markets covered by the rule but outside the scope of the Study. In all of these markets, the pricing of providers who do not use arbitration agreements would be unaffected by the rule.
Moreover, even in markets where arbitration agreements are ubiquitous, the Bureau does not believe that to the extent providers pass through costs, they will do so in a way that materially
To the extent that commenters such as small-dollar lenders asserted that their industry's profit margins are so thin that their products cannot be offered in a legally compliant manner (including by complying with State usury and other pricing limitations), the Bureau believes that such arguments essentially assert that those products do not currently comply with the law and thus the providers would likely be sued in class actions if their arbitration agreements did not block class actions. To the extent that is the case, the Bureau believes that protecting consumers against products and services that do not comply with the law both benefits consumers for the reasons explained above in Part VI.C.1 and advances the public interest.
To the extent that commenters asserted that the possibility of a differential impact on other particular types of providers or their customers negates a finding that the class rule is in the public interest, the Bureau disagrees.
The Bureau also has considered the comments that expressed concern that rather than raising prices, companies could instead be forced out of business as a result of the class proposal. To the extent these commenters were concerned that a class action settlement could put a provider out of business, the Bureau believes that risk is low.
Conversely, the Bureau notes, as it stated in the proposal, that some innovation is designed to mitigate risk and that to the extent that the class rule would affect positive innovations of this type, it would tend to facilitate them. No commenters disagreed with the Bureau's preliminary findings in this regard and the Bureau reaffirms them here.
The Bureau recognizes that there may be some innovation that is designed to serve the needs of consumers but that leverages new technologies or approaches to consumer finance in ways that raise novel legal questions and, in that sense, carries legal risk. The Bureau believes that these innovators who create such products, in general, consider a variety of concerns when bringing their ideas to market and doubts that the innovators would be deterred from launching a new product they would otherwise choose to launch because of the risk of class action exposure. But, even if at the margins, the effect of the class rule would be to deter certain innovations from occurring or to reduce the availability of certain products, the Bureau believes that, on balance, that would be a reasonable cost to achieve the benefits of the rule for the public and consumers. The Bureau believes that, in general, in a well-functioning regulatory regime, entities must balance their desire to profit, such as through innovation, with the need to comply with laws designed to protect consumers.
In response to commenters that asserted that the proposal would chill innovation without providing any corresponding benefit, the Bureau finds that the class rule would produce significant benefits, as noted throughout the Section 1022(b)(2) Analysis, such as relief provided to consumers through class action settlements and deterring companies from future violations of the law. The Bureau thus finds that the impact of the class proposal on innovation and the availability of products supports, rather than refutes, a finding that the class proposal would be in the public interest because it would incentivize providers to reach the right balance between innovation in the marketplace and consumer protection as well as to encourage innovation leading to more efficient compliance. For all of these reasons, the Bureau reaffirms its preliminary findings, as elaborated here, that the class rule is in the public interest both because of and notwithstanding its impact on innovation or the availability of products in the marketplace for consumer financial products and services.
The Bureau does not believe that these data suggest that plaintiff's attorneys are being unjustly enriched, let alone call into question the overall efficacy or value of class actions to the public interest. Commenters did not dispute that it is time-intensive and expensive to litigate large-scale consumer class actions and that most plaintiff's attorneys would not take on such cases if they did not expect to be paid for successful cases. In the typical individual case, an attorney will request a 33 percent or higher contingency from any funds that their client might receive.
With respect to commenters that criticized the fact that plaintiff's attorney fees are deducted from the settlement amounts intended for consumers, the Bureau notes that legal representation has a cost and this cost must be paid so that consumers can achieve class relief. To the extent the fees of plaintiff's attorneys are paid by the beneficiaries of their services (and diminish the beneficiaries' net recovery) that is not, in the Bureau's view, an inappropriate allocation of costs. Indeed, legal representation, like any other service, has a cost and is how most plaintiff's attorneys—class or otherwise—are compensated. The Bureau also notes that deduction of plaintiff's attorney fees from consumer recoveries does not occur in all class actions. Plaintiff's attorney fees in class action settlements can be based on recovery from the “common fund” (in which case the fees are subtracted from the amount agreed to be paid to consumers) or they can be awarded separate from the fund in cases where the underlying statute under which claims were asserted provides for attorney's fees.
Similarly, some commenters criticized plaintiff's attorney fee awards because they are based on the amount available to be paid to the class, rather than the amounts that end up being paid out after consumers make claims. As discussed above in Part VI.B.3, however, a significant number of consumer finance class actions settlements provide for automatic payments. With respect to all class settlements, including claims-made settlements, courts oversee the fairness and adequacy of fee awards in accordance with case law. Pursuant to these precedents, courts are required to find that fee awards in settled class action cases are fair.
As to the commenters that noted that plaintiff's attorney fees are proportionately higher in smaller settlements than in larger settlements, the Bureau believes that this likely reflects that there are certain minimum “fixed costs” to litigating a class action, which courts recognize as reasonable to recover, and also that a number of Federal consumer laws cap the amount available for recovery in a class action. When these costs occur in a case that ultimately provides smaller amounts of relief to consumers, the percentage of attorney's fees will necessarily be higher.
Further, certain statutes cap the total amount of relief that can be awarded in a class action under that statute. For consumer finance laws, these include the Expedited Funds Availability Act (EFAA), EFTA, FDCPA, TILA (including the Consumer Leasing Act and the Fair Credit Billing Act), and ECOA, which provides for punitive and actual damages but not statutory damages.
With respect to commenters that questioned the accuracy of the Study's data as it pertained to attorney's fees in class action settlements, the Bureau points out that the two competing studies cited by commenters covered many cases that would not be covered by this rule and were not covered in the Study. For example, the RAND study cited by one commenter was a 1999 case study of 10 cases that pre-dated CAFA, and only four of the cases studied were consumer finance cases.
With respect to a paper cited by several commenters as supporting the conclusion that attorney's fees are higher than shown by the Bureau's Study and “rarely less than 75 percent of the amount actually paid to consumers,” the paper does not appear to have reported the overall mean for attorney's fees of all the cases analyzed as a percentage of payments.
Specifically, the paper analyzed 26 FDCPA class action settlements and found the proportion of attorney's fees to cash relief to be between 62 percent and 84 percent and the proportion of attorney's fees to cash payments to be 64 percent to 100 percent.
Many of the commenters criticized the role of plaintiff's attorneys in class action settlements, asserting that they often have improper conflicts of interest with absent class members. However, judicial review of class action settlements, including the portion of any settlement allocated to the attorneys, is required in part because of the potential for such conflicts. Indeed, the Federal Judicial Center Manual notes, with respect to class action settlements, that “the parties or the attorneys often have conflicts of interest . . .” and instructs courts on how to manage those conflicts.
Similarly, some industry commenters put forward examples, prior to the period analyzed in the Study, of plaintiff's attorneys who engaged in unlawful practices such as paying individuals to serve as lead plaintiffs or recruiting professional plaintiffs to serve as lead plaintiffs in multiple cases. However, no commenters submitted evidence to support that such abuses are widespread, nor is the Bureau aware of support for that view. Further, the nature of the examples submitted indicates that prosecutors and the courts have uncovered and remedied such abuses when they occurred. Indeed, in the example cited by one commenter that involved plaintiff's attorneys who paid people to be lead plaintiffs, those attorneys were criminally charged with racketeering, mail fraud, and bribery and pleaded guilty to numerous charges.
As to commenters that criticized plaintiff's attorneys as “self-interested” in choosing to bring class action cases that might benefit them personally through generation of large fee awards, the Bureau recognizes that plaintiff's attorneys are unlikely to be motivated purely by altruism and may, indeed, factor the potential to earn a fee into their decisions about whether to pursue a case. The Bureau does not agree that the pecuniary motives of the plaintiff's attorney in pursuing a class action on behalf of absent class members determine whether a case ultimately provides relief to consumers or is in the public interest, much like the Bureau would not consider a provider's profit motive as evidence of whether the provider's product or service complies with the law.
In any event, plaintiff's attorneys are incentivized by the prospect of fee awards to pursue relief on behalf of consumers in cases where individual recoveries would be small and thus both individual consumers and individual attorneys would not have a financial motivation to proceed. By design, the class vehicle groups individual claims and thereby provides the plaintiff's attorney with the incentive to bring them.
The Bureau does estimate that there will be some increased class action litigation as a result of the class rule. Indeed, the Section 1022(b)(2) Analysis below in Part VIII estimates that there will be 3,021 additional Federal court class actions over a five-year period, or 604 Federal cases per year. The Bureau does not agree, however, that this increase in class action cases will overburden the Federal court system. In the most recent year for which data is available, there were 673 authorized district court judgeships.
To the extent that this small impact on the court system occurs, the Bureau finds that resolution of the additional class cases will provide relief for consumers and the threat of liability in those cases will deter providers from violating the law and therefore that the impact on the court system is justified. In other words, the Bureau finds that a relatively small impact on the court system in the form of additional class action cases is preferable to class action cases that could have provided relief to consumers from violations of the law being blocked by arbitration agreements or never filed at all. Accordingly, the impact on the court system from the class rule does not detract the Bureau's finding that the class rule is in the public interest.
The Bureau does not agree that to the extent the class rule increases compliance with the most protective State laws and has spillover effects in other States such a result would represent federalism in reverse. Companies that operate in multiple States have a choice of either acting differently in different States depending upon the permissiveness of State law or acting uniformly in a manner consistent with the most consumer-protective State law. The Federal system does not presuppose that a company may choose to so cabin its exposure in certain States (
In response to commenters' concerns regarding the legal uncertainty that may follow from the class rule that may create potential liability for covered providers, the Bureau does not believe that the rule creates any uncertainty as to the type of actions to which it would apply. Rather, the Bureau believes that the regulation text is clear that the final class rule applies to all State and Federal class actions, as discussed more fully in the section-by-section analysis to § 1040.4(a)(2) below in Part VII. To address any potential confusion, the Bureau intends to develop a suite of compliance materials for new part 1040, just as it has done with the other regulations it has issued. Nor does the Bureau believe that the rule creates any uncertainty as to the scope of preemption under the Federal Arbitration Act, since the Supreme Court has been quite clear that Congress can authorize exceptions to the FAA by statute as Congress did in section 1028.
Moreover, to the extent that covered entities have the ability to challenge legislation or rulemaking through the litigation process or otherwise, there is always some degree of uncertainty with respect to any statute or rulemaking. If the potential for that type of legal uncertainty discouraged the adoption of new legislation or regulations, new legislation or regulations would rarely occur. For this reason, the Bureau finds that the potential for legal uncertainty, if any, does not undermine a finding that the class rule is in the public interest.
It also bears noting that, as described in Part VI.A above, a group of State-legislator commenters argued that the proposed class rule was in the public interest precisely because Federal law currently undermines States' ability to pass laws that will be privately enforced, measure the efficacy of those laws, or observe their development.
As described above, in the proposal, the Bureau preliminarily found—in light of the Study, the Bureau's experience and expertise, and the Bureau's analysis—that a comparison of the relative fairness and efficiency of individual arbitration and individual litigation was inconclusive and thus that a complete prohibition on the use of pre-dispute arbitration agreements in consumer finance contracts was not warranted. Accordingly, the class proposal would not have prohibited covered entities from continuing to include arbitration agreements in consumer financial contracts generally; providers would still have been able to include them in consumer contracts and invoke them to compel arbitration in court cases that were not filed as class actions. In addition, the class proposal would not have foreclosed class arbitration; it would be available when the consumer chooses arbitration as the forum in which he or she pursues the class claims and the applicable arbitration agreement permits class arbitration.
However, in light of historical evidence that there have been serious concerns about the fairness of thousands of past arbitration proceedings, and that the Study identified some fairness concerns about certain current arbitration agreement provisions and practices, the Bureau believed that it was appropriate to propose a system to facilitate monitoring and public transparency regarding the conduct of arbitrations concerning covered consumer financial products and services going forward. Specifically, the Bureau proposed § 1040.4(b), which would have required providers to submit certain arbitral records to the Bureau that the Bureau would then further redact, if necessary, and publish. The Bureau preliminarily found this part of the proposal to be consistent with the Bureau's authority under section 1028(b) including finding that this part was in the public interest and for the protection of consumers. The Bureau made this preliminary finding after considering such countervailing considerations as the costs and burdens to providers.
This section discusses the bases for the preliminary findings, comments received, and the Bureau's further analyses and final findings pertaining to the monitoring rule. Similar to the Bureau's analysis of the statutory elements pertaining to the class rule, this discussion first addresses whether the monitoring rule is for the protection of consumers, and then addresses whether the rule is in the public interest. As discussed briefly in the findings and in the section-by-section analysis of § 1040.4(b) below, the Bureau is expanding the list of records that must be reported to the Bureau as urged by some commenters in order to better promote both statutory objectives. The Bureau is also finalizing its proposal to publish the reported records, with appropriate redactions, on the Bureau's Web site.
In the proposal, the evidence before the Bureau, including the Study, was inconclusive as to the relative fairness and efficacy of individual arbitration compared to individual litigation. The Bureau remained concerned, however, that the historical record demonstrated the potential for consumer harm in the use of arbitration agreements in the resolution of individual disputes. Among these concerns is that arbitrations could be administered by biased administrators (as was alleged in the case of NAF), that harmful arbitration provisions could be enforced, or that individual arbitrations could otherwise be conducted in an unfair manner.
The Bureau preliminarily found, consistent with the Study, that the monitoring proposal would have positive outcomes that would be for the protection of consumers. Specifically, the Bureau preliminarily found that the collection of arbitration documents would help the Bureau monitor how arbitration proceedings and agreements evolve and to see if they evolve in ways that harm consumers.
While the Study data identified only hundreds of arbitrations per year filed with the AAA in selected markets, in the period before the Study, there were tens of thousands of arbitrations per year, largely filed by providers. For instance, a large increase in the volume of provider-filed claims identified by the Bureau under the monitoring rule could suggest a need to monitor for potential fairness issues associated with large-scale debt collection arbitrations, such as those historically filed by providers before NAF and the AAA. The collection of awards would provide
The Bureau also stated in the proposal that, more generally, the collection of these documents would help the Bureau monitor consumer finance markets for risks to consumers, potentially providing the Bureau and the public with additional information about the types of potential violations of consumer finance or other laws alleged in arbitration, and whether any particular providers are facing repeat claims or have engaged in potentially illegal practices, and the extent to which providers may have adopted one-sided agreements in an attempt to avoid liability altogether by discouraging consumers from seeking resolution of claims in arbitration. Finally, monitoring would allow the Bureau to take action against providers that harm consumers.
Some commenters opposed the monitoring proposal, though they were split on whether it was inadequate to protect consumers in light of concerns about the fairness of arbitration or whether action by the Bureau was not warranted at all.
On one side, a consumer advocate commenter suggested that the Bureau adopt what it deemed a stronger alternative to the monitoring proposal
On the other side, some industry commenters wrote in general opposition to the Bureau's monitoring proposal, asserting that the record before the Bureau did not warrant taking action with regard to the fairness of arbitration proceedings. One industry commenter made several arguments in opposition to the monitoring proposal generally. First, the commenter asserted that the Study found no evidence of harm in arbitrations that warranted the Bureau's intervention. Next, the commenter asserted that the Bureau did not meet its burden to show that monitoring and publication were in the public interest and for the protection of consumers because the Study's assessment of AAA arbitrations did not show that arbitration was unfair to consumers. Finally, the commenter asserted that this must be so because the Bureau did not propose to also regulate post-dispute arbitration agreements. Another industry commenter asserted that, based upon its review of the Bureau's consumer complaints database, consumers are not experiencing unfairness in arbitration that warranted the proposed monitoring rule. An industry trade association commenter criticized the Bureau's citation of NAF as an example of the risks posed by individual arbitration to consumers as a red herring on the grounds that NAF is no longer an active risk to consumers as very few agreements currently specify NAF as an administrator, and that consumers are free to seek a different administrator even if NAF is specified in the agreement.
By contrast, many commenters supported the Bureau's preliminary finding that monitoring would have positive outcomes for consumers and for the public. A group of State attorneys general, nonprofit, individual, Congressional, consumer advocate, academic, industry, consumer law firm, and individual commenters wrote in general support of the Bureau's monitoring proposal. More specifically, the group of State attorneys general and nonprofit commenters supported the Bureau's preliminary finding that the collection and publication of documents would be valuable because it would help the Bureau and the public better understand arbitration generally. The academic commenters observed that the past existence of NAF provided a case study on the need for the transparency that the Bureau's monitoring proposal would provide. The academic commenters also suggested that NAF may have stopped certain practices sooner had more information about the outcomes of its arbitration proceedings been publicly available earlier.
The Bureau has carefully considered the comments received on the monitoring proposal and further analyzed the issues raised in light of the Study and the Bureau's experience and expertise. Based on all of these sources and for the reasons discussed above, in the proposal, and further below, the Bureau finds that requiring providers to submit specified, redacted arbitral records and then publishing redacted versions of these records will be for the protection of consumers by helping the Bureau and the public monitor for the risks to consumers in the underlying consumer finance markets.
The Bureau believes that such monitoring is important to this ongoing risk assessment because the kinds of fairness concerns that have been raised about some arbitration proceedings historically could prevent consumers from obtaining redress for legal violations and expose them to harmful practices in arbitrations filed against them. While the Bureau expects that the number of consumer-filed individual arbitrations will remain low for the reasons discussed above, to the extent that arbitrations occur (and consumers are precluded from proceeding in court), it is in their interest that the proceeding be fair. The Bureau believes that the monitoring rule is for the protection of consumers because the awareness that certain basic information about disputes filed in arbitration will be available to the public will tend to discourage unfair and unlawful conduct by provides of both consumer financial products and services and arbitral services. In the event that transparency alone is not sufficient, the monitoring rule will also facilitate appropriate follow-up actions by the Bureau and others to protect consumers.
Specifically, the Bureau finds that the monitoring rule is for the protection of consumers for several reasons. It would deter potential wrongdoers who would know that their practices, with respect to both their use of arbitration proceedings and to their provision of consumer financial products and services, will be made public and would facilitate redress for related harms to consumers. Additionally, the Bureau finds that the rule will allow the Bureau and the public to better understand arbitrations that occur under arbitration agreements entered into after the compliance date and to determine whether further action is needed to ensure that consumers are being protected. The materials the Bureau is requiring providers to submit in redacted form—similar to the AAA materials the Bureau reviewed in the Study—will allow the Bureau to more broadly monitor how arbitration proceedings are conducted, what provisions are contained in the underlying arbitration agreements, and whether providers are taking steps to prevent consumers from being able to seek relief in arbitration.
In particular, the Bureau finds, consistent with the Study, that the documents the Bureau collects will provide the Bureau with different and useful insights relevant to the above-mentioned assessment of risks to the consumers. The collection of arbitration claims will provide transparency regarding the types of claims consumers and providers are bringing to arbitration and the number of arbitrations filed,
The Bureau notes that the two categories of documents it is adding to what it had proposed will protect consumers by providing the Bureau and the public further insights into the risks that the use of arbitration agreements may pose for consumers in the covered consumer finance markets. The collection of answers to arbitral claims, required by new § 1040.4(b)(1)(i)(B), will supplement the Bureau's collection of claims and awards and will provide additional insights by providing a more balanced understanding of the facts (or disputes regarding the facts) in an arbitration proceeding, especially in cases where no award is issued. The collection of provider-filed motions in litigation in which they rely on arbitration agreements (and the collection of the underlying arbitration agreements that are invoked in such proceedings), as required by new § 1040.4(b)(1)(iii), will aid the Bureau in determining the frequency with which providers compel arbitration in response to individual litigation claims as well as to monitor the content of arbitration agreements for reasons similar to those described above. The Bureau also finds that this collection, in conjunction with the other arbitral records it will receive, will over time help track whether such claims are ultimately heard in arbitration rather than being dropped entirely, which could in turn shed more light on the extent to which consumers are deterred from pursuing individual claims more generally because of arbitration agreements.
The Bureau further finds that the collection of these documents will enhance the Bureau's ability to protect consumers by monitoring consumer finance markets for risks to consumers. The collection of these documents will provide another source of information to help the Bureau and others understand the markets in which claims are brought more broadly and how consumers and providers interact. For example, the collection of claims and awards will provide additional information about the types of issues that consumers and providers face that are not or cannot be resolved informally, including those issues that appear to give rise to repeat claims. This monitoring may facilitate the ability of the Bureau and other actors to address emerging market concerns for the protection of consumers.
As described above in Part VI.B.2, the Bureau believes that the number of consumer-filed individual arbitrations is likely always to be too low to provide optimal levels of deterrence and redress for legal violations affecting groups of consumers, and thus that greater advancements to the protection of consumers and public interest derive from the class rule. Nevertheless, the Bureau notes, as described further below, that some commenters expressed concern that the records from individual arbitrations would trigger increased scrutiny by regulators and increased litigation risk with regard to the disputed conduct by the affected financial services providers. The Bureau agrees with these commenters' underlying assumption that the monitoring rule would tend to increase deterrence and redress for legal violations but sees this as a positive impact. This is, in fact, one of the purposes of the rule.
In addition, if sunlight is not a sufficient disinfectant to discourage unfair practices in connection with arbitration proceedings,
As noted in the proposal and above, the Bureau intends to draw upon all of its statutorily authorized tools to address conduct that harms consumers that may occur in connection with providers' use of arbitration agreements. For example, the Bureau intends to continue to use its supervisory and enforcement authority, as appropriate, to evaluate whether specific practices in relation to arbitration—such as the use of particular provisions in agreements or
With regard to commenters that generally opposed the monitoring proposal, the Bureau disagrees with comments suggesting that the Study provided no basis for the monitoring proposal or that no consumer harm has been shown. As noted above in Parts II and III, the Study identified evidence of multiple historical problems with the conduct of arbitration, including potential conflicts of interest involving a major arbitration administrator, general fairness concerns about the filing of thousands of debt-collection arbitrations across multiple administrators, failure to pay fees by some individual financial services providers, and at least sporadic use of particular clauses in arbitration agreements that raise fairness concerns.
In addition, as noted by other commenters, State monitoring and publication laws have helped identify and stop potentially problematic practices. As set out in Part II.C, the California law requiring the reporting of arbitration statistics led to the investigations of arbitral administrators by city and State regulators,
In response to a commenter's assertion that the Study's analysis of AAA arbitrations did not demonstrate that arbitration was unfair to consumers, the Bureau disagrees that the monitoring rule must only be based upon demonstrated unfairness in the status quo. As set out in Part VI.B, the Bureau notes that the AAA data merely showed that (1) there were very few arbitrations, and (2) the data were
With regard to the commenter that suggested that, because the Bureau's proposal did not address post-dispute arbitration, the Bureau must have regarded arbitration as fair overall, the Bureau observes that section 1028 only authorizes the Bureau to study and regulate the use of pre-dispute arbitration agreements.
With regard to the comment that the data in the Bureau's consumer complaint database proves that arbitration is not unfair, the Bureau notes that its complaints function takes in informal complaints before the start of formal dispute resolution such as arbitration. The Bureau believes that a low volume of complaints about arbitration in the consumer complaint database is not dispositive of the fairness of arbitration. Moreover, the monitoring rule does not rest on a finding that arbitration as it is occurring today is unfair but rather that there is a significant risk that arbitration could operate in the future in ways that are injurious to consumers and that monitoring will enable the Bureau to mitigate that risk and to address it should it occur.
With regard to the comment that law-breaking providers might not submit documents to the Bureau pursuant to the proposed monitoring rule, the Bureau agrees that there is some risk of non-compliance, but notes that this is true of any regulation that the Bureau implements. The Bureau has no reason to believe that any substantial number of providers will not comply, such that the Bureau should not implement the monitoring rule. Further, the Bureau does not at this time believe that the risk of underreporting by providers is likely to be severe enough that a different type of intervention is warranted, such as a total ban on the use of pre-dispute arbitration agreements or standards for arbitration proceedings. As set out in Part VI.B, the Bureau is not adopting either intervention instead of monitoring. Nevertheless, the Bureau will monitor efforts to comply with the reporting requirements of providers over which it has enforcement or supervisory authority.
In the proposal, the Bureau also preliminarily found that the monitoring proposal would be in the public interest. This preliminary finding was based upon several considerations, including the considerations pertaining to the protection of consumers set out above. The Bureau also considered potential benefits stemming from the other public interest factors.
Consistent with the legal standard outlined above, in making its preliminary findings, the Bureau also analyzed potential tradeoffs under the public interest factors such as the monitoring proposal's potential compliance burden on providers, the potential confidentiality concerns of providers, and the potential privacy considerations affecting consumers and providers.
The Bureau summarizes comments on these preliminary findings and sets out final findings in response to these comments below.
The Bureau received three general categories of comments in response to the public interest factors addressing (1) consistent enforcement of consumer laws; (2) issues relating to whether the publication component of the monitoring rule in particular was in the public interest; and (3) privacy, redaction, and related issues associated with the proposal.
Another set of commenters asserted that making arbitral decision-making more transparent to the general public would have such negative impacts as to negate a finding that publication is in the public interest. One industry commenter argued that the Bureau should not publish awards because transparency in the decision-making of arbitrators would be detrimental to arbitrators and providers. That is, according to the commenter, arbitrators would face disincentives to make explicit findings, publication would put the onus on arbitrators to keep arbitration fair, and providers would be subject to further Bureau scrutiny. By contrast, other commenters argued that such transparency was beneficial, for many of these same reasons. For instance, academic commenters identified NAF as a case study on the importance of making arbitration records transparent, noting that NAF kept its arbitration files private until the Minnesota Attorney General's office obtained documents, and speculated that NAF may have been less likely to enter questionable agreements with certain debt collectors had it known its files would be made publicly available. A trade association of lawyers representing investors asserted that the public has an interest in accessing arbitral records and data. A nonprofit commenter suggested that there was a public interest in analyzing potential issues with individual arbitration, citing as examples secrecy, limited discovery, and arbitrator bias.
Another set of comments offered differing views on the attention that publication would draw to the underlying substantive claims, and the providers associated with them, set out in arbitration records. Some commenters believed this added attention—to business practices and particular providers—was unwarranted. Several industry commenters asserted that publication, and the accompanying publicity as to business practices identified in arbitration records would lead plaintiff's attorneys to bring more frivolous litigation generally, including additional class action lawsuits and follow-on individual arbitrations. One industry commenter expressed concern that the publication of records would subject providers to class actions concerning non-compliance with the monitoring rule if providers made errors in redacting arbitration documents or if pre-dispute arbitration agreements did not comply with the requirements of proposed § 1040.4(a)(2)(i). Other industry commenters suggested that providers would remove pre-dispute arbitration agreements from contracts with consumers to avoid the increased exposure to litigation risk associated with publication. A commenter that is an association of State regulators suggested that the publication would lead to more class action litigation, which it contended would exacerbate the difficulties State bank examiners face in assessing the risks associated with such class actions in their examinations. An industry commenter
Another group of commenters focused on other negative impacts on financial services providers besides increased litigation risk, emphasizing that they viewed arbitral confidentiality as one of the main benefits of the process that would be harmed by the proposal. Some commenters were concerned that, without confidentiality, providers would be subject to reputational risks if arbitrations filed against them were public. Some credit union and trade association commenters opposed the publication proposal on the grounds that it would expose credit unions and their members to reputational risk, especially because allegations made in arbitral filings could be taken as fact. Other industry commenters further complained that consumer data was to be redacted but not information on providers and their employees, potentially compromising the privacy of the provider's employees. Other industry commenters opposed the Bureau's monitoring proposal on the grounds that confidentiality was standard or customary in arbitration, and that the Bureau's publication proposal would undermine that. A commenter that is an association of State regulators also opposed the publication rule on the grounds that it may conflict with State laws on the confidentiality of arbitral records.
Other commenters contended that providers should not be able to maintain secrecy about their disputes with customers. A trade association of lawyers representing investors contended that the public has an interest in accessing arbitral records and data. Some academic and nonprofit commenters referenced other types of arbitrations where they asserted that results are published with no ill effects (
Several commenters also argued that the publication of claims and awards could help to facilitate the development of consumer protection law. A consumer advocate commenter argued that the publication of arbitration records is likely to help industry understand what actions might violate the law. Several consumer advocate commenters argued that the publication of arbitration records is likely to help consumer advocates and others advising consumers directly know what issues to pursue, in particular when they advocate on behalf of or advise low-income consumers. A consumer advocate commenter also argued that the publication of arbitration records collected from providers would permit consumers themselves to avoid harm by becoming aware of certain business practices.
In contrast, other commenters agreed with the Bureau's assessment of the burden of complying with the proposal as being relatively low, but for different reasons. A consumer advocate commenter observed that the burden under the monitoring proposal would be minimal. An industry commenter argued that the burden would be low because it predicted that providers would drop their arbitration agreements in response to the risk of increased litigation exposure arising from publication and thus few would have to comply with the substantive requirements of this rule.
Second, several industry commenters asserted that the collection of both public and non-public information by financial regulators poses a threat to consumer privacy. One of these industry commenters asserted that the collection of even redacted information could be combined with public information to re-identify consumers. Other industry commenters expressed concerns that monitoring and publication would expose consumers to a risk of privacy and data security violations. Another industry commenter suggested that the proposal would force consumers to expose their private data without consent. One trade association commenter asserted that consumers in debt collection cases may not wish to have their personal finances publicly disclosed. (The trade association made this comment in the context of opposing the class rule, but the Bureau construes this as a comment on privacy concerns pertaining to publication). Finally, another industry commenter expressed skepticism about permitting government regulators to collect data because of a lack of security at regulators, citing examples such as a recent Office of the Inspector General report on the security of the Bureau's consumer complaint database and issues affecting other Federal regulators.
Finally, several comments focused on the impact that the publication proposal would have on arbitral confidentiality. Some commenters were concerned that, without confidentiality, providers would be subject to reputational risks if arbitrations filed against them were public. Some credit union and trade association commenters opposed the publication proposal on the grounds that it would expose credit unions and their members to reputational risk, especially because allegations made in arbitral filings could be taken as fact. Other industry commenters raised a further concern that consumer data was to be redacted but not information on providers and their employees, potentially compromising the privacy of the provider's employees. Other industry commenters opposed publication on the grounds that confidentiality was standard or customary in arbitration, and that the Bureau's publication proposal would undermine that. A commenter that is an association of State regulators opposed the publication rule on the grounds that it may conflict with State laws on the confidentiality of arbitral records.
Other commenters agreed with the Bureau that providers should not be able to maintain secrecy about their
The Bureau has carefully considered the comments received on the monitoring proposal and further analyzed the issues raised in light of the Study and the Bureau's experience and expertise. Based on all of these sources, the Bureau finds that requiring providers to submit redacted arbitral records and publishing them in redacted form is in the public interest. The Bureau finds that the monitoring rule is in the public interest because, along with creating deterrence and facilitating redress, as described above, it will allow the Bureau to better evaluate whether the Federal consumer finance laws are being enforced consistently; promote confidence in a fair and efficient arbitration system; and facilitate transparency and accountability in the broader markets for consumer financial products and services. The Bureau also finds that the potential costs and burdens of the monitoring rule identified by commenters—including the cost of compliance and potential privacy and confidentiality issues—are modest and do not overshadow the rule's benefits to the public interest.
The Bureau finds that the publication requirement is in the public interest because, as commenters observed, it will promote transparency and insight into the conduct of arbitration proceedings. The Bureau believes that creating a transparent system of accountability is an important part of any dispute resolution system for formally adjudicating legal claims. By allowing the public access to redacted documents about the conduct of arbitrations, the public will be able to learn of and assess consumer allegations that providers have violated the law and, more generally, assess the degree to which arbitrations may proceed in a fair and efficient manner. By publishing the materials, the rule will also promote greater transparency among consumers and other members of the public. The Bureau also believes that providers may find the increased transparency arising from the Bureau's publication of records helpful to monitor best practices and avoid potentially unfair conduct or arbitration administrators.
The Bureau agrees with commenters that noted that publication would assist the members of the public and other regulators with analyzing arbitration outcomes and would help regulators determine if additional regulation of arbitration is warranted. Just as Dodd-Frank section 1028 called upon the Bureau to publish a report on arbitration to Congress, the Bureau finds it is in the public interest to permit anyone to review records of arbitration proceedings to better understand the workings of arbitration and its impact on consumers. The Bureau believes that the publication of claims will lead to transparency by revealing to the public the types of claims filed in arbitration and whether consumers or providers are filing them. The publication of answers will shed some light on the potential merits of these claims. The publication of awards will lead to increased transparency by revealing how different arbitrators decide cases. The Bureau believes that publishing redacted awards may generate public confidence in the arbitrators selected for a specific case as well as the arbitration system, at least for administrators whose awards tend to demonstrate fairness and impartiality. Publication of all of these arbitral records collectively could help educate the public and demonstrate the extent to which arbitration results in fair processes and outcomes for consumers. In particular, the Bureau agrees with the commenter that suggested that there is a public interest in analyzing potential issues with individual arbitration, such as limited discovery and arbitrator bias.
The publication of redacted awards will also signal to attorneys for consumers and providers which sorts of cases favor and do not favor consumers, thereby potentially facilitating better pre-arbitration case assessment and resolution of more disputes informally.
The Bureau believes that publication will assist academic researchers with analyzing consumer arbitration. To date,
The Bureau also finds that the publication of records would lead to greater transparency of the operation of the markets for consumer financial products and services. As noted by commenters, the publication of records under the monitoring rule will permit consumers, regulators, consumer attorneys, and providers to identify trends that warrant further action. These groups routinely use public databases, such as online court records, decision databases, and government complaint databases (
The Bureau agrees with commenters that asserted that the publication requirement would help consumer advocates identify issues to pursue in assisting consumers, and may help consumers themselves to avoid harm by becoming aware of certain business practices. In these ways, the Bureau believes that the monitoring rule will improve the ability of a broad range of stakeholders to understand whether markets for consumer financial products and services are operating in a fair and transparent manner.
The Bureau further finds that the publication of arbitral records will help draw attention to certain business practices by providers. This is beneficial because it will help not just consumers but also providers understand what actions might violate the law. While not binding precedent, arbitral awards in consumer finance cases (not currently available to non-parties in most cases) may provide an analysis of relevant law and facts that can assist others. Making awards available may help consumers identify potentially harmful practices by providers and may create incentives for providers to identify potentially safer practices. The Bureau agrees with commenters that this will assist the development of persuasive reasoning, including arbitration and litigation disputes, on issues of consumer financial protection.
While one commenter suggested the publication of awards would act as a disincentive for arbitrators to make explicit findings, no evidence was presented of this phenomenon. If this were true, it would generally only be known as a result of analyzing awards that have actually been published. Yet the Bureau is not aware of evidence of such a disincentive reflected in arbitration awards made public by FINRA and the AAA. The Bureau does agree with the commenter that publication will further incentivize arbitrators to keep arbitration fair. Arbitrators may feel more pressure knowing that their decisions are more likely to be scrutinized, and the Bureau believes that this awareness will have a salutary effect on arbitrator decisions, making them more likely to be fair.
With regard to the commenters concerned that providers would be subject to reputational risks unless arbitrations were kept confidential, the Bureau acknowledges the concern that publication may expose providers to reputational risk to the extent that mere allegations made in arbitral statements of claim would be taken as fact. In response, the Bureau has drafted, as set out below in the section-by-section analysis of § 1040.4(b)(1)(i)(B), a provision requiring providers to submit answers as well as arbitral counterclaims to balance out one-sided accounts and mitigate any perceived reputational risk. In any case, as is noted above, relatively few providers may be subject to any form of reputational risk according to the Bureau's estimate of the number of providers likely to submit records to the Bureau. In addition, in the Bureau's experience with publishing consumer complaints, reputational risk is not necessarily significant when there are low numbers of complaints; and the Bureau does not estimate that any one provider is likely to have a significant number of arbitrations with public records. The reputational risk associated with arbitration is not unique—providers are already exposed to reputational risk when complaints are filed in litigation, given that such records are public by default. Further, the Bureau believes that the potential benefits of transparency to consumers and the public at large outweigh any potential reputational risk to providers. The Bureau further agrees with commenters, as is noted above, that NAF is a key case study demonstrating the importance of transparency and how arbitral records can produce private and public responses to potentially problematic practices, and notes that the default for individual litigation is that records, absent compelling reasons, are available to the public.
While one commenter expressed the concern that providers that lose in arbitration proceedings in which they are accused of violations of consumer protection law may face more scrutiny from the Bureau than others, the Bureau finds that the loss of a single dispute with one consumer does not necessarily trigger such scrutiny, but to the extent this occurs it will benefit the public interest. The Bureau believes that any risk of added scrutiny could result in more relief for consumers and better business practices by providers deterred by the prospect of additional public enforcement or litigation in response to arbitral awards identifying certain illegal business practices.
The Bureau also believes that the publication portion of the rule is in the public interest because it will increase transparency and accountability with regard to conduct in the underlying consumer financial services markets. In contrast to commenters that viewed the possibility of increased scrutiny by regulators or plaintiff's attorneys as a negative outcome from the monitoring rule, the Bureau believes that the increased transparency will tend to increase consumers' ability to seek redress for legal violations, providers' incentives for compliance, and general public confidence in the orderly operation of the markets. While these impacts are likely to be modest compared to the class rule given that the number of consumer-filed individual arbitrations is so low, the Bureau still views them as supporting the adoption of the publication portion of the rule.
While some commenters were concerned that the publication of arbitral records may permit plaintiff's attorneys to identify potentially classable claims or claims that could be brought in individual arbitrations or litigations, the Bureau does not find this is necessarily a frequent result of publication. As discussed in Part VI.B.3
With regard to the industry commenter's concern that the publication requirement would subject providers to class actions concerning provider compliance with the monitoring rule itself, the Bureau will review records received from providers to ensure compliance with § 1040.4(b)(3) before publishing them, and pursuant to new § 1040.4(b)(5) the Bureau will further redact the records to reduce re-identification risk. The Bureau notes that, in any case, this rule does not permit private claims for non-compliance with § 1040.4(b)(3). The Bureau also believes that, given the low number of arbitrations identified by the Bureau in the Study, it is unlikely that any given provider would make enough redactions (let alone redaction mistakes) to face class liability. As to the concern that noncompliance of pre-dispute arbitration agreements with § 1040.4(a)(2)(i) may result in class action liability, the Bureau notes that there is no private right of action for non-compliance when this rule does not give rise to a private right of action.
With regard to the comment that providers would remove pre-dispute arbitration agreements from contracts with consumers because the publication of awards favoring consumers would increase provider exposure to litigation risk, the Bureau believes it unlikely that the publication requirement will cause providers to remove pre-dispute arbitration agreements above and beyond those that would do so because of the class rule. As explained further in the Section 1022(b)(2) Analysis, the odds that any one provider will be required to comply with the reporting and redaction requirements in a given year are quite low; out of the approximately 50,000 providers covered by the rule, the Bureau expects that each year less than 1,000 or so providers will be involved in arbitration proceedings or litigation motions relying on pre-dispute arbitration agreements such that they would be required to submit records to the Bureau. Moreover, the Study indicated that awards favoring consumers in individual arbitration are uncommon.
With regard to the commenter concerned that publication would make the work of State bank examiners more complicated, the Bureau disagrees that this is a reason not to publish arbitral records, as discussed above. In any event, for the reasons discussed above in connection with the class rule, the Bureau believes that investment in compliance activities is the best way to reduce class action risk; State bank examiners are well positioned to evaluate such compliance activities and encourage providers to take additional mitigation actions where warranted. The Bureau also believes that ease of forecasting class action risk does not outweigh the benefits to consumers and the public described above in connection with the monitoring rule, including the expressed interests of other State government commenters in using published arbitration data to protect consumers. As noted above, if there is additional class action litigation resulting from the publication of arbitral awards, the Bureau believes that such activity may benefit consumers and the public interest.
With regard to the comment that suggested that the existence of the Bureau's consumer complaint database obviated the need for the publication of arbitral records, the Bureau disagrees that the complaint database serves the same function. As discussed above, the consumer complaints database lists complaints that typically occur prior to a consumer's engagement with a formal dispute mechanism such as arbitration. The Bureau's consumer complaint function exists to ensure that “consumers can be heard by financial companies, get help with their own issues, and help others avoid similar ones.”
With regard to the comment that important information derived from arbitration records should be pursued by the Bureau itself, not published for others to see and exploit, the Bureau disagrees because it has, as is set out in Part VI.B, limited enforcement and supervisory resources and does not have the ability or authority to pursue every potential violation of law. Other State and Federal regulators, or private attorneys, may be able to further
With regard to the comment that the cost of complying with the rule would be low because providers would drop their arbitration agreements in response to the publication requirement, the Bureau disagrees that this is because the publication requirement will induce providers to drop their arbitration clauses. As set out above, the cost to providers is likely to be low because relatively few will face individual arbitrations and be required to submit documents to the Bureau. The Bureau believes that the publication requirement is unlikely to be a decisive factor in convincing providers to drop their clauses.
The Bureau finds that the monitoring rule will minimize any adverse impact to consumer privacy. The key potential concern identified by commenters is that consumers may fear that, by engaging in arbitration, the Bureau's requirements may cause information about them to be divulged. The Bureau does not believe that these concerns will materialize because the final rules set out below require providers to redact information that identifies consumers, and also requires the Bureau to redact additional information (as well as any private information the providers may have inadvertently left unredacted) before publishing any records to further reduce the risk that consumers are identified.
The Bureau acknowledges the concern expressed by commenters that even redacted information could be combined with publicly available information to re-identify specific consumers, but the Bureau believes that the redactions required of providers under § 1040.4(b)(3) will substantially reduce the availability of personal and financial information. Further, to address these concerns, the Bureau is adopting § 1040.4(b)(5), which was not in the proposal and which requires the Bureau to further redact other information to reduce even further any risk of re-identification before it publishes the materials.
With regard to the comment that the publication proposal will result in the exposure of private consumer data without consumer consent, § 1040.4(b)(3) requires the redaction of information identifying individual consumers, and new § 1040.4(b)(5) requires the redaction of additional data that could be used to re-identify individuals. The Bureau also notes that no consumer or consumer advocates submitted comments that suggested that the monitoring proposal created a concern with the disclosure of private consumer data. As to the comment that consumers in debt collection cases may not wish to have their personal finances publicly disclosed, the Bureau reiterates its belief that the redactions it requires of providers, along with the additional redactions to be made by the Bureau, will sufficiently reduce re-identification risk.
With regard to the comment that expressed skepticism about allowing government regulators to collect private data, the Bureau notes that the information it will receive from providers will generally be devoid of personal information to begin with, and the information the Bureau publishes will be redacted even further. While data breaches are a general concern for any public institution, the data that the Bureau will keep and publish will be redacted to reduce re-identification risk. The Bureau will also employ the same data security measures that it employs for other sensitive data that it currently maintains.
With regard to the comments that suggested that the Bureau exclude credit unions from the Bureau's monitoring requirement because of the burdens it would impose on credit unions, the Bureau declines to do so for several reasons. Most importantly, the commenter did not point to any unique burden that a credit union would face in complying with the monitoring rule that would warrant an exemption for credit unions. In fact, as the Study showed,
With regard to the concern that the loss of arbitral confidentiality would compromise the privacy of providers and their employees, the Bureau notes that § 1040.4(b)(3) requires the redaction of personal information of all individuals, not just consumers. This would include providers' employees unless the provider is an individual. In addition, the Bureau will redact other information to comply with applicable privacy laws, if necessary.
Confidentiality is not, as some commenters suggested, standard or custom in all arbitrations. As noted in the Study and by some commenters above, other arbitral administrators publish records by default, as set out above in the context of FINRA and AAA consumer arbitrations.
In any case, any expectation of confidentiality is lost to the extent parties to an arbitration file arbitration awards and other documents containing parties' names and other information with a court, such as in an effort to enforce an award. Finally, the Bureau finds the publication of arbitration records will likely not result in conflict with State laws on the confidentiality of arbitral records, given the experience of other nationwide administrators, such as FINRA, that publish arbitration records by default. To the extent that there is a conflict with State laws, the Bureau finds that publication would still be in the public interest.
The Bureau proposed § 1040.1 to set forth the authority for issuing the regulation and the regulation's purpose.
Proposed § 1040.1(a) provided that the rule is being issued pursuant to the authority granted to the Bureau by sections 1022(b)(1), 1022(c), and 1028(b) of the Dodd-Frank Act. As the proposal noted, section 1022(b)(1) authorizes the Bureau to prescribe rules and issue orders and 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, and to prevent evasions thereof. Section 1022(c)(4) authorizes the Bureau to monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for such products or services. Section 1028(b) states that the Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. Section 1028(b) further states that the findings in such rule shall be consistent with the study of pre-dispute arbitration agreements conducted under section 1028(a).
For the reasons described in Part VI and below, the Bureau issues this final rule pursuant to its authority as described in § 1040.1(a), with findings that are consistent with the Study conducted under section 1028(a). The Bureau did not receive any comments on proposed § 1040.1(a) and is finalizing this provision as proposed.
Proposed § 1040.1(b) stated that the purpose of part 1040 is the furtherance of the public interest and the protection of consumers regarding the use of agreements for consumer financial products and services providing for arbitration of any future dispute. This statement of purpose is consistent with Dodd-Frank section 1028(b), which authorizes the Bureau to prohibit or impose conditions or limitations on the use of pre-dispute arbitration agreements if the Bureau finds that they are in the public interest and for the protection of consumers. Dodd-Frank section 1028(b) also requires the findings in any rule issued under section 1028(b) to be consistent with the Study conducted under section 1028(a), which directs the Bureau to study the use of pre-dispute arbitration agreements in connection with the offering or providing of consumer financial products or services.
For the reasons described above in Part VI, the Bureau believes that the final rule is in the public interest and for the protection of consumers, and that its findings are consistent with the Study. The Bureau did not receive any comments on proposed § 1040.1(b) and is finalizing this provision as proposed with one addition. Final § 1040.1(b) incorporates the Bureau's exercise of its authority in Dodd-Frank section 1022(c), the purpose of which is monitoring for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for such products or services.
Proposed § 1040.2 set forth definitions for certain terms relevant to the proposal. The Bureau received a number of comments on those proposed terms and their definitions, as well as suggestions to define additional concepts. The Bureau is finalizing § 1040.2 with certain revisions from the proposal as discussed below.
The Bureau proposed to define the term class action because the substantive provisions of § 1040.4(a)(1) concern class actions. Proposed § 1040.2(a) would have defined the term class action as a lawsuit in which one or more parties seek class treatment pursuant to Federal Rule of Civil Procedure 23 or any State process analogous to Federal Rule of Civil Procedure 23.
Some consumer advocates and public-interest consumer lawyer commenters requested that the Bureau expand the definition of class action to include other types of mass actions that the commenters believed would have been excluded from the proposed definition. While the commenters suggested different approaches, they generally recommended that the definition be extended to cover two types of actions: (1) Actions in which one or more parties seek relief on a representative basis; and (2) actions in which there is more than one plaintiff but the plaintiffs do not seek relief on a representative basis (for example, mass joinder cases). One of the commenters, a public-interest consumer lawyer, suggested that the Bureau address this concern not by revising the definition of class action, but by adding a provision to proposed § 1040.4 that would prohibit providers from moving to compel arbitration in a multiple-plaintiff action brought by a group of plaintiffs after they have been denied class certification. The commenters stated that some pre-dispute arbitration agreements expressly prohibit these types of mass actions separate from the prohibition on class actions. The commenters also noted that these types of mass actions resemble class actions in that they enable multiple consumers to obtain relief through a single lawsuit.
After considering the comments, the Bureau is finalizing § 1040.2(a) as
Section 1028(b) of the Dodd-Frank Act authorizes the Bureau to prohibit or impose conditions or limitations on the use of a pre-dispute arbitration agreement between a covered person and a “consumer.” Section 1002(4) defines the term consumer as an individual or an agent, trustee, or representative acting on behalf of an individual. Proposed § 1040.2(b) would have incorporated the Act's definition of consumer by stating that a consumer is an individual or an agent, trustee, or representative acting on behalf of an individual.
An industry commenter stated the proposed definition of consumer is sufficiently clear, and a consumer advocate commenter requested that the Bureau finalize the definition of consumer as proposed. The consumer advocate commenter stated that the proposed definition was clear and easy to apply and that including agents, trustees, and representatives acting on behalf of individuals would ensure that the rule protects important groups of consumers. Another consumer advocate commenter expressed concern that companies contracting with one another could agree to relinquish a consumer's right to participate in a class action in a manner that binds the consumer even though the consumer was not a party to the contract. The commenter stated that the proposal acknowledged this issue by defining consumer to include an agent, trustee, or representative acting on behalf of an individual, and requested that the definition be amended by adding “or otherwise purporting to obligate, or limit the rights of, an individual.”
The Bureau is finalizing § 1040.2(b) as proposed. Regarding the consumer advocate's concern that companies could contract with one another to relinquish a consumer's right to participate in a class action in a manner that binds the consumer, the Bureau believes that a company would only have the legal authority to relinquish the consumer's rights if it were an “agent, trustee, or representative acting on behalf of” the consumer, and thus the company would be covered by the definition as proposed. The commenter did not explain how such a relinquishment could happen otherwise. Accordingly, the Bureau declines to revise the definition of consumer in response to this concern. The Bureau believes that, to the extent that a consumer is party to an arbitration agreement and a provider seeks to assert that agreement in a class action involving a covered product, this rule would apply.
Proposed § 1040.2(d) would have defined the term pre-dispute arbitration agreement as an agreement between a provider and a consumer (as separately defined in proposed § 1040.2(b) and § 1040.2(c)) providing for arbitration of any future dispute between the parties.
Both a consumer advocate and a public-interest consumer lawyer commenter expressed concern about the phrase “between a provider and a consumer” in the proposal's definition of pre-dispute arbitration agreement. The commenters asserted that the phrase is confusing and could potentially limit the rule's application in ways the Bureau did not appear to intend, given that the Bureau stated elsewhere in the proposal that the provisions of proposed § 1040.4 were intended to apply to pre-dispute arbitration agreements that were originally between consumers and entities other than providers. These commenters also stated that the phrase is redundant, because the substantive provisions in proposed § 1040.4 would have applied only to providers; thus, in the commenters' view, it is unnecessary also to limit the scope of the term pre-dispute arbitration agreement to an agreement between a provider and a consumer. The consumer advocate commenter suggested that the Bureau remove the phrase “between a provider and a consumer,” while the public-interest consumer lawyer commenter requested that the Bureau replace the word “provider” with the phrase “person” as defined in Dodd-Frank section 1002(19).
Additionally, the public-interest consumer lawyer commenter suggested that the Bureau amend proposed comment 2(d)-1 or add a new comment, to clarify that the presence or absence of opt-out provisions does not affect whether an agreement is a pre-dispute arbitration agreement under the rule. According to this commenter, providers sometimes argue that opt-out provisions make arbitration agreements fairer and that a consumer's failure to opt out indicates the consumer's assent to the arbitration agreement's terms. The commenter did not say, however, why it was necessary to clarify the definition of pre-dispute arbitration agreement on this point.
Additionally, several commenters expressed concern that providers would seek to evade the rule if it was finalized as proposed by adopting a practice of amending their consumer agreements after a class action has been filed but before certification to state that any claims related to the dispute that is the subject of the class action must be resolved individually. These commenters were concerned that the definition of pre-dispute arbitration agreement in proposed § 1040.2(d) was limited to agreements providing for arbitration of any
After consideration of the comments, the Bureau is finalizing the definition of pre-dispute arbitration agreement with modifications as described below.
Final § 1040.2(c) reflects two modifications from the proposal. First, the final rule's definition contains a new limitation: Pre-dispute arbitration agreements must be agreements providing for arbitration of any future dispute “concerning a consumer financial product or service covered by § 1040.3(a).” This limitation is already built into the operation of the rule because § 1040.4 only applies to pre-dispute arbitration agreements concerning consumer financial products or services. Nonetheless, for clarity, the Bureau has added this limitation into the definition of pre-dispute arbitration agreement itself to reflect section 1028(b), which authorizes the Bureau to regulate agreements “for a consumer financial product or service” providing for arbitration of any future dispute between the parties.
Second, the Bureau has replaced the phrase “between a provider and a consumer” with the phrase “between a covered person as defined by 12 U.S.C. 5481(6) and a consumer.” The Bureau is persuaded that defining pre-dispute arbitration agreement as an agreement “between a provider and a consumer,” as in the proposal, is unnecessary and potentially confusing as to the intended scope of the rule. Specifically, as stated in the proposal, the Bureau had intended that the substantive provisions in proposed § 1040.4 apply to providers as defined in proposed § 1040.2(c) when they are relying on arbitration agreements in contracts for consumer financial products and services that were originally between consumers and persons who were excluded from the definition of provider in accordance with proposed § 1040.3(b). The Bureau believes the phrase “between a consumer and a covered person as defined by 12 U.S.C. 5481(6)” addresses this concern and more closely reflects the Bureau's intention. The Bureau also notes that, while the term “covered person” is broader than the term “provider,” the final rule's use of the term “covered person” does not expand the universe of persons subject to the rule's requirements. That is because the rule's substantive requirements—the requirements imposed by § 1040.4(a)(1), (a)(2), and (b), discussed below—apply only to “providers.”
New comment 2(c)-1 further clarifies this concept. Comment 2(c)-1.i explains that, while § 1040.2(c) defines “pre-dispute arbitration agreement” as an agreement between a covered person and a consumer, the rule's substantive requirements, which are contained in § 1040.4, apply only to “providers.” Comment 2(c)-1.i notes further that, while “covered persons,” as that term is defined in Dodd-Frank section 1002(6), includes persons excluded from the Bureau's rulemaking authority under Dodd-Frank sections 1027 and 1029, the requirements contained in § 1040.4 would not apply to any such persons entering into a pre-dispute arbitration agreement because they are not “providers,” by virtue of § 1040.2(d) (stating that persons excluded under § 1040.3(b) are not providers) and § 1040.3(b)(6) (excluding any person to the extent not subject to the Bureau's rulemaking authority including under sections 1027 or 1029). The comment further clarifies that the requirements in § 1040.4 would apply, however, to the use of any such pre-dispute arbitration agreement by a different person that meets the definition of provider, when the pre-dispute arbitration agreement was entered into after the compliance date.
New comment 2(c)-1.ii illustrates this concept with an example. Comment 2(c)-1.ii states that an automobile dealer that provides consumer credit is a covered person under Dodd-Frank section 1002(6)—and such a person's contracts may contain pre-dispute arbitration agreements as that term is defined in § 1040.2(c). Yet an automobile dealer that is excluded from the Bureau's rulemaking authority in circumstances described by Dodd-Frank section 1029 would not be required to comply with the requirements in § 1040.4, because those requirements apply only to providers, and such automobile dealers, while they are covered persons, are excluded by § 1040.3(b)(6) and therefore are not providers under § 1040.2(d). The requirements in § 1040.4 would apply, however, to the use of the automobile dealer's pre-dispute arbitration agreement by a different person that meets the definition of provider, such as a servicer, or purchaser or acquirer of the automobile loan, where the agreement was entered into after the compliance date.
To clarify the relationship between the definition of pre-dispute arbitration agreement and delegation provisions, the Bureau is adding comment 2(c)-2 to the final rule.
The Bureau intends this interpretation to apply even if the delegation provision is contained in a separate provision of the contract. In accordance with the Supreme Court's decision in
The Bureau believes it is not necessary to revise the definition of pre-dispute arbitration agreement to address the commenters' concern that providers will seek to evade the rule by amending consumer agreements after a class action has been filed (but before certification) to state that any claims related to the dispute that is the subject of the class action must be resolved individually. The Bureau believes that, under existing precedents, courts would not enforce such agreements. Courts have routinely held arbitration agreements adopted after a class action has been filed, but before certification, unenforceable as unconscionable or as improper communications with the class.
Regarding the public-interest consumer lawyer commenter's concern about opt-out provisions, the Bureau does not believe that it is necessary to clarify that the presence or absence of an opt-out provision does not affect whether an agreement is a pre-dispute arbitration agreement within the meaning of § 1040.2(c). The Bureau believes that it is clear that, where a pre-dispute arbitration agreement includes an opt-out provision, and the consumer has not opted out, there remains a governing pre-dispute arbitration agreement to which the Bureau's rule would apply.
The Bureau did not receive comment on proposed comment 2(d)-1 and is finalizing the proposed comment, renumbered as comment 2(c)-3, as proposed.
Dodd-Frank section 1028(b) authorizes the Bureau to prohibit or impose conditions or limitations on the use of a pre-dispute arbitration agreement between a “covered person” and a consumer. Section 1002(6) defines the term covered person as any person that engages in offering or providing a consumer financial product or service and any affiliate of such a person if such affiliate acts as a service provider to that person. Section 1002(19) further defines person to mean an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.
Throughout the proposal, the Bureau used the term provider to refer to the entity to which the requirements in the proposal would have applied.
Proposed comment 2(c)-1 would have clarified that a provider as defined in proposed § 1040.2(c) that also engages in offering or providing products or services not covered by proposed § 1040.3 must comply with this part only for the products or services that it offers or provides that would be covered by proposed § 1040.3. The proposed comment would have illustrated this concept by noting that a merchant that transmits funds for its customers would be covered pursuant to proposed § 1040.3(a)(7) with respect to the transmittal of funds, but the same
Other than a comment from an industry commenter, which stated that the proposed definition of provider was sufficiently clear, the Bureau received no comments on this proposed provision.
As stated in the proposal, the definition of the term “person” under section 1002(19) of the Dodd-Frank Act includes an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity, and the term “entity” readily encompasses governments and government entities. Even if the term were ambiguous, the Bureau, based on its expertise and experience with respect to consumer financial markets, believes that interpreting the term to encompass governments and government entities would promote consumer protection, fair competition, and other objectives of the Dodd-Frank Act. Further, as stated in the proposal, the Bureau believes that the terms “companies” or “corporations” under the definition of “person,” on their face, cover all companies and corporations, including government-owned or -affiliated companies and corporations. In addition, even if those terms were ambiguous, the Bureau believes based on its expertise and experience with respect to consumer financial markets that interpreting them to cover government-owned or -affiliated companies and corporations would promote the objectives of the Dodd-Frank Act. Accordingly, while the Bureau has chosen to exempt certain government entities under § 1040.3(b)(2), the term provider is broad enough to encompass such entities to the extent that they are not otherwise excluded from the rule.
Several commenters requested that the Bureau define additional terms relevant to this rulemaking that the Bureau did not propose to define.
A public-interest consumer lawyer commenter and an industry commenter requested that the Bureau define the term “arbitration.” The public-interest consumer lawyer commenter suggested that the Bureau define “arbitration” as “any binding alternative dispute resolution process” and stated that this definition would provide clarity and limit evasion. The industry commenter did not recommend a specific definition of “arbitration” but stated that a definition would ensure compliance with the regulation.
The Bureau declines to add a definition of “arbitration” to § 1040.2. While neither commenter stated why they believed a definition of arbitration would either prevent evasion or improve compliance, the Bureau believes that the relevant evasion concern would be that providers would create a binding alternative dispute resolution (ADR) process that is similar to arbitration but that uses a different name, and that such an arrangement could harm consumers were a court to conclude that it would not be covered by this rule. The Bureau believes that any such evasion attempts would fail. The Bureau is aware that there has been extensive litigation on the question of whether a particular ADR process is arbitration, in part because the FAA does not define the term. Most circuits apply a “Federal common law” standard that looks to whether disputants empowered a third party to render a final and binding decision settling their dispute.
A consumer lawyer commenter requested that the Bureau add to § 1040.2 a definition of “business of insurance” that would cross-reference the definition of “business of insurance” in Dodd-Frank section 1002(3).
The Bureau declines to add to § 1040.2 a definition of “business of insurance” that cross-references the Dodd-Frank Act's definition of that term. The Bureau also declines to add commentary stating that contractual arrangements similar to GAP waiver agreements are not the business of insurance. The Bureau understands that a number of State courts and State banking regulators have determined that debt cancellation or suspension products such as those described by the commenter are not insurance.
An industry commenter requested that the Bureau define “account” and “pre-dispute.” The commenter did not recommend specific definitions for these terms but stated that they would help ensure compliance with the regulation. The Bureau believes it is unnecessary to define either of these terms. In the final rule, two provisions—§ 1040.3(a)(5) and (a)(6)—use the term account. However, these provisions cross-reference TISA and EFTA respectively and their implementing regulations, both of which define the term.
As discussed above, Dodd-Frank section 1028(b) authorizes the Bureau to issue regulations concerning agreements between a covered person and a consumer “for a consumer financial product or service” providing for arbitration of any future disputes that may arise. Accordingly, the Bureau proposed § 1040.3 to set forth the products and services to which proposed part 1040 would apply. Proposed § 1040.3(a) generally would have provided a list of products and services that would be covered by the proposal, while proposed § 1040.3(b) would have provided limited exclusions.
The Bureau proposed to cover a variety of consumer financial products and services that the Bureau believed are in or tied to the core consumer financial markets of lending money, storing money, and moving or exchanging money—all markets covered in significant part in the Study. Lending money includes, for example: Most types of consumer lending (such as making secured loans or unsecured loans or issuing credit cards), activities related to that consumer lending (such as providing referrals, servicing, credit monitoring, debt relief, and debt collection services, among others, as well as the purchasing or acquiring of such consumer loans), and extending and brokering those leases that are consumer financial products or services because they are similar to automobile loans. Storing money includes storing funds or other monetary value for consumers (such as providing deposit accounts). Moving money includes providing consumer services related to the movement or conversion of money (such as certain types of payment processing activities, transmitting and exchanging funds, and cashing checks).
Proposed § 1040.3(a) described the products and services in these core consumer financial markets that the Bureau proposed to cover in part 1040. Each component is discussed separately below in the discussion of each subsection of § 1040.3(a), along with a summary of comments received on each component, the Bureau's response to these comments, and any changes the Bureau is making to the subsection in the final rule.
As set forth above, the Bureau's rulemaking authority under Dodd-Frank section 1028(b) generally extends to the use of an agreement between a covered person and a consumer for a “consumer financial product or service” (as defined in Dodd-Frank section 1002(5)).
In exercising its authority under Dodd-Frank section 1028, the Bureau proposed to cover consumer financial products and services in what it described as the core markets of lending money, storing money, and moving or exchanging money. Accordingly, the Bureau did not propose to cover every type of consumer financial product or service as defined in Dodd-Frank section 1002(5), particularly those outside these three core areas. As the proposal explained, Bureau intends to continue to monitor other markets for consumer financial products and services in order to determine over time whether to revisit the scope of this rule.
In addition, the Bureau structured the proposed scope provisions to use a number of terms derived from existing, enumerated consumer financial protection statutes implemented by the Bureau in order to facilitate compliance. In so doing, the Bureau expected that the coverage of proposed part 1040 would have incorporated relevant future changes, if any, to the enumerated consumer financial protection statutes and their implementing regulations and to provisions of title X of Dodd-Frank referenced in proposed § 1040.3(a). For example, the proposal noted that changes that the Bureau had proposed regarding the definition of an account with regard to prepaid products under Regulation E would have, if adopted, affected the scope of proposed § 1040.3(a)(6).
To effectuate this approach, the Bureau specifically proposed in § 1040.3(a) that proposed part 1040 generally would have applied to pre-dispute arbitration agreements for the products or services listed in proposed § 1040.3(a) to the extent they are consumer financial products or services as defined by 12 U.S.C. 5481(5). As proposed comment 3(a)-1 would have explained, that statutory provision generally defines two types of consumer financial products and services. The first type is any financial product or service that is “offered or provided for use by consumers primarily for personal, family, or household purposes.” The second type is a financial product or service that is delivered, offered, or provided in connection with the first type of consumer financial product or service.
A number of consumer advocates, nonprofits, consumer law firms, and industry commenters identified specific products or services that, in their view, should or should not be covered; these comments are addressed in relevant subsections of the section-by-section analysis below.
In addition, the Bureau received several comments more generally addressing its overall proposed approach to scope of coverage that focused on three core markets and its frequent reliance on already-enumerated terms in Federal consumer financial laws. One consumer advocate agreed with the Bureau's proposed approach to delineating the scope of coverage, which, in its view, would reduce uncertainty and assist the Bureau and courts in administration of the rule. Three public-interest consumer lawyer commenters believed the proposed coverage was extensive. Nonetheless, a trade association of consumer lawyers, a consumer advocate, and an individual commenter stated in their comments that the scope of coverage should be broadened to reach all consumer financial products and services that may be regulated by the Bureau in the Dodd-Frank Act.
A public-interest consumer lawyer commenter supported the proposal's references to other laws and regulations to define scope, as this would ensure that the scope of coverage in the proposal would evolve as those laws and regulations are updated to address developments in the relevant markets. The commenter stated that this feature of the proposal would be particularly important for African American communities the commenter represents, which, in its view, are often a target for novel, and sometimes exploitative, consumer financial products and services. This commenter also suggested that for clarity the Bureau noted this feature in the official interpretations to part 1040. A consumer advocate commenter also supported the Bureau's proposed incorporation of definitions found in other regulations that may later be amended, noting the availability of notice-and-comment rulemaking for such amendments would allow commenters on those potential changes to address the relevance and application of part 1040.
In addition, a consumer advocate and a public-interest consumer lawyer also expressed concern in their comments that persons who provide services to providers covered by the proposal (but who are not themselves providers) could escape the reach of the proposal. In particular, these commenters asserted that if a covered provider failed to comply with the proposal's requirement to insert a contract provision preventing
The Bureau is finalizing the rule consistent with the overall approach it had set forth in the proposal to defining a broad but specific scope of coverage within the core markets of storing, lending, and moving money. The Bureau continues to believe that this approach will facilitate compliance with the rule and its administration. The Bureau recognizes, however, that the use of arbitration agreements for other consumer financial products or services not covered by the final rule nonetheless has a potential to cause harm to consumers. As stated in the proposal, the Bureau therefore plans to monitor the impact of arbitration agreements in these other markets. Based upon this monitoring, the Bureau may consider adjusting the scope of coverage of the rule in the future, whether by adjusting an existing category of coverage or by adding a new category of coverage, consistent with its rulemaking obligations and authority including Dodd-Frank section 1028.
In addition, the Bureau believes that the references in the scope of coverage § 1040.3 to existing laws and regulations is sufficient to signal that the coverage is determined based upon the content of those laws, as they exist now and as they may evolve in the future through amendments or new interpretations. Because this is how any regulation defining scope would function when it incorporates citations to existing laws, the Bureau does not believe it is necessary to adopt a specific comment to this effect, as one commenter suggested.
With regard to the commenter that sought broader coverage of service providers, the Bureau does not believe a change is necessary to address this commenter's concern. To the extent a service provider is providing or offering a covered consumer financial product or service, then the class rule (§ 1040.4(a)(1)) prohibits that service provider from relying upon any arbitration agreement entered into after the compliance date, regardless of whether the service provider itself had entered into the agreement (see comment 4-2). For example, a debt collector collecting consumer credit on behalf of the creditor may be a service provider, but also would be covered directly (see § 1040.3(a)(10)(iii)). To the extent this commenter was, in effect, seeking an expansion in the proposed scope of coverage to reach persons who are not offering or providing a covered consumer financial product or service and are not an affiliated service provider to persons offering or providing a covered consumer financial product or service, the Bureau does not believe such an expansion in scope of coverage is warranted. Nevertheless, the Bureau shares the commenter's concern regarding a situation in which a person provides services to a provider that had failed to comply with this rule, and relies on the provider's non-compliant arbitration agreement. The Bureau believes that this problem can be addressed through means other than adding unaffiliated service providers to the coverage of this rule. For example, consumers may assert that the arbitration agreement in this example was invalid or unenforceable for its failure to comply with the Bureau's rule.
The Bureau is also making minor technical revisions to the introductory paragraph of § 1040.3(a). First, because the definition of pre-dispute arbitration agreement in § 1040.2(c) already refers to agreements concerning the consumer financial products and services listed in § 1040.3(a), it is not necessary to repeat the term “pre-dispute arbitration agreement” when describing the provisions relating to coverage and exclusions from coverage in § 1040.3(a). Second, the Bureau also is replacing the term “generally applies” from the proposal with the phrase “except for persons when excluded from coverage pursuant to § 1040.3(b).” The Bureau is adopting this change to indicate that although a product or service may be listed in § 1040.3(a), a person described in § 1040.3(b) nonetheless will not be subject to the rule.
The Bureau is adopting comment 3(a)-1 to § 1040.3(a) as proposed to explain the two general categories of consumer financial products or services defined in the Dodd-Frank Act. In addition, in response to comments described below in the section-by-section analysis of § 1040.3(a)(3), the Bureau also is adopting comment 3(a)-2 concerning the rule's coverage of mobile phone applications and online access tools for covered products.
The Bureau believed that the proposal should apply to consumer credit and related activities including collecting on consumer credit. Specifically, proposed § 1040.3(a)(1) would have included in the coverage of proposed part 1040 consumer lending under the ECOA, as implemented by Regulation B, 12 CFR part 1002, and various supplemental activities related to that lending, while the related activity of debt collection would have been covered by proposed § 1040.3(a)(10).
In particular, proposed § 1040.3(a)(1) would have covered specific consumer lending activities engaged in by persons acting as “creditors” as defined by Regulation B, along with the related activities of acquiring, purchasing, selling, or servicing such consumer credit. Proposed § 1040.3(a)(1) would have broken these covered consumer financial products or services into the following five types: (i) Providing an “extension of credit” that is “consumer credit” as defined in Regulation B, 12 CFR 1002.2; (ii) acting as a “creditor” as defined by 12 CFR 1002.2(l) by “regularly participat[ing] in a credit decision” consistent with its meaning in 12 CFR 1002.2(l) concerning “consumer credit” as defined by 12 CFR 1002.2(h); (iii) acting, as a person's primary business activity, as a “creditor” as defined by 12 CFR 1002.2(l) by “refer[ring] applicants or prospective applicants to creditors, or select[ing] or offer[ing] to select creditors to whom requests for credit may be made” consistent with its meaning in 12 CFR 1002.2(l); (iv) acquiring, purchasing, or selling an extension of consumer credit covered by proposed § 1040.3(a)(1)(i); or (v) servicing an extension of consumer
Proposed § 1040.3(a)(1)(i) would have covered providing any “extension of credit” that is “consumer credit” as defined by Regulation B, 12 CFR 1002.2.
As indicated in the proposal, the Bureau had considered covering consumer credit under two statutory schemes: TILA and ECOA, as well as their implementing regulations. The Bureau believed, however, that using a single definition would have been simpler and thus it proposed to use the Regulation B definitions under ECOA because they are more inclusive. For example, unlike the TILA and its implementing regulation (Regulation Z, 12 CFR 1026.2(17)(i)), ECOA and Regulation B do not include an exclusion for credit with four or fewer installments and no finance charge. Regulation B also explicitly addresses participating in credit decisions, and as discussed below in the section-by-section analysis to proposed § 1040.3(a)(1)(iii), loan brokering.
The Bureau further noted in the proposal that in many circumstances, merchants, retailers, and other sellers of nonfinancial goods or services (hereinafter, merchants) may act as creditors under ECOA in extending credit to consumers. While such extensions of consumer credit would have been covered by proposed § 1040.3(a)(1), exemptions proposed in § 1040.3(b) would have excluded certain merchants from coverage.
The Bureau received a number of comments on in its proposed approach to covering extensions of consumer credit in proposed § 1040.3(a)(1). For the most part, these comments focused on coverage (or exclusion) of specific types of consumer credit and related activities.
Two public-interest consumer lawyer commenters and a consumer advocate expressed support for the proposal's defining covered consumer credit based upon the coverage in Regulation B implementing ECOA, rather than what they viewed as a narrower universe of consumer credit transactions covered by Regulation Z implementing TILA. One of the public-interest consumer lawyers noted the ECOA-based coverage would be broader than TILA-based coverage, and importantly, in its view, reach persons with roles in the decision to approve or deny credit beyond only the person extending the credit. This commenter also stated that ECOA coverage would reach certain activities in relation to credit extended to consumers by merchants that are not subject to TILA. In the view of the consumer advocate, ECOA-based coverage is important because the alternative—TILA-based coverage—could incentivize companies to try to avoid coverage by reducing the number of installments or embedding a finance charge into the purchase price in order to render the credit not subject to TILA. A consumer lawyer also stated that, based on his experience counseling members of the armed forces, the proposal is important because it would extend its protections to products and services, such as loans secured by automobiles and other personal property, that are not reached by regulations implementing the MLA's restrictions on arbitration agreements. Finally, another public-interest consumer lawyer stated that the proposed broad coverage of consumer credit, including short-term loans, is particularly important, as these products are used at higher rates by African Americans.
The consumer advocate stated its support for coverage of any life insurance policy loans that are not the business of insurance. The industry trade association commenters asserted, however, that the Bureau unnecessarily created uncertainty for the insurance market by insinuating that there are loans administered by insurers that are not in business of insurance. These commenters requested that the Bureau confirm life insurance policy loans are categorically excluded from the rule because they are always the business of insurance, so that there is no uncertainty regarding the potential impact of the rule on them. In support of their arguments, they pointed to a number of ways in which, in their view, State law and State regulators treat policy loans as the business of insurance. These commenters emphasized that many States have adopted a model policy loan interest rate bill issued by the National Association of Insurance Commissioners (NAIC),
The Bureau is adopting § 1040.3(a)(1)(i) and (a)(1)(ii) as proposed, with minor edits to more clearly signify how the coverage of these provisions is tied to established terms in Regulation B. For example, subparagraph (i) is revised to emphasize that it only applies to persons who are “creditors” under Regulation B. By proposing to cover extension of “consumer credit,” the proposal had already implicitly incorporated the term “creditor,” which is part of the definition of “credit” in Regulation B.
As to the comments addressing whether mobile wireless third-party billing providers extend consumer credit, as noted above, because this rule borrows defined terms from an existing regulation, providers can look to interpretations of ECOA and Regulation B for the particular circumstances as they may arise. It is beyond the scope of this rulemaking to specify or describe the details of the circumstances that are covered by ECOA and Regulation B. Moreover, regardless of whether mobile wireless third-party billing providers are granting the consumer a right to defer payment, there are other potential bases for coverage, such as transmitting or exchanging funds under § 1040.3(a)(7) or payment processing under § 1040.3(a)(8). In addition, if the third party is the one granting the consumer a right to defer payment in circumstances described in § 1040.3(a)(1)(i), and the mobile wireless provider is billing for and collecting those payments, these billing activities of the mobile wireless provider may involve the servicing of consumer credit covered by § 1040.3(a)(1)(v).
The Bureau also acknowledges the comments from the association of State insurance regulators and the industry trade associations that expressed concern over a statement in the Bureau's Section 1022(b)(2) Analysis in the proposal that did not rule out the possibility that the proposal could cover some life insurance policy loans. As the Bureau noted in its Section 1022(b)(2) Analysis in the proposal, however, the Bureau did not believe such coverage was likely.
Proposed § 1040.3(a)(1)(iii) would have covered persons who, as their primary business activity, act as “creditors” as defined by Regulation B, 12 CFR 1002.2(l), by referring consumers to other ECOA creditors and/or selecting or offering to select such other creditors from whom the consumer may obtain ECOA credit. Regulation B comment 2(l)-2 describes examples of persons engaged in such activities.
Because the Bureau did not generally propose to cover activities of merchants to facilitate payment for the merchants' own nonfinancial goods or services,
With regard to proposed § 1040.3(a)(1)(iii)'s treatment of persons providing creditor referral or selection services as their primary business, several commenters, including consumer advocates, consumer law firms, public-interest consumer lawyers, and a nonprofit, stated that lead generators for consumer credit products should be explicitly covered because these persons can steer consumers to harmful consumer credit products. A consumer advocate added in its comment that it assumed that these lead generators would have been covered by the proposal based on the coverage in this provision of persons regularly engaged in consumer credit referrals or creditor selection as their primary business. This commenter stated that the final rule should include a clarification making this assumption explicit, otherwise, the commenter was concerned that lead generators that sell a list of leads to creditors may claim that the mere act of selling leads does not constitute “referring” or “selecting” a creditor to make an offer within the meaning of Regulation B.
A consumer lawyer also stated that, based on his experience counseling members of the armed forces, the proposed coverage concerning consumer credit referrals is important because these activities are not reached
Two consumer advocates and a public-interest consumer lawyer also urged the Bureau to remove the “primary business” limitation in proposed § 1040.3(a)(1)(iii). One of the consumer advocate commenters asserted that this limitation was a loophole that would allow companies engaged in credit referrals or creditor selection to restructure their business to avoid coverage of the rule. The other consumer advocate commenter asserted that a company can have more than one primary business and thus the proposed exclusion was confusing. Finally, the public-interest consumer lawyer commenter stated that the rule should cover merchants providing credit referrals (including automobile dealers, medical providers and others) even when their primary business activity is the sale of nonfinancial goods or services to consumers.
The Bureau is finalizing proposed § 1040.3(a)(1)(iii) and its associated commentary with certain technical edits
As explained in the proposal, the Bureau's goal in proposing a primary business limitation on § 1040.3(a)(1)(iii) was to exclude from coverage merchants that are facilitating payment for their own nonfinancial goods or services in transactions with consumers through, for example, creditor referrals or selection activities.
The Bureau also is making conforming changes to comment 3(a)(1)(iii)-1 and providing an example of incidental merchant referral or selection activity that would be excluded, even if performed regularly by a merchant who therefore may meet the definition of the term creditor in Regulation B.
With regard to the commenters seeking coverage of consumer credit lead generators under proposed § 1040.3(a)(1)(iii), the Bureau is not including an express reference to lead generation in the final rule. As noted above, the Bureau believes that basing consumer credit coverage on a longstanding regulation implementing an enumerated consumer protection law (
Proposed § 1040.3(a)(1)(iv) and (v) would have covered certain specified types of consumer financial products or services when offered or provided with respect to consumer credit covered by proposed § 1040.3(a)(1)(i). First, proposed § 1040.3(a)(1)(iv) would have covered acquiring, purchasing, or selling an extension of consumer credit that would have been covered by proposed § 1040.3(a)(1)(i). In addition, proposed § 1040.3(a)(1)(v) would have covered servicing of an extension of consumer credit that would have been covered by proposed § 1040.3(a)(1)(i). With regard to servicing, the Bureau did not propose a specific definition but noted in proposed comment 3(a)(1)(v)-1 other examples where the Bureau has defined servicing: For the postsecondary student loan market in 12 CFR 1090.106 and the mortgage market in Regulation X, 12 CFR 1024.2(b).
The Bureau received one comment on its proposal to cover acquiring, purchasing, or selling an extension of consumer credit in proposed § 1040.3(a)(1)(v). A consumer advocate expressed support for covering those who acquire credit extended by others. The commenter cited the example of indirect automobile finance companies that acquire loans from automobile dealers in circumstances where the Dodd-Frank Act excludes the dealer from the Bureau's rulemaking authority. The commenter stated that, in its view, acquirers and purchasers of consumer debts risk harming consumers if they fail to pass along information about the debt to debt collectors or subsequent purchasers.
The Bureau received some comments concerning its proposal to cover the servicing of consumer credit in proposed § 1040.3(a)(1)(v). A consumer advocate and a public-interest consumer lawyer expressed support for how this proposed coverage would reach third-party servicers of consumer credit extended by medical providers. In addition, many commenters addressed the Bureau's request for comment on whether the Bureau should add language explicitly covering furnishing information to consumer reporting agencies. These commenters, including consumer advocates, nonprofits, public-interest consumer lawyers, consumer law firms, and a research center urged the Bureau to add language explicitly covering furnishing information to consumer reporting agencies.
Another industry trade association stated in its comment that entities affiliated with merchants often engage in servicing of consumer credit extended by such merchants. In the view of this commenter, the rule's exclusions for merchants engaging in certain types of credit transactions (
The Bureau is adopting § 1040.3(a)(1)(iv) and (v) as proposed. With regard to comments that requested that the Bureau separately cover furnishing of information on covered consumer credit accounts to a consumer reporting agency, the Bureau reiterates that it did not propose to identify furnishing separately as a covered product or service because it believes these activities are commonly carried out by servicers.
With regard to the industry trade association that requested an exemption for merchant affiliates, the Bureau does not believe an exemption is warranted. Regardless of a firm's motivation for utilizing an affiliate for servicing of an extension of consumer credit (as opposed to having the originating creditor handle servicing in-house), that affiliate must comply with applicable laws in its servicing activities, and the Bureau believes that consumers should have an effective remedy for any violation of those laws. Any asymmetry in coverage between servicing by merchants and merchant affiliates is a function of the statutory exclusion for merchants pursuant to Dodd-Frank section 1027(a)(2), and not a policy determination by the Bureau that the rule should never apply to consumer financial product or service activity related to merchants. The Bureau believes that merchant affiliates engaged in servicing should be covered for the same reasons that it believes servicing by unaffiliated servicers and servicing of any type of consumer credit should be covered.
Proposed § 1040.3(a)(2) would have extended coverage to brokering or extending consumer automobile leases as defined in 12 CFR 1090.108, which applies to leases of automobiles with an initial term of at least 90 days and either of the following two characteristics: (1) The lease is the “functional equivalent” of an automobile purchase finance arrangement and is on a “non-operating basis” within the meaning of Dodd-Frank section 1002(15)(A)(ii); or (2) the lease qualifies as a “full-payout lease and a net lease” within the meaning of the Bureau's Larger Participant rulemaking for the automobile finance market.
With regard to the proposed coverage of automobile financing, an industry trade association whose members participate in vehicle financing asked whether the rule would cover automobile club memberships.
The Bureau also received a few comments from consumer advocates on proposed § 1040.3(a)(2). One consumer advocate supported coverage of automobile financing including leasing contracts. The commenter cited several risks of harm that consumers face in this market and several examples that the commenter asserted illustrate the importance of class actions in this market.
The Bureau is adopting § 1040.3(a)(2) as proposed. As discussed in the proposal, the Bureau has identified the market for automobile leases as a significant one to millions of consumers and concluded that it is part of the core consumer finance market for lending money that the Bureau proposed to cover in this rule. The Bureau did not propose to cover forms of consumer leasing other than automobile leasing. The Bureau notes that it is unclear from the comments urging expansion to other forms of leasing, which industry comments did not address, what the impact of expanding coverage to reach all forms of personal property leasing under Dodd-Frank section 1002(15)(A)(ii) would be. The Bureau also notes, with regard to concerns that lack of coverage under the rule would incentivize providers to restructure credit transactions as leases, that the rule's coverage of merchants extending credit is limited anyway
With regard to the question from an industry trade association concerning coverage of automobile club memberships, such memberships are not per se covered by the rule, as the Bureau believes that they would generally be nonfinancial goods or services. This does not necessarily mean, however, that the rule would never apply to claims concerning such products or services. For example, claims concerning the marketing of “add-on” products or services by lenders in connection with extending consumer credit could “concern” the loan, within the meaning of § 1040.4(a) or (b), depending on the facts and circumstances of the claim.
As stated in the proposal, the Bureau believed that the proposal should cover debt relief services, such as services that offer to renegotiate, settle, or modify the terms of a consumer's debt.
Two public-interest consumer lawyer commenters expressed support for the proposal's coverage of debt relief services. These commenters pointed to consumer harms they believe these products have caused, and supported the proposal to cover debt relief not only for unsecured credit, but also for secured credit (including mortgage relief services) and non-credit debts. One commenter said this breadth of coverage would help to prevent circumvention but did not explain how.
One public-interest consumer lawyer commenter urged the Bureau to cover general credit counseling in the rule. The commenter asserted that credit counselors can play an important role in consumers' decisions regarding consumer credit and are therefore a part of this core market. Another public-interest consumer lawyer commenter asserted that these credit counseling services often target low-income individuals. Neither commenter offered a suggestion for how the Bureau can define this market.
Many commenters, including consumer advocates, nonprofits, public-interest consumer lawyers, consumer law firms, and a research center advocated to expand the scope of coverage to reach a particular kind of credit counseling—credit repair services. These commenters asserted that many scams are perpetrated on consumers in the guise of credit repair services. Some of these commenters noted that some credit repair services include neither debt relief nor the provision of consumer reports to consumers and thus would not be covered by the proposal. In addition, an industry commenter described ongoing problems that third-party credit repair companies were creating for consumer reporting agencies.
Some commenters, including consumer advocates, nonprofits, consumer law firms, and others, also urged that the scope of coverage of the rule be expanded to include certain other services that the Bureau can regulate as financial advisory services pursuant to 12 U.S.C. 5481(15)(A)(viii). These commenters referred to a wide range of services, including “lead generation” by providing information to facilitate the marketing of a variety of types of consumer financial products or services beyond consumer credit; and technological applications that collect personal financial information of consumers to facilitate delivery of advice on matters of consumer finance, whether budgeting, managing credit, or otherwise. Some of these commenters
The final rule adopts proposed § 1040.3(a)(3) as proposed, with an addition to cover providing products or services “represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating.” The Bureau requested comment on the possibility of separately covering credit repair services and is making this change because it shares commenters' concerns over the potential for consumer harm in the credit repair market.
The final rule's description of credit repair services is based on the description of credit repair services in the Telemarketing Sales Rule (TSR), which the Bureau, together with the FTC, enforces.
With regard to coverage of other types of services that commenters characterized as financial advisory services, the Bureau did not propose in this rulemaking to cover financial advisory services generally. At this time, the Bureau is not expanding the coverage of this rule to include these products or services. The Bureau will continue to monitor the use and impact of arbitration agreements in the provision of financial advisory services as part of its overall role in monitoring consumer finance markets. The Bureau also may determine at a future time that coverage of other forms of credit counseling would be warranted.
The Bureau also recognizes that any number of consumer financial products or services it is not covering in this rule may involve the collection of the personal financial data of consumers, giving rise to a risk of a data breach and potentially identity theft. However, the Bureau in this rule is not seeking to cover providers merely based on their collection of consumer financial data. At the same time, the Bureau recognizes that the collection of such data in connection with a service or product covered by the rule is important to include within the scope of this rule. Accordingly, the Bureau is adopting comment 3(a)-2 to clarify that when a person is a provider, the technological tools they provide in connection with the covered product, such as internet or mobile phone apps, also are covered. This comment applies to all of the covered products and services in § 1040.3(a).
For the reasons described in the proposal and reiterated above, the final rule adopts § 1040.3(a)(3) and comment 3(a)-1 as proposed, renumbers them as § 1040.3(a)(3)(i) and comment 3(a)(3)(i)-1, adds § 1040.3(a)(3)(ii) and comment 3(a)(3)(ii)-1 to cover credit repair services, and adds comment 3(a)-2 as described above.
As explained in the proposal, the Bureau believed that the proposal should apply to providing consumers with consumer reports and information specific to a consumer from consumer reports, such as by providing credit scores and credit monitoring.
As the proposal noted, the FCRA, enacted in 1970, defines which types of businesses are consumer reporting agencies.
Proposed § 1040.3(a)(4) therefore would have applied to consumer reporting agencies when providing such products or services directly to consumers, as well as to other types of entities that deliver consumer reports or information from consumer reports directly to consumers. For example, proposed § 1040.3(a)(4) would have covered not only credit monitoring services that monitor entries on a consumer's credit report on an ongoing basis, but also a discrete service that transmits a consumer report as defined by the FCRA, a credit score, or other information from a consumer report directly to a consumer.
Proposed § 1040.3(a)(4) would not have covered users of consumer reports who provide those reports or information from them to consumers solely in connection with adverse action notices with respect to a product or service that is not otherwise covered by proposed § 1040.3(a). For example, a user of a consumer report providing a consumer with a copy of their credit report solely in connection with an adverse action taken on an application for employment would not have been covered by proposed § 1040.3(a)(4).
One consumer advocate urged the Bureau to revise the proposed language to refer to the term “consumer file disclosure” from FCRA, and to cover products or services provided by affiliates of consumer reporting agencies to account for recent case law that might otherwise cause confusion or be construed to narrow the scope of coverage from what the proposal intended.
A credit reporting industry commenter and a credit reporting industry trade association, with support from several Members of Congress and another industry trade association, urged the Bureau to structure the rule to avoid creating class action exposure under the CROA for credit monitoring or credit education products and services. CROA was enacted in 1996 for the purpose of ensuring that prospective buyers of services from credit repair organizations can make informed decisions and are protected from unfair or deceptive practices.
In particular, two industry commenters asserted that the Bureau either failed to make findings that applying the rule to credit monitoring would be for the protection of consumers and in the public interest or improperly shifted the burden to industry to establish that applying the rule to credit monitoring does not meet those legal standards in Dodd-Frank section 1028. A nonprofit commenter also objected more broadly to the Bureau's preliminary view in the proposal that it would be more appropriate for issues such as these, which concern particular statutes with high statutory damages, to be dealt with by the Congress and the courts. The nonprofit stated that because the Bureau was exercising discretion to fashion the rule and determine how it should apply, that the Bureau would be the appropriate body to determine how to develop exemptions.
These industry commenters asserted that CROA, which regulates contracts, disclosures, and other practices of credit repair organizations,
These commenters further asserted that exposure to class action liability for CROA violations could prompt providers to stop offering credit monitoring services. This, the industry commenters believe, would deprive consumers of a product that is valuable and serves an important function of helping consumers prevent or mitigate the impact of identity theft, and could drive consumers to riskier products. They asserted that it would be infeasible for credit monitoring services to comply with several CROA provisions, the application of which they asserted also would be confusing or inconvenient for consumers. For example, the commenters asserted that mandatory disclosure language might be confusing to consumers because it refers to the credit repair organization dealing with consumer reporting agencies, and yet some credit monitoring providers are themselves consumer reporting agencies.
The consumer reporting industry trade association also asserted that proposed § 1040.3(a)(4) would create an un-level playing field in the market of identity theft prevention products and services. The commenter stated this would occur because some products or services monitor information from a consumer report as defined in FCRA, while others do not use such reports. In the view of this commenter, by basing coverage on whether the consumer report as defined in FCRA is a source of information, the proposal would disadvantage those identity monitoring products that rely upon that source of information. This commenter cited a particular concern with how identity monitoring products that do not rely on FCRA-defined information would be able to use arbitration agreements to prevent exposure to CROA liability.
Other commenters sought an expansion of this category of coverage. Specifically, several commenters, including consumer advocates and advocacy groups, a research center, two trade associations of consumer lawyers, and a small business advocacy group urged the Bureau to expand the coverage in proposed § 1040.3(a)(4) to include identity monitoring services that monitor and provide consumers with information from sources other than consumer reporting agencies. One of these consumer advocates noted that identity monitoring services may monitor the internet for references to consumers' personal financial information, citing a service provided by a consumer reporting agency as an example. This commenter asserted that these services are related to the protection of the financial assets and financial reputation of the consumer, and may monitor financial or banking data of the consumer, bringing them within the authority of the Bureau to regulate.
In response to the request for comment in the proposal on whether the scope of coverage should be expanded to include other activities of consumer reporting agencies, many commenters, including consumer advocates, nonprofits, a consumer law firm, and others, indicated that the Bureau should do so. Several of these comments expressed the view that consumer complaints concerning information in consumer credit files are very common, and collective remedies under FCRA are important to addressing inaccurate consumer credit reporting practices. An industry trade association stated in its comment, however, that arbitration agreements are not and could not be used in the context of consumer reporting agencies carrying out their statutory duties. Therefore, the commenter asserted that there is no support in the Study for this expansion of coverage and the Bureau lacks any rationale for considering it.
A number of consumer advocates, nonprofits, and others also stated in their comments that the final rule should cover furnishing of information to consumer reporting agencies. These comments indicated that the coverage of furnishing should be broader than the proposal and not be limited to furnishing in connection with a
After consideration of the comments, the Bureau is adopting revisions to proposed § 1040.3(a)(4) with minor wording modifications to clarify the intended scope of coverage by referring not only to the provision to consumers of “consumer reports” and “credit scores” as defined in FCRA,
As discussed above, in proposed § 1040.3(a)(4) the Bureau sought to cover credit monitoring as well as services providing consumers with their credit reports or a credit score. These types of products and services all provide consumers with information that ultimately originates from a consumer reporting agency as defined in FCRA. In response to the comments suggesting that providing information to a consumer from a “consumer file” as defined in FCRA should be separately covered, in an abundance of caution, the Bureau is revising the terminology in the final rule to clarify this activity is covered by § 1040.3(a)(4). The Bureau is clarifying that § 1030.3(a)(4) covers providing information derived from a consumer's “file,” which FCRA, 15 U.S.C. 1681a(g), defines as “all of the information on [the] consumer recorded and retained by a consumer reporting agency . . .”
However, the Bureau is not adopting the consumer advocate commenter's suggestion of referring to a “consumer file disclosure,” as that is not a defined term in FCRA and relying on that term could raise doubt over the coverage of products or services whose information comes from a consumer's “file” but not as a result of the consumer file disclosure. Instead, the Bureau's revision to § 1030.3(a)(4) reaches more broadly, to information “derived from the consumer's file.”
The Bureau has carefully considered the comments relating to potential class liability for credit monitoring services under CROA, but does not agree that an exemption is warranted. In enacting CROA, Congress included a definition of the term credit repair organization in the statute.
At the outset, the Bureau notes that it disfavors exemptions to the class rule for claims under a particular statute. For the Bureau to decide a Congressionally-created private right of action does not protect consumers would amount to reconsideration by the Bureau of legislative policy choices. Further, the Bureau is concerned about taking actions that would be construed as allowing companies to avoid complying with applicable law. Indeed, such a result would be contrary to the goals of this rulemaking including deterring violations of the law and promoting the rule of law. And for the reasons discussed below, the Bureau does not believe commenters have presented persuasive evidence that compliance with or the remedial scheme established by the statute creating that private right of action is against the public good.
With regard to CROA specifically, as the proposal indicated, the Bureau's Study covered class actions involving CROA and the Bureau has conducted pre-proposal outreach and research concerning CROA. The Bureau subsequently received a number of industry comments, which are discussed above. These inputs did not provide evidence that CROA, on the whole, fails to promote the public good and protection of consumers.
In adopting CROA, Congress sought to protect consumers in the credit repair market as a whole, which it covered comprehensively, with limited exceptions.
Moreover, the Bureau notes that concerns about whether and when the statute applies to credit monitoring and (if so) whether the statute should be scaled back raise difficult policy and legal issues. Specifically, the Bureau notes that since 2005, there have been a number of efforts in Congress to determine whether CROA could be improved by clarifying the CROA credit monitoring coverage issue that commenters raised here.
With regard to the industry commenters' claims that compliance with CROA is infeasible or would result in substantial price increases, the Bureau is not persuaded of these claims based on the record before it.
Commenters also contended that application of CROA to credit monitoring products could potentially
Relatedly, with respect to credit education services, the Bureau notes that the commenters' principal concern seems to be that consumers may not elect to use a CROA-compliant service. Although the commenters speculated that a brief waiting period before commencement of the service was a reason for this, the record did not establish that. In any event, as noted above, to the extent consumers voluntarily choose not to use a product or service, this does not mean that the product or service is not accessible to them.
Insofar as compliance is not infeasible and cost increases are unlikely, commenters' primary concern appears to be that the disgorgement remedy available under CROA makes it difficult—if not impossible—for providers to irreversibly pass any increased costs on to consumers. This is because no matter how high a provider raises its prices, it may not be able to retain that increase to cover CROA liability in the event that all revenue must be returned to injured consumers. The Bureau is not persuaded for several reasons. First, the Bureau recognizes, as confirmed by the industry commenters, that a variety of identity theft prevention and remediation products or services may be bundled with credit monitoring, such as identity monitoring from non-FCRA sources, identity restoration services, and identity theft insurance. As noted above, these products and services would not be covered by § 1040.3(a)(4) if they do not involve providing information derived from the consumer's file maintained by the consumer reporting agency, and in the case of identity theft insurance may be excluded pursuant to § 1040.3(b)(6) as the business of insurance. Thus the impact of disgorgement would not necessarily fall on the entire bundled suite of services, but generally only on the credit monitoring component of those services (to the extent CROA applies and a violation occurs). The commenters did not assert that the CROA exposure that the provider of a bundled suite of services may face would be based on the fees consumers paid for the bundled suite of services. Accordingly, the Bureau believes this exposure, to the extent it exists, may be more limited for bundled services. Second, the Bureau further understands that, under CROA,
For all of the reasons discussed above, the Bureau does not believe that it would be appropriate, in this rule, for the Bureau to substitute its judgment for that of Congress, which has so far not acted to restructure the scope of CROA in this area.
With regard to other concerns raised by some commenters that the scope of proposed § 1040.3(a)(4) was too narrow, the Bureau disagrees that the scope should be expanded. For example, the Bureau is not expanding the scope of proposed § 1040.3(a)(4) to reach forms of identity monitoring services that do not involve providing consumers with consumer reports, credit scores, or information derived from consumer files at this time. Given the limited nature of the comments received, the Bureau has insufficient information in this rulemaking to develop a legal definition of this type of product or service. At the same time, however, the Bureau
The Bureau also is not expanding the scope of proposed § 1040.3(a)(4) to include consumer reporting agency activities beyond those that involve providing consumer reports, credit scores, or information derived from a consumer file under FCRA. The Bureau is not persuaded that arbitration agreements affect these activities, and agrees with the industry association comment that it is unclear how a consumer reporting agency would be able to enter into an arbitration agreement with a consumer in this context. The Bureau may inquire into this question in its supervision and monitoring of the consumer reporting market. If arbitration agreements did appear to be limiting the ability of consumers to obtain relief from a consumer reporting agency in a FCRA class action, the Bureau could address that issue at a future time.
With regard to the comments seeking an expansion of scope to cover furnishing, independent of other proposed coverage, the Bureau is not persuaded that it should do so at this time. The examples these commenters described pertained to furnishing by persons as part of a product or service that is already covered by the rule, such as debt collection (§ 1040.3(a)(10)) and servicing consumer credit (§ 1040.3(a)(1)(v)). As stated in the section-by-section analyses of those provisions, furnishing in connection with these products or services already would be covered as part of the coverage of those products or services. For debt collection, this would be true whether the collection is on an extension of consumer credit, an automobile lease, a check, or a deposit account. Thus, the Bureau does not believe separately covering furnishing is necessary at this time.
As explained in the proposal, the Bureau believed the proposal should apply to deposit and share accounts.
TISA created uniform disclosure requirements for deposit and share accounts.
The Bureau did not receive comments on proposed § 1040.3(a)(5).
As explained in the proposal, in addition to coverage of deposit and share accounts as defined by (or within the meaning set forth in) TISA in proposed § 1040.3(a)(5), the Bureau believed the proposal should cover other accounts as well as remittance transfers subject to the EFTA.
The Bureau noted in the proposal that it had separately proposed a rule to extend the Regulation E definition of “account” to include “prepaid accounts.”
In the proposal, the Bureau noted that EFTA also regulates preauthorized electronic fund transfers (PEFTs) and store gifts cards and gift certificates. The Bureau had not proposed to include those activities as covered products or services under proposed § 1040.3(a)(6). The Bureau noted that certain gift cards and gift certificates redeemable only at a single store or affiliated group of merchants, while subject to Regulation E,
The Bureau received several comments related to proposed § 1040.3(a)(6). Some consumer advocates and nonprofits urged the Bureau to apply the rule to stored value products, regardless of whether they are accounts under Regulation E. One commenter noted that the enumerated laws do not evolve as quickly as the markets, leaving gaps in coverage. Two commenters raised specific concerns with prison release cards. One commenter stated that, regardless of whether they are covered as accounts under Regulation E, the rule should cover general use gift cards, non-merchant rewards cards, Supplemental Nutrition Assistance Program (SNAP) cards, and cards linked to health savings accounts, noting that some of these are network branded just like other types of cards that are covered under Regulation E.
An industry trade association commenter in the consumer payments sector also stated that clarifications in the final rule should address the coverage of prepaid and stored value cards. The commenter did not say, however, whether the rule should include or exclude these products.
The Bureau adopts § 1040.3(a)(6) as proposed. Since the close of the comment period, the Bureau has adopted changes to the definition of “account” in Regulation E in its final prepaid accounts rule that it issued in October 2016. That rule, the relevant provisions of which are scheduled to take effect on April 1, 2018, expands the definition of account under Regulation E to include certain types of prepaid products not previously covered.
As explained in the proposal, the Bureau believed that the proposal should apply to transmitting or exchanging funds.
For example, a business that provides consumers with domestic money transfers generally would have been covered by proposed § 1040.3(a)(7). As noted above, however, proposed § 1040.3(a)(7) would not have applied to transmitting or exchanging funds where that activity is integral to a non-covered product or service. Thus, proposed § 1040.3(a)(7) generally would not have applied, for example, to a real estate settlement agent, an attorney, or a trust company or other custodian transmitting funds from an escrow or trust account that are an integral part of real estate settlement services or legal services. By contrast, a merchant who offers a domestic money transfer service as a stand-alone product to consumers would have been covered by proposed § 1040.3(a)(7). In addition, the Bureau believed that mobile wireless third-party billing services that engage in transmitting funds would have been covered by proposed § 1040.3(a)(7), as the Bureau understood that such services would not typically be integral to the provision of wireless telecommunications services.
A consumer advocate commenter generally expressed support for the coverage in proposed § 1040.3(a)(7). This commenter stated support for the view that this provision may apply to mobile wireless third-party billing, asserting that cramming is a serious consumer protection problem and that arbitration agreements impede relief. This commenter urged the Bureau to narrow the proposed exclusion for transfers that are integral to a product or service not covered by the rule, to prevent evasion. The commenter stated that only transfers that are necessary and essential for a non-covered service should be excluded.
An industry trade association commented, however, that, in their view, mobile wireless third-party billing is not a consumer financial product or service and therefore should not be cited as an example that would be covered by the rule.
The Bureau is finalizing § 1040.3(a)(7) as proposed, but changing the exclusion in two ways to prevent evasion and uncertainty. First, the Bureau sought comment on whether the Bureau should define the limitation on coverage in a different way, including whether the Bureau should adopt “necessary or essential to a non-covered product or service” as the limitation. Consistent with the consumer advocate's comment described above, as revised in the final rule, the limitation would apply only for transmitting or exchanging funds when necessary to a product or service that is not covered by the rule (which could include, for example, another consumer financial product or service that is not listed in § 1040.3(a) or a nonfinancial good or service). The Bureau also is replacing the term “integral,” with the term “necessary,” which the Bureau believes is a narrower term.
With regard to the industry trade association comment that stated that mobile wireless third-party billing is not a service undertaken for consumer, household, or family purposes within the meaning of the Dodd-Frank Act, the Bureau notes that the where the provider is acting as a bill payment service provider like other financial services providers,
The Bureau recognizes that, to comply with the final rule, mobile wireless providers engaged in providing third-party billing services would need to analyze the extent to which their products or services include transmitting or exchanging funds for consumer purposes. The Bureau further recognizes that the scope of transmitting and exchanging funds under the Dodd-Frank Act has not been interpreted by regulation. Nonetheless, the Bureau is not persuaded by the suggestion in the comment that for providers to determine whether they are covered would be particularly burdensome. As noted in the proposal, the phrase transmitting and exchanging funds is defined in the Dodd-Frank Act.
In addition, to the extent the application of the rule creates an incentive for the provider to develop a compliance system and creates class action exposure for providers who fail to meet their legal obligations in delivering consumer financial services, these are the chief goals of this rulemaking. The findings in Part VI and the Bureau's Section 1022(b)(2) Analysis account for the fact that, on the margins, providers may forgo offering a product because they do not want to invest in compliance and make private aggregate relief available to consumers for that product. In addition, applying the rule to an incidental product or service would not create coverage for the provider's core product. If the provider included an arbitration agreement for the products and services that are not covered by the rule, the rule would not prohibit the provider from relying on that arbitration agreement for those products and services in a class action. Relatedly, as noted below, the provider would have the option, under the final rule, of including contract language that clarifies that some products or services provided are not covered by the rule, which would limit the impact of the § 1040.4(a)(2) of the rule. Thus, the impact of the rule on the provider would presumably be in proportion to the importance that the covered product or service has to the provider.
As explained in the proposal, the Bureau believed that the proposal should cover certain types of payment and financial data processing.
The coverage of proposed § 1040.3(a)(8) would not have included all types of payment and financial data processing, but rather only those types that involve accepting financial or banking data directly from the consumer for initiating a payment, credit card, or charge card transaction. An entity would have been covered, for example, by providing the consumer with a mobile phone application (or app, for short) that accepts this data from the
The Bureau notes that the breadth of proposed § 1040.3(a)(8) would have been limited in several ways. First, the coverage of proposed § 1040.3(a)(8) would not have included merchants, retailers, or sellers of nonfinancial goods or services when they are providing payment processing services directly and exclusively for the purpose of initiating payment instructions by the consumer to pay such persons for the purchase of, or to complete a commercial transaction for, such nonfinancial goods or services. Those types of payment processing services are excluded from the type of financial product or service identified in Dodd-Frank section 1002(15)(A)(vii)(I). As a result, they would not be a consumer financial product or service pursuant to 12 U.S.C. 5481(5), which is a statutory limitation on the coverage of proposed § 1040.3(a). For the sake of clarity, proposed § 1040.3(a)(8) would have stated that it would not apply to accepting instructions directly from a consumer to pay for a nonfinancial good or service sold by the person who is accepting the instructions. In addition, proposed § 1040.3(a)(8) would not have applied to accepting instructions directly from a consumer to pay for a nonfinancial good or service marketed by the person who is accepting the instructions. As a result of this proposed exception, proposed § 1040.3(a)(8) would not have reached, for example, a sales agent, such as a travel agent, who accepts an instruction from a consumer to pay for a nonfinancial good or service that is marketed by the agent on behalf of a third party that provides the nonfinancial good or service.
The Bureau further notes that certain forms of payment processing also would have been covered by other provisions of proposed § 1040.3(a). This may include, for example, proposed § 1040.3(a)(1)(v) (servicing of consumer credit), § 1040.3(a)(3) (debt relief services), § 1040.3(a)(5) (deposit and share accounts), § 1040.3(a)(6) (consumer asset accounts and remittance transfers), § 1040.3(a)(7) (transmitting or exchanging funds), or § 1040.3(a)(10) (debt collection).
A public-interest consumer lawyer commenter stated that the exclusion in proposed § 1040.3(a)(8) should not exclude sellers of automobiles, in particular when the payment being processed is for a loan to finance the purchase of the dealer's automobiles.
A consumer advocate commenter recommended that the Bureau expand the scope of payment and financial data processing coverage in three ways. First, this commenter stated that the rule should explicitly cover electronic funds transfers (EFTs) and preauthorized electronic funds transfers (PEFTs) as those terms are defined in Regulation E. Second, this commenter stated that transfers of funds between accounts at the same financial institution, which are not EFTs under Regulation E, should be covered. Third, this commenter stated that the Bureau should remove the word “directly” from proposed § 1040.3(a)(8), so that the rule would reach persons who work behind the scenes to arrange debiting funds from consumer accounts as part of work-at-home schemes, fake dating apps, or other schemes perpetrated by third parties who are not offering consumer financial products or services.
This consumer advocate commenter also expressed support for coverage that would regulate mobile wireless third-party billing, asserting that cramming is a serious consumer protection problem and that arbitration agreements impede relief to consumers harmed by cramming practices. As noted above, an industry trade association, however, disagreed with the Bureau's observation that proposed § 1040.3(a)(8) could apply to mobile wireless third-party billing.
For the reasons described in the proposal, and explained below, the final rule adopts § 1040.3(a)(8) and comment 3(a)(8)-1 as proposed with minor edits for clarity. The proposal described the payment processing activity excluded from § 1040.3(a)(8) based on whether it was to process a payment or card transaction for a nonfinancial good or service sold or marketed by the processor. Rather than using the term nonfinancial good or service, which is not defined, the Bureau believes it would be clearer to refer to goods and services that are not covered by § 1040.3(a).
With regard to the public-interest consumer lawyer comment that stated that automobile dealers should not be excluded when processing payments on their loans, the Bureau does not believe an adjustment to § 1040.3(a)(8) is necessary. As discussed in the proposal and further below with regard to § 1040.3(b)(6), the Bureau's jurisdiction over certain automobile dealers and other merchants is constrained by the Dodd-Frank Act.
The Bureau disagrees with the consumer advocate commenter that any of the changes it seeks are necessary. The Bureau notes that EFTs and PEFTs will typically be covered pursuant to § 1040.3(a)(5) or (a)(6) because they are made to or from an account as defined under EFTA or TISA and/or pursuant to § 1040.3(a)(8) because they also are processed by persons who accept data directly from the consumer to initiate payments for services these persons neither sold nor marketed. Similarly, a transfer of funds between accounts need not be defined as covered payment processing, since the underlying accounts are already themselves covered, for example, by § 1040.3(a)(5) and (a)(6).
With regard to the commenter's suggestion to remove “directly” from proposed § 1040.3(a)(8), the Bureau believes that limiting the scope of
The Bureau agrees with the industry trade association comment that, when a mobile wireless provider markets its own nonfinancial goods or services, then any payment processing the mobile wireless provider provides to the consumer in the course of purchasing the nonfinancial good or service it has marketed to the consumer would not be covered by § 1040.3(a)(8) because this provision specifically excludes such situations. However, the Bureau disagrees with the commenter's view that merely providing payment processing services constitutes marketing of the goods or services for which the payments are being processed so as to warrant categorically excluding third-party billing from the scope of the rule. In the Bureau's experience, this view is overbroad and could render the coverage in § 1040.3(a)(8) meaningless because an exception for simply facilitating payment of goods or services would swallow the rule. While it is true that making a payment method available can facilitate sales of a product, the Bureau does not believe that act by itself would constitute marketing as the Bureau interprets that term in the context of this regulation. To be eligible for the marketing exclusion, a payment processor would need to be engaged in marketing activity for the nonfinancial good or service independent of the payment processing activity itself.
As stated in the proposal, the Bureau believed that the proposal should apply to cashing checks for consumers as well as to associated consumer check collection and consumer check guaranty services. Proposed § 1040.3(a)(9) would have included in the coverage of proposed part 1040 check cashing, check collection, or check guaranty services, which are types of consumer financial products or services identified in Dodd-Frank section 1002(15)(A)(vi).
The Bureau did not receive comments on its proposal to cover cashing checks for consumers and associated check collection and check guaranty services. The final rule adopts proposed § 1040.3(a)(9) as proposed. The Bureau also notes that, as discussed below in the section-by-section analysis of § 1040.3(a)(10), furnishing in connection with debt collection would be covered as a collection activity. This also would be true for furnishing in connection with covered check collection or check guaranty activity.
As explained in the proposal, the Bureau believed that the proposal should apply to debt collection activities arising from consumer financial products and services covered by paragraphs (1) through (9) of proposed § 1040.3(a).
As the proposal explained, the Bureau believed that collections coverage was particularly important because the Study showed that class actions alleging violations of the FDCPA were the most common type of class actions filed across the six significant markets that the Bureau studied. Debt collection class settlements were also by far the most common type of class action settlement in all of consumer finance,
Specifically, proposed § 1040.3(a)(10) would have applied the requirements of proposed part 1040 to collecting debt that arises from any of the consumer financial products or services covered by any of paragraphs (1) through (9) of proposed § 1040.3(a). For clarity, proposed § 1040.3(a)(10) would have identified the specific types of entities that the Bureau understands typically are engaged in collecting these debts: (i) A person offering or providing the product or service giving rise to the debt being collected, an affiliate of such person, or a person acting on behalf of such person or affiliate; (ii) a purchaser or acquirer of an extension of consumer credit covered by proposed § 1040.3(a)(1)(i), an affiliate of such person, or a person acting on behalf of such person or affiliate; and (iii) a debt collector as defined by the FDCPA, 15 U.S.C. 1692a(6). The proposed coverage of each of these types of entities engaged in debt collection is described separately below.
Proposed § 1040.3(a)(10)(i) would have applied to collection by a person offering or providing the covered product or service giving rise to the debt being collected, an affiliate of such person,
In addition, proposed § 1040.3(a)(10)(ii) would have covered collection activities by an acquirer or purchaser of an extension of consumer credit covered by proposed § 1040.3(a)(1), an affiliate of such person, or a person acting on behalf of such person or affiliate. This coverage would have reached such persons even when proposed § 1040.3(b) would have excluded the original creditor from coverage. For example, such collection activities by acquirers or purchasers would have been covered even when the original creditor, such as a government or merchant, would have been excluded from coverage in circumstances described in proposed § 1040.3(b). As a result, collection by an acquirer or purchaser of an extension of merchant consumer credit covered by Regulation B, such as medical credit, would have been covered by proposed § 1040.3(a)(10)(ii), even in circumstances where proposed § 1040.3(b)(5) would have excluded the medical creditor from coverage.
The proposal explained that the Bureau believed that many activities involved in the collection of debts arising from extensions of consumer credit would also constitute servicing under proposed § 1040.3(a)(1)(v). However, the Bureau was proposing the coverage of collection activities by any other person acting on behalf of the provider or affiliate in proposed § 1040.3(a)(10)(i) and (ii) to confirm that collection activity by such other persons would have been covered even when such other persons do not meet the definition of a debt collector under the FDCPA (
As discussed in the proposal as described above, some debt collection activities are carried out by persons hired by the owner of a debt to collect the debt. The FDCPA generally considers such persons to be debt collectors and subjects them to its various statutory requirements and prohibitions against abusive collection practices. Allegations of violation of the FDCPA by debt collectors also were among the most common type of consumer claim identified in the Study, whether in class actions, individual arbitration, or individual litigation. Proposed § 1040.3(a)(10)(iii) therefore would have included in the coverage of proposed part 1040 collecting debt by a debt collector as defined by the FDCPA, 15 U.S.C. 1692a(6),
As discussed in the proposal as described above, the Bureau believed it is important to cover collection on all of the consumer financial products and services covered by the rule, since all of these products can generate fees that, if not paid, lead to collection activities by debt collectors as defined in the FDCPA. Of course, one of the most common types of debt collected by FDCPA debt collectors arises from consumer credit transactions. Accordingly, proposed § 1040.3(a)(10)(iii) would have extended coverage, for example, to collection by a third-party FDCPA debt collector acting on behalf of the persons extending credit who are ECOA creditors and thus subject to proposed § 1040.3(a)(1)(i) or their successors and assigns who are subject to proposed § 1040.3(a)(1)(iv). The Bureau believed that proposed § 1040.3(a)(10)'s references to these existing regulatory regimes would facilitate compliance, since the Bureau expected that industry has substantial experience with existing contours of coverage under the FDCPA and ECOA. As discussed above, proposed § 1040.3(a)(10)(ii) would have applied proposed part 1040 to purchasers of consumer credit extended by persons over whom the Bureau lacks rulemaking authority under Dodd-Frank section 1027 or 1029 or who are otherwise exempt under proposed § 1040.3(b). Similarly, proposed § 1040.3(a)(10)(iii) would have applied to FDCPA debt collectors when collecting on this type of credit as well as other debts arising from products or services covered by proposed § 1040.3(a)(1) through (9) provided by persons over whom the Bureau lacks rulemaking authority under Dodd-Frank section 1027 or 1029 or who otherwise would have been exempt under proposed § 1040.3(b).
The Bureau recognized that FDCPA debt collectors do not typically become
Proposed comment 3(a)(10)-1 would have further clarified that collecting debt by persons listed in § 1040.3(a)(1) would have been covered with respect to the consumer financial products or services identified in those provisions, but not for other types of credit or debt they may collect, such as business credit.
A debt collection industry trade association challenged the Bureau's findings generally, mostly echoing other industry comments criticizing the proposal and the class rule in particular, as discussed above in Part VI. In addition, this commenter asserted that individual arbitration was superior to class litigation in consumer disputes. Some of the reasons it offered in support of this claim were specific to debt collection. For example, the commenter stated that in debt collection disputes, consumers place a particularly high value on confidentiality, which it believed arbitration better preserves. It also stated that debt collection claims are simpler to adjudicate, and thus suited to a simpler dispute process, which it believed arbitration offers. The commenter also noted that debt collectors, and small entities in particular, can use creditors' arbitration agreements to avoid the burdens of challenging flawed class litigation.
Three public-interest consumer lawyer commenters and a consumer advocate commenter supported the proposed coverage of debt collection, which in their view was one of the most important components of the proposed coverage. One of the public-interest consumer lawyers stated that a significant portion of the complaints these commenters have seen pertain to unfair debt collection practices. The consumer advocate commenter also noted the prevalence of class actions addressing debt collection problems as providing support for coverage of debt collection in the proposal. A public-interest consumer lawyer commenter also expressed support in particular for the coverage in proposed § 1040.3(a)(10)(i) and (ii), noting its understanding that these provisions would apply even when the covered person is not a debt collector as defined in the FDCPA, and also when the debt being collected arises from other covered activities beyond extending consumer credit. Another public-interest consumer lawyer commenter asserted that recourse to class actions for violation of debt collection laws is critically important for the protection of consumers. This commenter also stated that coverage of collection by third parties on consumer credit extended by exempt persons, such as medical providers, was particularly important. It stated that it has seen a number of instances of improper medical billing or collection practices, indicating that coverage in this rule is important.
The consumer advocate commenter also urged the Bureau to clarify that, with regard to proposed § 1040.3(a)(10)(iii), the FDCPA applies to debt buyers. For example, collectors may collect on debts they have purchased arising from deposit accounts, automobile leases, or check collection activities.
Finally, the consumer advocate commenter urged the Bureau to clarify that proposed § 1040.3(a)(10)(i) covers third parties acting on behalf of an exempt creditor or its affiliate when collecting on a debt arising from a covered consumer financial product or service. As an example, this commenter referred to a third-party collector of a medical credit account.
The Bureau adopts § 1040.3(a)(10) and its commentary in comments 3(a)(10)-1 and 3(a)(10)-2 as proposed.
The industry trade association commenter's criticisms of the class rule were principally directed at the findings in support of rule as a whole, and are therefore addressed in Part VI above and, to the extent they relate to small entities, in the discussion of the potential alternative of a small entity exemption in Part IX below. With regard to the commenter's assertion that individual arbitration is superior to class litigation of debt collection disputes, the Bureau emphasizes that, as discussed in Part VI, creditors may continue to make individual arbitration available, which may also make it available for disputes with debt collectors. In addition, with regard to its claim that arbitration better protects consumer confidentiality, the Bureau notes that arbitration also depends on courts for enforcing awards, which may expose consumers to the same confidentiality concerns as individual litigation (indeed, the Bureau understands that many of the debt collection arbitrations in NAF discussed in Part II led to court actions to enforce arbitral awards in debt collection) and further that, according to the Study, the majority of arbitration agreements did not have confidentiality provisions.
The Bureau agrees with the consumer advocate comment that, as proposed, § 1040.3(a)(10) would apply to a third party collecting on consumer credit originated by an exempt person, such as a medical provider exempt in circumstances described in proposed § 1040.3(b)(6).
With regard to the consumer advocate commenter's request that this rule clarify the coverage of debt buyers under the FDCPA, the Bureau is not, in this rulemaking, interpreting the scope of the FDCPA. The scope of that statute as it stands now therefore determines the scope of § 1040.3(a)(10)(iii). The Bureau also notes, however, that the Supreme Court recently issued a decision holding that a debt buyer collecting on its own behalf debts that it purchased was not collecting or attempting to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another within the meaning of the FDCPA.
With regard to the consumer advocate commenter's request to confirm that furnishing is a debt collection activity, when a person is collecting debt within the meaning of § 1040.3(a)(10), the Bureau agrees that if that person furnishes information on that debt in the course of that debt collection, then furnishing falls within the scope of the rule. The relevant factor is therefore whether the furnishing is done in the course of the debt collection, and not whether the debt collector is required to engage in the furnishing. However, the only commenter to address this question was this consumer advocate; the Bureau did not receive any other comments indicating uncertainty over the coverage of furnishing by debt collectors as a debt collection activity. Therefore, the Bureau believes this clarification is sufficient.
With regard to the consumer advocate comment concerning coverage of payment processing that may be ancillary to debt collection activities, the Bureau agrees that this would be covered by § 1040.3(a)(10) regardless of whether it is also covered by any other provision in § 1040.3(a). The Bureau interprets the term debt collection to include processing payments made by consumers as part of debt collection activity (
Proposed § 1040.3(b) would have identified the set of conditions under which certain persons would have been excluded from the coverage of proposed part 1040 when providing a certain products or services that were otherwise covered by proposed § 1040.3(a).
For illustrative purposes, the Bureau noted in the proposal that persons offering or providing consumer financial products or services covered by proposed § 1040.3(a) described above would have included, without limitation, banks, credit unions, credit card issuers, certain automobile lenders, automobile title lenders, small-dollar or payday lenders, private student lenders, payment advance companies, other installment and open-end lenders, loan originators and other entities that arrange for consumer loans, providers of certain automobile leases, loan servicers, debt settlement firms, foreclosure rescue firms, certain credit service/repair organizations, providers of consumer credit reports and credit scores, credit monitoring service providers, debt collectors, debt buyers, check cashing providers, remittance transfer providers, domestic money transfer or currency exchange service providers, and certain payment processors.
Some commenters sought exclusions for certain persons, rather than certain products or services. Comments concerning a possible small entity exemption are discussed in Part IX below. In addition, a number of credit union and community bank industry commenters sought an exemption from the rule, for a variety of reasons. For example, credit union commenters cited their member-owned, not-for-profit cooperative structure
Other comments on the proposed exemptions and the Bureau's analysis of those comments are discussed in the section-by-section analysis of each proposed exclusion below.
The Bureau is adopting the text in the introductory paragraphs of § 1040.3(b) as proposed, with a minor clarification to account for the fact that some exclusions apply more broadly to particular parties, rather than simply with regard to specific consumer financial products or services.
With regard to the exemptions requested by credit union and community bank commenters, the Bureau is not adopting such exemptions in the rule as discussed further in Part VI above and the Section 1022(b)(2) Analysis below. As discussed in the section-by-section analysis of § 1040.3(b)(2) below, the Bureau has determined in the final rule that democratic accountability structures are an insufficient basis for excluding governments from the rule. With regard to an exemption for credit unions, the Bureau similarly believes that shareholder ownership, while providing a form of democratic shareholder accountability over the credit union, is not a sufficient compliance incentive to replace a right to enforce the laws on a class basis. The Bureau further believes that the presence of a financial institution in a community, such as a credit union or community bank, with the interest of developing and retaining customers in that community, also is not a sufficient compliance incentive to replace a right to enforce those laws on a class basis.
Proposed § 1040.3(b)(1) would have excluded from the coverage of proposed part 1040 broker-dealers to the extent they are providing any products or services covered by proposed § 1040.3(a) that are also subject to specified rules promulgated or authorized by the SEC prohibiting the use of pre-dispute arbitration agreements in class litigation and providing for making arbitral awards public. The term “broker-dealers” generally refers to persons engaged in the business of effecting securities transactions for the account of others or buying and selling securities for their own account.
As discussed above and in the proposal,
The proposal also identified a CFTC regulation requiring that pre-dispute arbitration agreements in customer agreements for certain products and services regulated by the CFTC be voluntary, such that the customer receives a specified disclosure before being asked to sign the pre-dispute arbitration agreement, is not required to sign the pre-dispute arbitration agreement as a condition of receiving the product or service, and is only subject to the pre-dispute arbitration
Thus, under the proposal, any product or service that would be subject to both the Bureau's proposal and the CFTC rule
The Bureau consulted with the SEC and CFTC prior to issuing the proposal and after the close of the comment period and received a formal comment letter from the staff of the CFTC. In addition, the Bureau received comments from an industry trade association whose members include both broker-dealers and investment advisers regulated by the SEC, an investment adviser industry trade association, and an industry trade association representing futures commission merchants regulated by the CFTC. These comments generally expressed an opinion that the Bureau lacks any authority under the Dodd-Frank Act to promulgate rules governing the conduct of SEC- or CFTC-regulated persons when acting in a regulated capacity. The commenters referenced provisions in Dodd-Frank section 1027 and in the Act's legislative history that, in their view, support that position.
With respect to broker-dealers and investment advisers, the broker-dealer and investment adviser trade association commenters also stated that their position was further supported by language in Dodd-Frank section 1002(15)(A)(vii), which excludes “services related to securities” from the general definition of financial advisory products or services that are subject to the Bureau's Dodd-Frank Act jurisdiction.
The industry trade associations also observed that the Bureau's Study did not analyze the use of arbitration agreements by their members. The commenters also did not identify any consumer financial products or services provided by their investment adviser or futures commission merchant members that could be subject to this rule. With respect to broker-dealers, a securities industry trade association, whose members include broker-dealers who are also registered investment advisers, stated that broker-dealers provide margin loans to purchase securities, and may also provide payment processing or remittances in certain circumstances. In the view of this industry trade association, however, these products or services were related to securities within the meaning of Dodd-Frank section 1002(15)(A)(vii), and, as a result of this relationship, excluded from the rulemaking authority of the Bureau. The commenter asserted that this would be the case regardless of whether the services relating to securities were financial advisory in nature, but further asserted that the products or services do relate to financial advisory services that broker-dealers provide. The industry trade association asked the Bureau to identify what covered products and services that, in the Bureau's view, broker-dealers provide. This commenter also stated that neither it nor its members were aware of any covered products or services that investment advisers provide, and asked the Bureau to specifically identify any such covered products or services of which it was aware.
A trade association of consumer lawyers stated in its comment letter that the Bureau should not exempt any products or services covered by the proposal that are subject to the CFTC's jurisdiction because CFTC arbitration rules are limited and ineffective, do not guarantee the option for participation in class actions, and do not provide for the transparency of arbitral awards. This commenter did not identify, however, any consumer financial products or services provided by CFTC-regulated entities.
An association of lawyers who represent investors also urged the Bureau to not exempt investment advisers providing a covered product or service because there is currently no regulation of the use of arbitration agreements related to these products or services by investment advisers, and the SEC, in its view, has no current plan to exercise its authority to regulate investment adviser arbitration agreements under Dodd-Frank section 921. This commenter did not identify, however, any consumer financial products or services provided by investment advisers.
The Bureau adopts § 1040.3(b)(1)(i), an exemption for persons regulated by the SEC as defined in Dodd-Frank section 1002(21), which includes broker-dealers and investment advisers, as well as their employees, agents, and contractors, to the extent regulated by the SEC. This exemption also applies to persons acting in other SEC-regulated capacities as defined in Dodd-Frank section 1002(21), such as stock
In addition, the exemption in § 1040.3(b)(1)(ii) applies to any person to the extent regulated by a State securities commission as a broker-dealer or investment adviser. For example, some smaller investment advisers have assets under management that fall below registration thresholds for SEC oversight but that are required to register in the States in which they operate. Similarly, some broker-dealers operating exclusively within a State or only with respect to excluded and exempted securities may not be required to register with the SEC but may be regulated by a State securities commission. The Bureau has decided not to apply the rule only to smaller investment advisers or broker-dealers not registered with the SEC, as it sees no reason to target only this one segment of the market for coverage in this rule and doing so may create confusion in the marketplace. The exclusion in § 1040.3(b)(1)(ii) does not reach more broadly than broker-dealers and investment advisers, however. The Bureau does not confer a blanket exemption on persons regulated by State securities commissions because unlike the term person-regulated by the SEC, there is no definition of this term in the Dodd-Frank Act. In some States, an agency that is a State securities commission regulates securities firms as well as banks and other providers that regularly provide consumer financial products or services.
Thus, as revised, this exclusion applies to a broker-dealer or investment adviser who falls into either or both of the following categories: (1) Is a person regulated by the SEC as defined in Dodd-Frank section 1002(21); or (2) to the extent the person is regulated by a State securities commission as described in Dodd-Frank section 1027(h). It also applies to any other person regulated by the SEC as defined in Dodd-Frank section 1002(21).
With respect to persons regulated by the CFTC, the Bureau is similarly adding an exemption in the final rule to exclude persons regulated by the CFTC as defined in 12 U.S.C. 5481(20) or a person with respect to any account, contract, agreement, or transaction to the extent subject to the jurisdiction of the Commodity Futures Trading Commission under the CEA, 7 U.S.C. 1
Proposed § 1040.3(b)(2) would have excluded from the coverage of proposed part 1040 governments and their affiliates, as defined by 12 U.S.C. 5481(1), to the extent such entities provide products and services directly to consumers within their jurisdiction as specified in proposed § 1040.3(b)(2)(i) or (ii). This proposed exclusion would not have applied to an entity that is neither a government nor an affiliate of a government but provides services to a government or an affiliate of a government.
As stated in the proposal, the Bureau believed that private enforcement of consumer protection laws, when provided for by statute, is an important companion to regulation, supervision of, and enforcement against private providers by governments at the local, State, and Federal levels. The Bureau believed, however, that financial products and services provided by governments and their affiliates directly to consumers who reside within territorial jurisdiction of the governments should generally not be covered by proposed part 1040 given the unique position that governments are in with respect to products and services that they and their affiliates provide directly to their own constituents.
Specifically, proposed § 1040.3(b)(2)(i) would have excluded from coverage any products and services covered by proposed § 1040.3(a) when provided directly by the Federal government and its affiliates. In circumstances where proposed
Proposed § 1040.3(b)(2)(ii) would have excluded from coverage any State, local, or Tribal government, and any affiliate of a State, local, or Tribal government, to the extent it is providing consumer financial products and services covered by § 1040.3(a) directly to consumers who reside in the government's territorial jurisdiction. The Bureau believed that such governments and their affiliates are persons pursuant to Dodd-Frank section 1002(19) and that a number of such governments and their affiliates may provide financial products and services that could otherwise be covered by proposed § 1040.3(a). In circumstances where proposed § 1040.3(b)(2)(ii) would have applied, the Bureau posited that governments and their affiliates may be uniquely accountable through the democratic process to consumers for products and services the governments and their affiliates provide directly to consumers who reside within their territorial jurisdiction. The Bureau additionally posited that the democratic process may compel governments and their affiliates to treat consumers who reside within the government's territorial jurisdictions fairly with respect to dispute resolution over the products and services the governments and affiliates provide directly to those consumers. For these reasons, the Bureau proposed to exempt from coverage of part 1040 products and services provided directly by governments and their affiliates to consumers who reside within the territorial jurisdiction of these governments.
As with the proposed exclusion for the Federal government and its affiliates, proposed § 1040.3(b)(2)(ii) would not have excluded from the coverage of part 1040 nongovernmental entities that provide covered products or services on behalf of State, local, or Tribal governments or their affiliates, such as a bank that issues a payroll card account for State, local, or Tribal government employees or a private debt collector that collects on consumer credit extended by a State, local, or Tribal government. This proposed exemption also would not have extended to State, local, or Tribal governments or their affiliates providing products or services to consumers who reside outside the territorial jurisdiction of the particular government. The Bureau believed that the democratic process and its accountability mechanisms are not generally as strong in protecting consumers who do not reside in the territory of the government that is itself, or via a government affiliate, providing products or services directly to them. For example, because such consumers do not reside in the government's territorial jurisdiction, they are not likely to be eligible to vote in elections to select representatives in that government or on ballot initiatives or other matters that would bind that government or its affiliates.
Proposed comment 1040.3(b)(2)-2 would have provided examples of consumer financial products and services that are offered or provided by State, local, or Tribal governments or their affiliates directly to consumers who reside in the government's territorial jurisdiction, as well as products and services that would have fallen outside the scope of the proposed exclusion. The use of the term “affiliated” in these examples also would have indicated that this exemption would not have applied to services provided by persons who are not affiliates of governments. For example, so-called “public utilities” would not have been exempt unless they control, are controlled by, or are under common control with a government or its affiliates. The Bureau requested comment on these proposed examples, and on whether other examples should be included.
The Bureau further noted that the proposal would not have covered any government utility, or other affiliates of governments such as schools, when eligible for other exemptions in proposed § 1040.3(b). For example, a government would have been exempt when providing consumer credit for its own services if the government does this below the frequency specified in proposed § 1040.3(b)(3), or if the credit does not include a finance charge, in which case the exemption in proposed § 1040.3(b)(5) generally would have applied.
A consumer advocate and two public-interest consumer lawyer commenters urged the Bureau not to adopt the proposed exclusions, asserting that democratic processes are insufficient to protect consumers. In particular, they noted that consumers are not necessarily aware of legal harms (as the Bureau had itself noted in the proposal), and thus may be unable to use the democratic process to hold government providers to account. Moreover, even when consumers are aware, the commenters asserted that very few are likely to exercise their vote on this basis alone, particularly over small-dollar harms. The commenters also cited examples of the use of class actions to protect the rights of minorities, who, in their view, have historically faced particular difficulties holding governments accountable.
These commenters separately urged the Bureau not to use the term “affiliate” as defined in Dodd-Frank Act section 1002(1) because that definition was developed for the private marketplace and would be ambiguous in this context. One of these commenters also stated that affiliates of governments often have weaker accountability than governments themselves. Instead, the commenters advocated using a more developed test applied by the Internal Revenue Service to determine when entities are governmental in nature such
As is discussed above in Part IV, the Bureau held a consultation with representatives of Tribal governments in Phoenix, Arizona, on August 22, 2016. Many Tribal government representatives attending the consultation and other Tribal commenters (for convenience, both are referred to here as Tribal commenters, as many of those providing oral input at the consultation also provided written comments) emphasized that, in their view, the proposal would interfere with the sovereign immunity of Tribal governments.
In particular, Tribal commenters criticized proposed § 1040.3(b)(2). With regard to the Bureau's focus on democratic accountability, a number of Tribal commenters stated that their governments are sufficiently accountable, whether to residents or non-residents, and that they should be completely exempted from the rule. One Tribal commenter stated that the lack of a similar exemption in the Bureau's proposed rulemaking for small-dollar loans raised questions about the Bureau's rationale for proposing one here.
Several Tribal commenters also stated that the proposal would interfere with Supreme Court and other appellate precedent recognizing that consumers who are not members of a Tribe and not resident in Tribal territory nonetheless can consent to Tribal jurisdiction.
Several Tribal commenters further asserted that there was no basis for applying the proposal to Tribal governments, since they have sovereign immunity from private lawsuits including class actions.
Finally, two Tribal commenters urged the Bureau to expand its proposed exemption to include a service provider that acts on behalf of a government, asserting that these service providers enjoy the same legal status as the government itself. In support of their position, these commenters asserted that contractors may manage Tribal casinos without violating Federal gambling law, and contractors that run lotteries on behalf of State governments enjoy the same immunities that are conferred on the State government itself.
After consideration of the comments and the Bureau's further analyses, the Bureau has decided to shift away from an exemption for governments based on where their consumers reside, as the Bureau had proposed. The Bureau also understands the concerns raised by commenters about democratic accountability being potentially insufficient to protect consumers in some situations. At the same time, the Bureau also does not see a need, in general, for the rule to apply to persons who cannot be sued in class actions in any event because they are immune from suit. The Bureau is therefore adopting a status-based exemption in § 1040.3(b)(2) for (i) Federal government agencies as defined in the Federal Tort Claims Act, 28 U.S.C. 2671, and (ii) any State, Tribe, or other person to the extent the person qualifies as an arm of the State or Tribe within the meaning of Federal law concerning sovereign immunity and the person's immunities have not been abrogated by the U.S. Congress. The Bureau is adding comment 3(b)(2)(ii)-1 to clarify that, when the rule uses the term State, this includes any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.
The Bureau recognizes that certain government actors generally enjoy blanket immunities from private suit except when the immunity is lawfully abrogated by an act of Congress. These actors include not only States and Tribes, but also entities that are determined to be an “arm of a State,” and similarly, an arm of a Tribe.
Insofar as U.S. sovereign immunity law allows for the immunities of a State or Tribe (and by extension, their arms) to be, in some circumstances, abrogated by Congress, the Bureau does not intend for its rule to permit arbitration agreements to block class actions in these instances.
The Bureau also recognizes that the existence and nature of sovereign immunity from suit is not always fully certain. If a question or uncertainty were to arise, the final rule provides tailored language for entities to include in their contracts to preserve any immunity claims. Specifically, as discussed in the section-by-section analysis for § 1040.4(a)(2)(vi) below, if a person has a genuine belief that sovereign immunity from private suit under applicable law may apply to a person that may seek to assert the pre-dispute arbitration agreement, the person may voluntarily include a specified provision in its arbitration agreement that is designed to preserve any claim to that immunity that the person may have. This option allows providers covered by the rule to deal with any uncertainty they may perceive concerning the status of their immunities, without taking the risk that a court ultimately would disagree with their reliance on the exemption in § 1040.3(b)(2), and potentially subjecting them to a risk of penalties for violation of this rule.
The Bureau also recognizes that some governmental entities may not be eligible for the exemption in § 1040.3(b)(2)(ii). For example, some local governments may not be an arm of the State in which they are located. These governments would be subject to the rule to the extent they use arbitration agreements in connection with offering or providing a covered product or service to consumers and no other exemption applies. The rulemaking record does not establish that such situations are common.
The Bureau further notes that the exemption in § 1040.3(b)(2)(ii) applies to an entity that qualifies as an arm of the State or arm of the Tribe under U.S. law, regardless of whether it has waived its immunity. Under sovereign immunity law, States, Tribes, or arms of a State or Tribe may become amenable to private suit by voluntarily consenting to private suit.
The Bureau proposed in § 1040.3(b)(3) an exemption for a person in relation to any product or service listed in a paragraph under proposed § 1040.3(a) that the person and any affiliates collectively provide to no more than 25 consumers in the current calendar year and that it and any affiliates have not provided to more than 25 consumers in the preceding calendar year.
As stated in the proposal, the Bureau believed that a threshold of the type described above (based upon provision of a product or service to only 25 or fewer persons annually) may have been appropriate to exclude covered products and services from coverage when they are not offered or provided on a regular basis for several reasons.
As also explained in the proposal, the Bureau was aware that some of the terms in statutes or their implementing regulations referenced in proposed § 1040.3(a) have their own exclusions for persons who do not regularly engage in covered activity. Except for the definition of remittance transfer in Regulation E subpart B, which is incorporated into proposed § 1040.3(a)(6),
For purposes of the proposal, the Bureau believed that a single uniform numerical threshold may facilitate compliance and reduce complexity, particularly given that application of the proposal would not just affect consumers' ability to bring class claims under specific Federal consumer financial laws, but also other types of State and Federal law claims. The proposed 25-consumer threshold also would have been generally consistent with the threshold for “regularly extend[ing] consumer credit” under 12 CFR 1026.2(a)(17)(v), which applies certain TILA disclosure requirements to persons making more than 25 non-mortgage credit transactions in a year. The Bureau emphasized that it was proposing this uniform standard in the unique context of this proposal, and that it expected to continue to interpret thresholds under the enumerated consumer financial protection statutes and their implementing regulations according to their specific language, contexts, and purposes. The Bureau further noted that basing an exemption on the level of activity in the current and preceding calendar year would have been consistent with the threshold under 12 CFR 1026.2(a)(17)(v).
The Bureau received one comment on this proposed exemption from a consumer advocate that supported the proposed exemption as appropriate. In this commenter's opinion, the exemption would have minimal impact on consumers in light of the numerosity requirement for class actions. The commenter noted that the similar exemption in Regulation Z has been well understood and implemented.
The final rule adopts § 1040.3(b)(3) and comment 3(b)(3)-1 as proposed, with two minor clarifications. First, rather than framing the exemption as applying “when” the person provides products or services below the specified threshold frequency, the final rule states that the exemption applies “with respect to” the products or services provided below that frequency. This revision seeks to emphasize more
The Bureau also adopts new comment 3(b)(3)-2 to clarify the obligations of a person providing a covered product or service upon becoming ineligible for the exemption. The Bureau notes that the exclusion in § 1040.3(b)(3) is based on the frequency with which a person and its affiliates collectively “provide” a product or service. That standard is in the present tense so the exemption is available so long as the criteria in the exemption are met. Accordingly, comment 3(b)(3)-2 clarifies that, if, during a calendar year, a person to that point excluded by § 1040.3(b)(3) for a given product or service described in § 1040.3(a) provides that product or service to a 26th consumer, then that person ceases to be eligible for this exclusion at that point in time with respect to that product or service. The provider must begin complying with this part with respect to the covered product or service provided to that 26th consumer. In addition, the provider will not be eligible for the exclusion in § 1040.3(b)(3) whenever it offers or provides that product or service for the remainder of that calendar year and the following calendar year.
As stated in the proposal, merchants, retailers, and other sellers of nonfinancial goods and services extending consumer credit are excluded from the Bureau's rulemaking authority except in certain limited circumstances under Dodd-Frank section 1027(a)(2)(B). Thus, while they are covered persons under the Dodd-Frank section 1002(6), the proposal would have applied to them generally only when they act as creditors as defined by Regulation B by extending consumer credit or participating in consumer credit decisions, or when they engage in collection on or sale of these consumer credit accounts beyond the scope of the exclusion in Dodd-Frank section 1027(a)(2). In particular, because section 1027(a)(2)(A) generally excludes activities by a merchant, retailer, or other seller of nonfinancial goods or services to the extent such person extends credit directly to a consumer exclusively for the purchase of a nonfinancial good or service directly from that person, the Bureau proposed to reflect that general restriction through language excluding merchants in § 1040.3(b)(5) as discussed further below.
The Bureau also proposed in § 1040.3(b)(4) to exclude merchants from the scope of the rule for an additional type of activity that is generally not excluded from Bureau jurisdiction under section 1027(a)(2). Specifically, proposed § 1040.3(b)(4) would have excluded merchants to the extent they are engaged in certain “factoring” transactions and other types of commercial credit in which the merchant collateralizes its interest in its own consumer credit receivables on which no finance charge is imposed.
Proposed § 1040.3(b)(4)(i) thus would have excluded from the coverage of part 1040 merchants, retailers, or other sellers of nonfinancial goods or services to the extent providing an extension of consumer credit covered by proposed § 1040.3(a)(1)(i) and described by Dodd-Frank section 1027(a)(2)(A)(i) in connection with a credit transaction pursuant to Dodd-Frank section 1027(a)(2)(B)(i) unless the same credit transactions are also credit transactions pursuant to Dodd-Frank section 1027(a)(2)(B)(ii) or (iii). Thus, a merchant who is a creditor under Regulation B that is extending consumer credit as described in Dodd-Frank section 1027(a)(2)(A)(i) would have been eligible for this exemption with respect to such consumer credit transactions when they are sold, assigned, or otherwise conveyed to a third party, so long as the consumer credit was not extended in an amount that significantly exceeded the value of the good or service (which creates a basis for rulemaking authority under section 1027(a)(2)(B)(ii)) and did not have a finance charge (which creates a basis for rulemaking authority under section 1027(a)(2)(B)(iii) except where the creditor is not engaged significantly in that type of lending under section 1027(a)(2)(C)(i)).
In addition, the exclusion in proposed § 1040.3(b)(4)(ii) would have applied to a merchant who purchases or acquires credit extended by another merchant in a sale, assignment, or other conveyance that is subject to Dodd-Frank section 1027(a)(2)(B)(i). As a result, the proposal would not have applied, for example, to a merchant who, in a merger or acquisition transaction, acquires customer accounts of another merchant who had extended credit with no finance charge and not in an amount that significantly exceeded the value of the goods or services (
Further, the Bureau noted that proposed § 1040.3(b)(4) would only have exempted a merchant, retailer, or seller of the nonfinancial good or service, but would not have affected coverage of other persons who may conduct servicing, debt collection activities, or provide covered products and services pursuant to proposed § 1040.3(a) in connection with the same extension of consumer credit. As discussed below in the section-by-section analysis to comments 4-1 and 4-2, those providers would have been subject to the proposal.
A public-interest consumer lawyer commenter opposed the proposed exemption in § 1040.3(b)(4) but did not elaborate on the basis for its opposition. A consumer advocate commenter was not opposed to the exemption in proposed § 1040.3(b)(4), stating that some merchant financing arrangements may expose the merchant to risks, but
An industry trade association expressed concern that the scope of the exemption in proposed § 1040.3(b)(4)(i) would be confusing and difficult to analyze for merchants extending consumer credit with no finance charge. This commenter stated that the Bureau should clarify that any merchant extending consumer credit would be exempt from the rule except where extending consumer credit with a finance charge or in an amount that significantly exceeded the value of the nonfinancial good or service being financed. The commenter also stated that the merchant should be excluded, unless the basis for covering the merchant was established by “clear and convincing evidence.” Finally, the commenter stated that the exemption in proposed § 1040.3(b)(4)(ii) should not be limited to the act of acquiring or purchasing the extension of consumer credit, but should also include the activities carried out with respect to that account that would have been exempt had they been performed by the selling merchant, such as servicing. Otherwise, in its view, the purchasing or acquiring merchant would be more limited in what it could do without triggering the rule than the original merchant would be—without any basis for that differential treatment.
The final rule adopts § 1040.3(b)(4) as proposed, with technical changes to refer to the excluded person in the singular instead of plural and to refer to the activity of offering as excluded,
Therefore, in light of the addition of subparagraph (A) to § 1040.3(b)(4)(i) to refer to circumstances—
The Bureau is also adding comment 3(b)(4)-1 to clarify that the exemption in § 1040.3(b)(4)(ii) applies not only to the purchase or acquisition itself, but also to any servicing or collection by the merchant purchaser or acquirer.
The Bureau also reaffirms the statement that it made in the proposal concerning the ineligibility of third parties for the statutory exclusion in Dodd-Frank section 1027(a)(2).
The proposal would not have applied to persons to the extent they are excluded from the rulemaking authority of the Bureau under Dodd-Frank sections 1027 and 1029. For the sake of clarity, the Bureau proposed to make this limitation an explicit exemption in proposed § 1040.3(b)(5). Proposed § 1040.3(b)(5) thus would have clarified that part 1040 would not have applied to a person to the extent the Bureau lacks rulemaking authority over that person or a product or service offered or provided by the person under Dodd-Frank sections 1027 and 1029 (12 U.S.C. 5517 and 5519).
As the Bureau noted in the proposal, the Bureau had intended that proposed § 1040.3(b)(5) would only restrict application of proposed § 1040.4 with regard to those parties for which the Bureau's authority is constrained by Dodd-Frank sections 1027 and 1029. Accordingly, while merchants and automobile dealers who are not subject to the Bureau's rulemaking authority due to sections 1027 and 1029 would not have been subject to proposed § 1040.4, the Bureau explained that it has Dodd-Frank section 1028 rulemaking authority over other providers who assume or seek to use arbitration agreements entered into by such merchants or automobile dealers. Notably, entities excluded from Bureau rulemaking authority under Dodd-Frank sections 1027 and 1029 may still be covered persons as defined by Dodd-Frank section 1002(6). Thus, the Bureau stated that proposed § 1040.4 may apply to a provider that assumes or seeks to use an arbitration agreement entered into by a covered person over whom the Bureau lacks rulemaking authority under Dodd-Frank sections 1027 and 1029 with respect to the activity at issue.
For example, proposed § 1040.4 may have applied to a provider that is a debt collector, as defined in the FDCPA, collecting on debt arising from a consumer credit transaction originated by a merchant, even if the merchant would have been exempt under proposed § 1040.3(b)(5) because the merchant is excluded from Bureau rulemaking authority under Dodd-Frank section 1027 for the particular extension of consumer credit at issue. As noted in the discussion of proposed § 1040.3(a)(10) described above, for example, hospitals, doctors, and other service providers extending incidental
A consumer advocate stated in its comments that the final rule should clarify that the rule applies to buy-here-pay-here automobile lenders, which this commenter described as dealers who provide their own financing to consumers and require the consumers to return to the lot to make payments. This commenter believed that this clarification would help address what, in its view, was a general misimpression held by some in the marketplace that the Bureau did not regulate buy-here-pay-here automobile lenders.
An industry trade association for automobile dealers stated in its comment that, in its view, proposed § 1040.3(b)(5) would be inadequate to truly exempt automobile dealers from the rulemaking and instead that the proposal would conflict with the exclusion in Dodd-Frank section 1029 for certain automobile dealers. The commenter focused specifically on the proposed requirement in § 1040.4(a)(2) that providers include in their pre-dispute arbitration agreements mandatory language explaining that the provisions would not prohibit consumers from participating in class actions. Although proposed § 1040.3(b)(5) would have excluded many automobile dealers from this requirement, the commenter argued that the rule would still effectively require automobile dealers making loans that are assigned to unaffiliated third parties to include the mandatory contract provisions that the unaffiliated third parties would be required to have under the rule. This commenter asserted that automobile dealers are generally required to use the forms created by indirect automobile finance companies. Because indirect lenders would be required to use the Bureau's contract provision, the commenter predicted that they would require as a matter of contract that the dealers include that provision on their standard forms, rather than satisfying the rule either by sending consumers notice of the restriction on use of pre-dispute arbitration agreements or amending the agreement at the time that the indirect lenders acquire the loan contracts.
In addition, an industry commenter sought an express exemption providing that the rule would not apply to employer compensation agreements that relate to consumer financial products and services for employees, for example, employer-provided assistance with the down payment for a home. The commenter asserted that Dodd-Frank section 1027(g) excluded any employee benefit or compensation plan or arrangement from Bureau rulemaking authority, and expressed concern that even if some employer-provided consumer financial products or services were covered by the rule, the rule should not reach broader employment agreements concerning other aspects of the employment relationship. The commenter suggested that an exclusion for employer-provided products and services also would be consistent with the Bureau's decision not to propose covering consumer reports provided by employers under proposed § 1040.3(a)(4). On the other hand, a consumer advocate commenter expressed concerns about certain practices by employers, such as compelled use of a payroll card account, in violation of Regulation E.
The Bureau has considered the comments and is adopting proposed § 1040.3(b)(5) with minor technical changes for clarity,
As the Bureau had explained in the proposal, automobile dealers extending consumer credit that is assigned to unaffiliated third parties are generally excluded from the rulemaking authority of the Bureau in the circumstances described in Dodd-Frank section 1029. These automobile dealers are not subject to this rule, as reaffirmed by the explicit reference to section 1029 in § 1040.3(b)(6), and would thus not be obligated to include in their consumer contracts the provisions mandated in the rule. The class rule also would not require indirect automobile finance companies to mandate that automobile dealers with whom they work use contracts with consumers that include the provisions mandated in the rule. Rather, the indirect automobile finance company could amend the contract to include the mandated provisions or send the consumer a notice about the rule at the time the company purchases the credit.
At the same time, the Bureau acknowledges the possibility that, as a business decision and of their own volition, indirect automobile finance lenders may include an arbitration provision consistent with the rule in a form contract they provide to the automobile dealer to use with the consumer. However, even if this were to occur, as discussed below in connection with § 1040.4(a)(2)(iii)(A), these lenders would be free to include in their contracts language to clarify that the rule would not apply to the dealers (to the extent that the dealers are excluded from Bureau rulemaking authority by Dodd-Frank section 1029).
The Bureau does not believe it is necessary in this rule, in either regulation text or commentary, to provide interpretations of the scope of provisions in Dodd-Frank sections 1027 or 1029. With regard to buy-here-pay-here automobile lenders, the Bureau did receive a number of comments on behalf of automobile lenders or automobile dealers, and none suggested the type of confusion that the consumer advocate commenter suggested may exist. The Bureau does not believe it is necessary to restate the statute in this rule.
With regard to the industry commenter concerned with potential coverage of employers under the rule, the Bureau notes that Dodd-Frank section 1027(g) generally excludes Bureau rulemaking authority over consumer financial products or services that relate to a “specified plan or arrangement.”
Nonetheless, the Bureau recognizes that employee benefits may be subject to employment arbitration agreements and that employment arbitration and the regulation of employment arbitration agreements may function differently from those the Bureau analyzed in the Study, for example because they do not necessarily follow rules designed for consumer arbitration. Thus, the Bureau is adopting an exemption in § 1040.3(b)(5) to exclude employers to the extent they are offering or providing a product or service to an employee as an employee benefit. The Bureau is adopting this approach at this time for the reasons discussed herein, but notes that it also expects to monitor these products and services and could adjust the scope of the rule to reach any that are not excluded from the Bureau's rulemaking authority under Dodd-Frank section 1027(g).
For the sake of clarity, because the term “employer” is not defined in the Dodd-Frank Act, § 1040.3(b)(5) incorporates a well-recognized definition of employer from Federal law, in section 203(d) of the Fair Labor Standards Act (FLSA).
The exemption includes two important limitations, however. First, the exemption would only apply to the employer. If, for example, an employer were to partner with a third party that may extend consumer credit to the employee, the employer may be exempt with respect to its activity of referring its employees to the third party (which otherwise may be covered by § 1040.3(a)(1)(iii) in certain circumstances). The third-party lender, however, generally would be covered by § 1040.3(a)(1)(i). Similarly, if an employer extended credit to the employee but hired a third party to administer the loan, that third party generally would still be covered by § 1040.3(a)(1)(v). Likewise, if an employer partners with an unaffiliated bank to provide a network-branded payroll card to its employees that is covered by § 1040.3(a)(6) because it is an account, then the consumer's agreement with the bank generally would be covered because it is entered into by the bank, even if the payroll card also may be part of a general suite of employee benefits such that the employer may be exempt under § 1040.3(b)(5).
Second, the exemption only applies when the consumer financial product or service is an employee benefit. Whether the product or service is an employee benefit will depend on the facts and circumstances. As clarified in comment 3(b)(5)-1, however, if an employer offers or provides a consumer financial product or service to its employee on terms and conditions that it makes available to the general public, that is not an employee benefit for purposes of the exemption. To the extent that an employer is in the general business of providing covered consumer financial products and services, the Bureau does not believe that employees should be treated differently from other consumers who receive those products and services on the same terms and conditions.
Dodd-Frank section 1028(b) authorizes the Bureau to prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that doing so is in the public interest and for the protection of consumers. Section 1028(b) also requires that the findings in any such rule be consistent with the Study conducted under Dodd-Frank section 1028(a). Dodd-Frank section 1028(d) states that any regulation prescribed by the Bureau under section 1028(b) shall apply to any agreement between a consumer and a covered person entered into after the end of the 180-day period beginning on the regulation's effective date. (The final rule refers to this date—the date after the end of the 180-day period beginning on the effective date—as the “compliance date.”
Section 1028(b) of the Dodd-Frank Act allows the Bureau to regulate the “use” of the pre-dispute arbitration agreements covered by this rule. The Bureau believes that, under the ordinary meaning of this provision, a provider's “use” of a pre-dispute arbitration agreement broadly encompasses the inclusion of such an agreement in an agreement for a consumer financial product or service, the content of such an agreement, and the reliance on or invocation of such an agreement (for example, a motion to compel arbitration of a claim filed as a class action). To the extent that the term “use” in Section 1028(b) is ambiguous, the Bureau believes that interpreting it to cover all these circumstances would promote the
Accordingly, final § 1040.4 contains three provisions. Final § 1040.4(a)(1) prohibits providers from relying on pre-dispute arbitration agreements entered into after the compliance date in class actions concerning consumer financial products covered by § 1040.3.
The Bureau notes that providers may respond to the Bureau's rule by removing these provisions and adopting provisions in the agreement for the covered financial product or service that waive consumers' rights to participate in a class action. Providers could attempt to block consumers from pursuing class actions by including them in product agreements. Of course, the Bureau's rule would not apply to such waivers because they would not be part of a contract with a pre-dispute arbitration agreement and outside the scope of Section 1028. The Bureau will actively monitor consumer financial markets for this practice—and for other practices that might function in such a way as to deprive consumers of their ability to meaningfully pursue their claims—and will assess whether such practices could constitute unfair, deceptive, or abusive acts or practices under Dodd-Frank section 1031.
The Bureau proposed § 1040.4(a)(1) in accordance with its authority under section 1028(b) of the Dodd-Frank Act and in furtherance of its goal to ensure that class actions are available to consumers who are harmed by providers of consumer financial products and services. Proposed § 1040.4(a)(1) would have stated that a provider shall not seek to rely in any way on a pre-dispute arbitration agreement entered into after the rule's compliance date with respect to any aspect of a class action that is related to any of the consumer financial products or services covered by proposed § 1040.3 including to seek a stay or dismissal of particular claims or the entire action, unless and until the presiding court has ruled that the case may not proceed as a class action and, if that ruling may be subject to appellate review on an interlocutory basis, the time to seek such review has elapsed or the review has been resolved.
Proposed § 1040.4(a)(1) would have barred providers from relying on a pre-dispute arbitration agreement entered into after the compliance date, as described above, even if the agreement did not include the provision required by proposed § 1040.4(a)(2). In the preamble to the proposal, the Bureau gave several examples of such scenarios, such as where a third-party debt collector obtained the right to collect on an agreement entered into after the compliance date by a creditor that was covered by proposed § 1040.3(a) but excluded from coverage under proposed § 1040.3(b). The proposal's section-by-section analysis for proposed § 1040.3(a)(10) contained additional examples, specific to debt collection by merchants, of scenarios where proposed § 1040.4(a)(1) would have applied even where the pre-dispute arbitration agreement itself was not required to contain the provision outlined in proposed § 1040.4(a)(2).
Proposed § 1040.4(a)(1) would have prevented providers from relying on a pre-dispute arbitration agreement in a class action unless and until the presiding court ruled that the case may not proceed as a class action, and, if the ruling may have been subject to interlocutory appellate review, the time to seek such review elapsed, or the review was resolved. For example, if a case was filed as a putative class action and a court had not yet ruled on a motion to certify the class, proposed § 1040.4(a)(1) would have prohibited a motion to compel arbitration that relied on a pre-dispute arbitration agreement. If the court denied a motion for class certification and ordered the case to proceed on an individual basis, and the ruling may have been subject to interlocutory appellate review—pursuant to Federal Rule 23(f) of the Federal Rules of Civil Procedure or an analogous State procedural rule—proposed § 1040.4(a)(1) would have prohibited a motion to compel arbitration based on a pre-dispute arbitration agreement until the time to seek appellate review elapsed or appellate review was resolved. If the court denied a motion for class certification—and the ruling was either not subject to interlocutory appellate review, the time to seek review elapsed, or the appellate court determined that the case could not proceed as a class action—proposed § 1040.4(a)(1) would have no longer prohibited a provider from relying on a pre-dispute arbitration agreement.
Proposed comment 4(a)(1)-1 would have provided a non-exhaustive list of six examples of impermissible reliance under proposed § 1040.4(a)(1). Proposed comments 4(a)(1)-1.i through iii would have described conduct by a defendant in a class action lawsuit, and proposed comments 4(a)(1)-1.iv through vi described conduct in arbitration. In the preamble to the proposal, the Bureau stated that one purpose of proposed comments 4(a)(1)-1.iv through vi was to prevent providers from evading proposed § 1040.4(a)(1) by filing an arbitration claim against a consumer who had already filed a claim on the same issue in a putative class action in order to resolve that issue in arbitration and stop the class action. The Bureau noted that proposed § 1040.4(a)(1) would not have prohibited a provider from continuing to arbitrate a “first-filed” arbitration claim—
Proposed comment 4(a)(1)-2 would have stated that where a class action concerns multiple products or services, and only some of the products or services were covered by proposed § 1040.3, the prohibition in proposed § 1040.4(a)(1) applied only to claims that concern the covered products or services.
The Bureau received a wide range of comments on proposed § 1040.4(a)(1). Some of the comments addressed whether the Bureau's attempt to restrict the use of arbitration agreements in proposed § 1040.4(a)(1) was authorized by section 1028(b)—specifically, whether proposed § 1040.4(a)(1) was in the public interest, for the protection of consumers, and consistent with the Study. The Bureau responds to these comments in Part VI, above, and finds that § 1040.4(a)(1), as discussed below, satisfies the requirements of section 1028(b). Below, the Bureau responds to the remaining comments, which generally addressed technical aspects of the regulatory text and commentary.
Commenters recommended changes to the regulatory text that they thought would clarify when providers may rely on pre-dispute arbitration agreements in class actions. A consumer advocate commenter suggested that the Bureau add the phrase “such that a class action may not proceed” to the end of proposed § 1040.4(a)(1) in order to clarify that the prohibition on reliance applies until interlocutory appellate review has been resolved “such that a class action may not proceed”—and that providers may
Several commenters requested that the Bureau revise proposed § 1040.4(a)(1) to accomplish different policy outcomes based on various objectives. An individual commenter requested that the Bureau revise proposed § 1040.4(a)(1) to permit providers to block class actions as long as they allow for class arbitration. This commenter believed class arbitration might provide a lower-cost option in some cases. An industry commenter suggested that the Bureau further evaluate whether class arbitration could achieve the objectives of the rule and suggested that such an inquiry might lead the Bureau to formulate a rule permitting providers to block class actions as long as class arbitration is available. This commenter also believed that class arbitration might be more cost effective than class litigation. Another industry commenter stated that, because the proposal would “prohibit an institution from inserting a class waiver in its arbitration provision,” the proposal represents an endorsement of class arbitration. An individual commenter suggested that the Bureau extend proposed § 1040.4(a)(1) to ban providers from relying on pre-dispute arbitration agreements in individual lawsuits brought by military servicemembers and spouses of servicemembers. The commenter noted that the MLA bars many types of creditors from enforcing arbitration agreements against members of the armed forces on active duty or active Guard and Reserve duty (and their families); however, the commenter pointed out that the Bureau's rule would cover a wider range of consumer financial products and services than the MLA and its implementing regulations.
A few commenters requested that the Bureau clarify the application of proposed § 1040.4(a)(1). A trade association of defense lawyers stated that the Bureau should clarify whether invoking arbitration against an absent class member would constitute impermissible reliance under proposed § 1040.4(a)(1). In the commenter's view, if invoking arbitration under these circumstances would be impermissible, providers would face great difficulty complying with the rule, because class action complaints often include vague class definitions that can make it hard to know, at the outset of a case, which consumers are part of the proposed class. The same commenter also requested that the Bureau clarify whether, in the case of a first-filed arbitration—
In addition, a trade association of defense lawyers asserted that proposed § 1040.4(a)(1) would exceed the Bureau's legal authority. According to the commenter, the prohibition in proposed § 1040.4(a)(1) would raise separation-of-powers concerns under the Constitution, because it could be viewed as regulating a defendant's conduct in court, and would also exceed the Bureau's authority under the Dodd-Frank Act, because the Act does not grant the Bureau authority to regulate parties' conduct in judicial proceedings.
An industry commenter requested that the final rule state that a company does not violate the rule simply by pursuing its legal rights in good faith. The commenter expressed concern that if a company moves to compel arbitration based on a good faith belief that the relevant product is not covered, and the court determines that the product is covered, the company will have violated proposed § 1040.4(a)(1)—and could face penalties under title X of the Dodd-Frank Act—for doing nothing more than asserting what it believed to be its legitimate interpretation of the rule and the Act. The commenter expressed concern that the proposal would chill defendants from invoking arbitration agreements where they had a good faith basis to believe they could do so without violating part 1040. Similarly, the trade association of defense lawyers stated that, under the proposal, it was unclear whether a defendant would violate the rule by moving to compel arbitration or seeking to plead its right to arbitrate in the event that class certification is ultimately denied. The commenter also expressed concern that arguing, in opposition to class certification, that individual arbitration is a superior alternative to class litigation for resolving the dispute could be construed as “relying” on an arbitration agreement in a class action and therefore would be a violation of the rule.
Finally, a consumer advocate commenter expressed support for comment 4(a)(1)-1—the non-exhaustive list containing examples of conduct that would constitute impermissible reliance on a pre-dispute arbitration agreement under § 1040.4(a)(1)—as drafted.
Pursuant to the Bureau's authority under Dodd-Frank section 1028(b) to impose conditions or limitations on the use of pre-dispute arbitration agreements between covered persons and consumers for consumer financial products and services, the Bureau is finalizing § 1040.4(a)(1) with limited modifications as described below. For the reasons described above in Part VI, the Bureau finds that § 1040.4(a)(1) satisfies the requirements of section 1028(b) because it is in the public interest and for the protection of consumers, and because the related findings are consistent with the Study that the Bureau conducted pursuant to section 1028(a).
Similar to what was proposed, the Bureau is finalizing § 1040.4(a)(1) to state that a provider shall not rely in any way on a pre-dispute arbitration agreement entered into after the rule's compliance date with respect to any aspect of a class action concerning any of the consumer financial products or services covered by § 1040.3, including to seek a stay or dismissal of particular claims or the entire action, unless and until the presiding court has ruled that the case may not proceed as a class action and, if that ruling may be subject to appellate review on an interlocutory basis, the time to seek such review has elapsed, or such review has been resolved such that the case cannot proceed as a class action.
Final § 1040.4(a)(1) differs from proposed § 1040.4(a)(1) in several respects. First, instead of using the phrase “related to” to describe the nexus between the class action and the covered consumer financial service or product that triggers application of the rule, the final rule uses the phrase “concerning.” The Bureau is making this change for consistency with other provisions in the rule that use the phrase “concerning” to describe this nexus, including in § 1040.2(c) (definition of pre-dispute arbitration agreement), § 1040.4(a)(2) (contract provisions), and § 1040.4(b) (monitoring rule). Second, the Bureau has added the phrase “such that the case cannot proceed as a class action” to the end of proposed § 1040.4(a)(1). In the Bureau's view, the prohibition in proposed § 1040.4(a)(1) would have applied if review had been resolved such that a case may proceed as a class action. However, the Bureau agrees with the consumer advocate commenter's assertion that this phrase more precisely conveys the scope of the provision's prohibition on reliance in a class action. Third, in response to the industry commenter that requested that the Bureau clarify that both uses of the word “review” in the final clause of proposed § 1040.4(a)(1) refer to interlocutory review, the Bureau has revised the phrase “or the review has been resolved” to read “or such review has been resolved.” Fourth, instead of prohibiting seeking to rely on an arbitration agreement in a class action, the rule prohibits relying on the arbitration agreement in a class action. The Bureau believes the term “seek” is not needed. A motion that seeks to compel arbitration, for example, relies on an arbitration agreement, as clarified in comment 4(a)(1)-1.i.
The commentary to the final rule also includes new comment 4(a)(1)-1.ii, which contains an example of conduct that does not constitute reliance. The comment 4(a)(1)-1.ii states that reliance on a pre-dispute arbitration agreement does not include seeking or taking steps to preserve a class action defendant's ability to seek arbitration after the trial court has denied a motion to certify the class and either an appellate court has affirmed that decision on an interlocutory appeal of that motion, or the time to seek such an appeal has elapsed. This comment is intended to address the concern raised by the trade association of defense lawyers' comment that a defendant could violate the rule by moving to compel arbitration, or seeking to assert its contingent right to arbitrate in the future in the event that the case cannot proceed as a class action (
The commentary to the final rule also includes new comment 4(a)(1)-2. This comment is intended to address the industry commenter's concern that § 1040.4(a)(1) would chill defendants from moving to compel arbitration when they have a good faith basis to believe that they could do so without violating the rule. The Bureau believes that, in the vast majority of cases, providers will know whether the rule applies—particularly because the Bureau has defined coverage primarily in relation to existing statutes and, where applicable, their implementing regulations. However, the Bureau acknowledges that, at the margins, some cases will raise questions about whether the rule covers particular persons, particular agreements, or particular consumer financial products and services. In some instances, a person may be genuinely uncertain about the rule's application in a particular class action case. New comment 4(a)(1)-2 clarifies that a class action defendant does not violate § 1040.4(a)(1) by, for example, relying on a pre-dispute arbitration agreement where it has a genuine belief that either it is not a provider pursuant to § 1040.2(d) or that none of the claims asserted in the class action concern any of the consumer financial products or services covered pursuant to § 1040.3.
The Bureau intends comment 4(a)(1)-2 to mirror the
The Bureau has also made a technical corrections to comment 4(a)(1)-1
The Bureau declines to revise proposed § 1040.4(a)(1) to permit providers to block class actions as long as they allow for class arbitrations. The Bureau believes that allowing consumers to seek class action relief is in the public interest, for the protection of consumers, and consistent with the Study.
The Bureau notes, however, that § 1040.4(a)(1) would not preclude the use of class arbitration as a forum. Final § 1040.4(a)(1) would permit an arbitration agreement that allows for class arbitration, if it also allowed a consumer the option of pursuing class litigation instead. In other words, a pre-dispute arbitration agreement that allows a consumer to choose whether to file a class claim in court or in arbitration would be permissible under proposed § 1040.4(a), although an arbitration agreement that permits the claim to only be filed in class arbitration would not be permissible. The Bureau expects that, if class arbitration proves to be an efficient procedure through which consumers can enforce their rights and obtain redress, providers will make the option available to consumers and consumers will choose it over class litigation in court. Additionally, as with individual arbitration and as discussed in greater detail below in the section-by-section analysis of § 1040.4(b), the Bureau will monitor any class arbitrations that do occur.
With respect to the industry commenter's assertion that the proposal represents an endorsement of class arbitration because it would prohibit institutions from inserting class waivers into their arbitration agreements, the Bureau believes the commenter misunderstood the proposal. Final § 1040.4(a)(1)—like proposed § 1040.4(a)(1)—would prohibit providers from relying on pre-dispute arbitration agreements in class action lawsuits. It would not prohibit providers from adopting terms preventing class arbitration.
With respect to the trade association of defense lawyers' comment that requesting clarification of the application of the rule to a litigant's possible opposition to class certification on the grounds that individual arbitration is superior, the Bureau disagrees that such a clarification is needed. The Bureau does not understand from the comment how a company could assert that individual arbitration pursuant to an arbitration agreement is superior to a class action if the company could not actually, under the rule, be permitted to compel individual arbitration in a class action. Because individual arbitration of the named plaintiff's claims in a class action could not be compelled under the arbitration agreement, it appears speculative that a company could assert superiority of such a method of dispute resolution in the context of a class action governed by the Bureau's rule. In any event, the Bureau's rule does not prohibit a defendant from arguing that a class action would not be superior to individual resolution generally based on the facts at issue in a particular case. The Bureau therefore does not believe the issue warrants clarification in the final rule. The Bureau intends to monitor any specific practices that may emerge in this regard, however, and may exercise its statutory authorities as appropriate to clarify the rule or to take other appropriate action in order to prevent circumvention or evasion of the rule.
In response to the individual commenter's request regarding the MLA, the Bureau notes, as an initial matter, that the final rule will not supersede the MLA's protections because the final rule and the MLA's prohibition on enforcing arbitration agreements do not conflict. The MLA bans certain categories of creditors from using pre-dispute arbitration agreements in certain consumer credit agreements and from enforcing existing pre-dispute arbitration agreements.
The Bureau declines to prohibit the enforcement of pre-dispute arbitration agreements against servicemembers and the spouses of servicemembers in the final rule, as requested by the commenter. As described elsewhere in this final rule, the Bureau considered and rejected an alternative under which the Bureau would have prohibited altogether the enforcement of covered pre-dispute arbitration agreements against consumers.
In response to the industry commenter that requested clarification as to whether § 1040.4(a)(1) would ban reliance on a pre-dispute arbitration agreement for a non-covered product or service, where the original transaction involved some covered products or services, the Bureau notes that a provider that offers or provides non-covered products or services must comply with part 1040 only for the products and services it provides that are covered under § 1040.3. The Bureau explains this issue further in comment 2(d)-1.
Regarding the trade association of defense lawyers' comment that requested that the Bureau clarify the rule's application in relation to absent class members of a putative class action, the commenter appears to envision a scenario in which a provider moves to compel arbitration in an individual lawsuit against a plaintiff who is also a putative class member in a pending class action against the provider relating to the same dispute. The commenter asked whether such a motion to compel would constitute impermissible reliance under proposed § 1040.4(a)(1), especially in light of proposed comment 4(a)(1)-1.ii, which would have stated that reliance on an arbitration agreement under § 1040.4(a)(1) includes “seeking to exclude a person or persons from a class in a class action.” The Bureau disagrees with the commenter that that comment was ambiguous. That comment refers to exclusions of persons from a class “in a class action.” For example, defendants may file motions in a pending class action to strike or reform or narrow the class definition to exclude persons who have pre-dispute arbitration agreements. The example in the comment clarifies that such exclusions are not permitted by the rule. The example does not reach parallel individual litigation. In particular, that example does not apply to individual litigation with consumers who may or may not be covered by alleged class definitions in a pending class complaint or class definitions in a certified class or preliminarily or finally approved class settlement. If a consumer elects to file an individual lawsuit against a provider, that consumer's individual lawsuit will be subject to the rule on the same basis as any individual lawsuit (
The trade association of defense lawyers' comment also requested clarification as to the preclusive effect of an arbitral award under a “first-filed” arbitration—
In response to the individual commenter that requested that the Bureau clarify that the rule would not preclude a consumer from filing an individual arbitration, the Bureau confirms that nothing in the rule would preclude this. And in response to the industry commenter that requested that the Bureau confirm that proposed § 1040.4(a)(1) would only preclude a broker-dealer from enforcing an arbitration agreement in a class action against a consumer to the extent that the relevant class action “related to” a covered consumer financial product or service, the Bureau notes that the final rule contains an exemption for broker-dealers.
Finally, the Bureau disagrees with the trade association of defense lawyers' comment asserting that proposed § 1040.4(a)(1) would raise separation-of-powers concerns under the U.S. Constitution and would exceed the Bureau's authority under the Dodd-Frank Act by regulating a defendant's conduct in court (
The Bureau proposed § 1040.4(a)(2) in accordance with its authority under Dodd-Frank section 1028(b) and in furtherance of its goal to ensure that class actions are available to consumers who are harmed by providers of consumer financial products and services. Proposed § 1040.4(a)(2)(i) would have generally required providers, upon entering into a pre-dispute arbitration agreement for a covered product or service after the compliance date, to ensure that the agreement contained a specified provision stating that neither the provider nor anyone else would use the
Proposed § 1040.4(a)(2)(i) would have stated that, except as permitted by proposed § 1040.4(a)(2)(ii) and (iii) and proposed § 1040.5(b), providers shall, upon entering into a pre-dispute arbitration agreement for a consumer financial product or service covered by proposed § 1040.3 after the compliance date, ensure that the agreement contains the following provision:
We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.
The proposal noted that the Bureau intended the phrase “contains the following provision” in proposed § 1040.4(a)(2)(i) to clarify that the specified text should be included as a contractual provision within the pre-dispute arbitration agreement—as, for instance, the Federal Trade Commission's Holder in Due Course Rule also requires.
As the proposal stated, the Bureau designed the § 1040.4(a)(2)(i) provision—as well as the § 1040.4(a)(2)(ii) and (iii)(A) provisions and the § 1040.4(a)(2)(iii)(B) notice—to use plain language. While the Bureau did not believe that disclosure requirements or consumer education could materially increase the filing of individual claims in arbitration or litigation, the Bureau believed that consumers who consulted their contracts should be able to understand their dispute resolution rights.
Where a pre-dispute arbitration agreement was in a contract for multiple products or services, only some of which were covered under proposed § 1040.3, proposed § 1040.4(a)(2)(ii) would have permitted (but not required) providers to include the following alternative contract provision in place of the one required by proposed § 1040.4(a)(2)(i):
We are providing you with more than one product or service, only some of which are covered by the Arbitration Agreements Rule issued by the Consumer Financial Protection Bureau. We agree that neither we nor anyone else will use this agreement to stop you being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it. This provision applies only to class action claims concerning the products or services covered by that Rule.
Proposed § 1040.4(a)(2)(iii) would have set forth how to comply with proposed § 1040.4(a)(2) in circumstances where a provider entered into a pre-existing pre-dispute arbitration agreement that did not contain either the provision required by proposed § 1040.4(a)(2)(i) or the alternative permitted by proposed § 1040.4(a)(2)(ii), presumably because the original agreement was entered into by person that was not a provider and thus was not subject to any of those provisions or because the original agreement was entered into before the compliance date. Under proposed § 1040.4(a)(2)(iii), within 60 days of entering into the pre-dispute arbitration agreement, providers would have been required either to ensure that the agreement was amended to contain the provision specified in proposed § 1040.4(a)(2)(iii)(A) or to provide any consumer to whom the agreement applied with the written notice specified in proposed § 1040.4(a)(2)(iii)(B). For providers that chose to ensure that the agreement is amended, the provision specified by proposed § 1040.4(a)(2)(iii)(A) would have been as follows:
We agree that neither we nor anyone else that later becomes a party to this pre-dispute arbitration agreement will use it to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.
For providers that chose to provide consumers with a written notice, the required notice provision specified by § 1040.4(a)(2)(iii)(B) would have been as follows:
We agree not to use any pre-dispute arbitration agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.
As the proposal stated, the Bureau believed that the notice option afforded by proposed § 1040.4(a)(2)(iii)(B) would have reduced the burden to providers for whom amendment may be impossible, challenging, or costly while preserving the consumer awareness benefits of § 1040.4(a)(2)(iii)(A). The Bureau also noted that, whether the provider elected to ensure that the agreement is amended, chose to provide the required notice, or violated proposed § 1040.4(a)(2)(iii) by failing to do either, the provider would still have been required to comply with proposed § 1040.4(a)(1).
The proposal also described how buyers of medical debt would have needed to perform due diligence, in some cases, to determine how the rule would have applied to the debts they buy. In cases involving incidental credit that is subject to ECOA, debt buyers
Proposed comment 4(a)(2)-2 would have provided an illustrative example clarifying how proposed § 1040.4(a) applied in the context of portfolio mergers and acquisitions. The comment described a hypothetical scenario in which Bank A acquired Bank B after the compliance date and Bank B had entered into pre-dispute arbitration agreements before the compliance date. The comment stated that if, as part of the acquisition, Bank A acquired products of Bank B's that were subject to pre-dispute arbitration agreements (and thereby entered into such agreements), proposed § 1040.4(a)(2)(iii) would have required Bank A to either (1) ensure the account agreements are amended to contain the provision required by proposed § 1040.4(a)(2)(iii)(A) or (2) deliver the notice in accordance with proposed § 1040.4(a)(2)(iii)(B).
Proposed comment 4(a)(2)-3 would have clarified that providers may provide the notice in any way the provider communicates with the consumer, including electronically. The proposed comment would have further explained that providers may either provide the notice as a standalone document or include it in another notice that the customer receives, such as a periodic statement, to the extent permitted by other laws and regulations. The Bureau stated in the proposal that it believes that giving providers a wide range of options for furnishing the notice would accomplish the goal of informing consumers while reducing the burden on providers.
For ease of reference, in this section-by-section analysis, the Bureau refers to the contract provision that would be required by proposed § 1040.4(a)(2)(i) as the “required 4(a)(2)(i) provision”; the optional, alternative provision permitted by § 1040.4(a)(2)(ii) as the “optional 4(a)(2)(ii) provision”; and the provisions specified in § 1040.4(a)(2)(iii) as the “4(a)(2)(iii) amendment” and the “4(a)(2)(iii) notice.” The Bureau also refers to the provisions specified in § 1040.4(a)(2) collectively as the “4(a)(2) provisions” or simply “the provisions.”
The Bureau received a wide range of comments on proposed § 1040.4(a)(2). Several comments addressed the 4(a)(2) provisions as a whole, while the other comments concerned individual provisions.
Several commenters addressed the Bureau's overall approach to § 1040.4(a)(2). An industry commenter requested that the Bureau give providers the flexibility to disclose the provisions “in substance” rather than verbatim (as required by the proposal). The commenter argued that providers need such flexibility because the provisions' terminology may not conform to the rest of the provider's agreement. The commenter also stated that such flexibility would also avoid class actions over typographical errors and other minor issues. Another industry commenter expressed concern that plaintiffs could construe the provisions as a waiver by the defendant of its right to assert certain defenses in a class action, such as defenses to class certification. A State regulator commenter requested that the Bureau clarify whether the provisions would apply only to class actions brought under Federal and State consumer protection laws or also to class actions brought under other Federal and State laws. A consumer advocate commenter suggested that the provisions be reframed as a relinquishment of the provider's right to rely on the pre-dispute arbitration agreement in a class action (rather than merely as a binding agreement not to do so).
A trade association of lawyers who represent investors praised the provisions for conveying the consumer's rights in plain language, stating that the proposed language is much simpler than similar language required by FINRA for securities contracts.
A consumer advocate commenter requested that the Bureau revise proposed § 1040.4 to include additional sanctions on providers that violate § 1040.4(a)(2). The commenter requested that the Bureau forbid providers from relying on an arbitration agreement in an individual (
Further, several Tribal commenters expressed concerns about proposed § 1040.4(a)(2) related to sovereign immunity.
In addition to comments about § 1040.4(a)(2) generally, the Bureau received numerous comments about specific provisions. The Bureau received one comment specific to the proposed 4(a)(2)(i) provision. A public-interest consumer lawyer commenter recommended that, to improve readability, the Bureau revise the provision to read: “No one can use this agreement to stop you from being part of a class action case in court. You can file a class action in court or you can be a member of a class action filed by someone else.”
Numerous commenters addressed the optional 4(a)(2)(ii) provision specifically. Many of these commenters expressed concern that the provision would confuse consumers and suggested that the Bureau modify the provision in various ways to make it more understandable. Some commenters requested that, where agreements are for both covered and non-covered products, the Bureau require providers to indicate, in their agreements, which products the Bureau's rule covers and which it does not cover. A consumer advocate commenter requested that the Bureau require providers to furnish two separate product agreements, one for covered products and one for non-covered products. A trade association of consumer lawyers suggested that the Bureau either require providers to identify which products are covered or to provide separate terms for each product. An industry commenter recommended that the Bureau give providers the option to disclose which products are subject to the provision and which are not. A public-interest consumer lawyer commenter requested that, where contracts are for both covered and non-covered products, the optional 4(a)(2)(ii) provision instead be mandatory, because allowing the provider to use the 4(a)(2)(i) provision, which implies that all products are covered, would mislead the consumer.
Commenters expressed additional concerns about the provision that would be required by proposed § 1040.4(a)(2)(ii) apart from concerns related to the potential for consumer confusion. A consumer advocate commenter argued that the provision would hurt class action plaintiffs by highlighting that the rule's coverage was limited in scope, which, according to the commenter, would create a “roadblock” in the consumer's prosecution of a class action.
Several comments addressed proposed § 1040.4(a)(2)(iii) specifically. A consumer advocate commenter argued that the phrase “who later becomes a party” in the proposed 4(a)(2)(iii)(A) amendment unduly limits the amendment's binding effect, relative to the proposed 4(a)(2)(i) provision, which states that neither the contracting party “nor anyone else” may stop the consumer from being part of a class action. The commenter suggested that the Bureau require providers entering into pre-existing contracts that do not contain the required provision to simply insert the proposed 4(a)(2)(i) provision via an amendment. Two commenters—a consumer advocate and a public-interest consumer lawyer—argued that the Bureau should require amendments in certain scenarios where the proposal would otherwise allow providers to send notices. According to the consumer advocate commenter, the Bureau should only allow providers to send the notice where the provider cannot amend the contract unilaterally, while the other commenter similarly thought the Bureau should only permit the notice when amendment is “contractually impossible.” These commenters argued that amendments are superior to notices from a consumer protection standpoint because amendments, unlike notices, would bind third parties. An industry
Other commenters suggested revisions that they believed would increase the binding effect of the proposed 4(a)(2)(iii)(B) notice on third parties. Two public-interest consumer lawyer commenters expressed concern that the notice, unlike the amendment, does not contain the phrase “neither we nor anyone else” and therefore lacks a prohibition against successors to the contract from blocking consumer involvement in a class action. One of these commenters suggested that the phrase “neither we nor anyone else” be included in the notice. The other commenter suggested that the Bureau revise the first sentence of the notice to read: “No one can use this agreement to stop you from being part of a class action case in court. You can file a class action in court or you can be a member of a class action filed by someone else.” The commenter also contended that these revisions would improve the notice's readability and, for this reason, the amendment should use the same language. A consumer advocate commenter asked the Bureau to require contracts between providers and third parties to waive the third parties' right to rely on pre-dispute arbitration agreements in class actions; to require providers to consider the notice to be part of the agreement and supply the notice whenever the agreement is requested by a third party; to require providers to store a record of the notice in the same way it would store an amendment, so that the documents, together, would be considered to be the complete agreement; and to add language to the notice stating that the provider considers its promise to not stop the consumer from being part of a class action to be binding on third parties.
In furtherance of the Bureau's goal to ensure that consumers can seek relief through class actions when they are harmed by providers of consumer financial products and services, and based on the findings discussed above in Part VI made pursuant to the Bureau's authority under section 1028(b), the Bureau is finalizing § 1040.4(a)(2) with the modifications described below.
Final § 1040.4(a)(2)(i) states that, except as permitted by § 1040.4(a)(2)(ii) and (iii) and § 1040.5(b), providers shall, upon entering into a pre-dispute arbitration agreement for a product or service covered by § 1040.3 after the compliance date, ensure that the agreement contains the following provision:
We agree that neither we nor anyone else will rely on this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.
The Bureau has made three minor revisions to § 1040.4(a)(2)(i) and the required 4(a)(2)(i) provision, compared with the proposal. First, the Bureau replaced the term “use” with the term “rely on” to more closely mirror the language in § 1040.4(a)(1).
Final § 1040.4(a)(2)(ii) permits providers, where a pre-dispute arbitration agreement is in a contract that applies to multiple products or services, and only some of those products or services are covered under § 1040.3, to include the following alternative contract provision in place of the one required by § 1040.4(a)(2)(i):
We are providing you with more than one product or service, only some of which are covered by the Arbitration Agreements Rule issued by the Consumer Financial Protection Bureau. The following provision applies only to class action claims concerning the products or services covered by that Rule: We agree that neither we nor anyone else will rely on this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.
Final § 1040.4(a)(2)(iii) sets forth how to comply with § 1040.4(a)(2) where a pre-dispute arbitration agreement existed previously between other parties and does not contain either the required 4(a)(2)(i) provision or the optional 4(a)(2)(ii) provision. Final § 1040.4(a)(2)(iii)(A) states that providers entering into such agreements shall either ensure the agreement is amended to contain the provision specified in paragraph (a)(2)(i) or (a)(2)(ii) of this section or provide any consumer to whom the agreement applies with the following written notice:
We agree not to rely on any pre-dispute arbitration agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.
The provider may add to the written notice the following optional language when the pre-dispute arbitration agreement applies to multiple products or services, only some of which are covered by § 1040.3: “This notice applies only to class action claims concerning the products or services covered by the Arbitration Agreements Rule issued by the Consumer Financial Protection Bureau.” The Bureau is permitting this optional language in the written notice so that the notice may be structured similarly to the optional contract provision in § 1040.4(a)(2)(ii). Final § 1040.4(a)(2)(iii)(B) states that the provider shall ensure that the pre-dispute agreement is amended or provide the notice to consumers within 60 days of entering into it.
Final § 1040.4(a)(2)(iii) differs from the proposal in one other key respect: While proposed § 1040.4(a)(2)(iii)(A) included specified language for the required amendment that was different from the § 1040.4(a)(2)(i) and (2)(ii) provisions, final § 1040.4(a)(2)(iii)(A) requires providers to ensure their agreements are amended to contain either the § 1040.4(a)(2)(i) or (2)(ii) provisions. The proposed § 1040.4(a)(2)(iii)(A) amendment differed from the proposed § 1040.4(a)(2)(i) and (2)(ii) provisions
Rather than mandating unique language for the amendment containing the phrase “who later becomes a party,” the Bureau is allowing providers to use the § 1040.4(a)(2)(i) or 4(2)(ii) provisions in any amendment pursuant to § 1040.4(a)(2)(iii) and is separately finalizing § 1040.4(a)(2)(iv)—described in greater detail below—which would allow providers to add sentences to the required contract provision stating, for example, that the provision does not apply to parties that entered into the agreement before the compliance date and that the provision does not apply to persons excluded under the rule. The final rule's approach also benefits providers entering into pre-existing agreements for both covered and non-covered products and services, because they can amend the agreement to include the optional § 1040.4(a)(2)(ii) provision. The contractual amendment that would have been required by proposed § 1040.4(a)(2)(iii)(A), in contrast, included no language pertaining to agreements for both covered and non-covered products.
The Bureau also notes that, where a provider is entering into a pre-dispute arbitration agreement that existed previously between other parties and does not contain either the § 1040.4(a)(2)(i) or (2)(ii) provisions, the Bureau expects the provider to comply with § 1040.4(a)(2)(iii) by amending the agreement or providing a notice. For example, where Lender X enters into a loan agreement subject to a pre-dispute arbitration agreement before the compliance date, then sells the account to Buyer A after the compliance date, and Buyer A chooses to provide the notice (instead of amending the agreement), Buyer B—who subsequently purchases the account from Buyer A—must either amend the agreement or send the notice under § 1040.4(a)(2)(iii). This applies to any subsequent buyers as well.
As in the proposal, providers are required to use the exact language of the required 4(a)(2)(i) provision, the optional 4(a)(2)(ii) provision, and the 4(a)(2)(iii) notice as applicable. The final rule, however, contains three limited exceptions to this general rule. Three new provisions—§ 1040.4(a)(2)(iv) through (vi)—describe these limited exceptions.
Final § 1040.4(a)(2)(iv) specifies three sentences that providers are allowed to add at the end of the 4(a)(2)(i) and 4(a)(2)(ii) provisions. Final § 1040.4(a)(2)(iv)(A)(
The Bureau also is adding § 1040.4(a)(2)(iv)(A)(
Final § 1040.4(a)(2)(iv)(B) authorizes providers to also include the sentence, “This provision does not apply to persons that are excluded from the Consumer Financial Protection Bureau's Arbitration Agreements Rule.” The Bureau is allowing providers to use this sentence to clarify that the 4(a)(2)(i) or 4(a)(2)(ii) provisions do not bind persons that are excluded under § 1040.3(b). One scenario, among others, in which providers may wish to use this sentence is when entering into a pre-dispute arbitration agreement along with excluded persons. The sentence will clarify that the phrase “neither we nor anyone else” in the 4(a)(2)(i) and 4(a)(2)(ii) provisions does not refer to excluded persons.
Final § 1040.4(a)(2)(iv)(C) authorizes providers to also include the sentence, “This provision also applies to the delegation provision.” As discussed above, comment 2(d)-2 to the final rule clarifies that a delegation provision is itself a pre-dispute arbitration agreement. However, if a provider has included the 4(a)(2) contract provision in its pre-dispute arbitration agreement already with this additional sentence, the Bureau does not believe it is necessary for the 4(a)(2) provision to be included separately in the related delegation provision. The added sentence already clarifies that the 4(a)(2) provision applies to the delegation provision as well as the broader pre-dispute arbitration agreement. Accordingly, § 1040.4(a)(2)(iv)(C) states that a provider using the sentence specified in paragraph (a)(2)(iv)(C) as part of the 4(a)(2)(i) or 4(a)(2)(ii) provisions in a pre-dispute arbitration agreement is not required to separately insert the 4(a)(2)(i) or 4(a)(2)(ii) provisions into a delegation provision that relates to such a pre-dispute arbitration agreement. Otherwise, as explained in comment 4(a)(2)-4, if the provider uses a delegation provision and does not include the additional sentence in § 1040.4(a)(2)(iv)(C), then the provider would be required to include the 4(a)(2) provision both in the delegation provision as well as in the broader pre-dispute arbitration agreement to which it relates.
Further, the Bureau has added § 1040.4(a)(2)(v) in response to the industry commenter that requested that
In response to concerns about Tribal sovereign immunity, the Bureau has also added § 1040.4(a)(2)(vi), which provides that, in any provision or notice required under § 1040.4(a)(2), if a person has a genuine belief that sovereign immunity from suit under applicable law may apply to any person that may seek to assert the pre-dispute arbitration agreement, then the provision or notice may include, after the sentence reading “You may file a class action in court or you may be a member of a class action filed by someone else,” the following language: “However, the defendants in the class action may claim they cannot be sued due to their sovereign immunity. This provision does not create or waive any such immunity.” The word “notice” may be substituted for the word “provision” if the language is included in a notice. The Bureau notes that, even without this optional language, none of the 4(a)(2) provisions would limit a Tribe's sovereign immunity from class action lawsuits. Nevertheless, the Bureau is adopting § 1040.4(a)(2)(vi) to address the Tribal government commenters' concern that plaintiffs and courts could misconstrue the 4(a)(2) provisions in this fashion.
As noted above, the Bureau is clarifying that the optional language in § 1040.4(a)(2)(vi) may be used when there is a genuine belief that sovereign immunity under applicable law may apply. This standard—“genuine belief”—is derived from case law governing certain rights to petition a court, which are discussed further in the section-by-section analysis of comment 4(a)(1)-2 above. By using this standard to describe when the optional provision may be used, the Bureau is providing an avenue for persons who may not be certain whether they are eligible for the exemption in § 1040.3(b)(2) to preserve any sovereign immunity to which they may ultimately be entitled. For example, a person may not be certain that that they are entitled to immunities under applicable law (such as an entity that works with a State or Tribe but might not meet the common law test for being an arm of the State or arm of the Tribe), or their immunity might not be based on their status as an arm of the Tribe or arm of the State (such as a local government in circumstances when it is not an arm of the State).
Finally, the Bureau is adding § 1040.4(a)(2)(vii) to clarify that a provider may provide any provision or notice required by § 1040.4(a)(2) in a language other than English if the pre-dispute arbitration agreement is also written in that other language. This clarification is to ensure consumers reading other languages are able to understand the required provision or notice. The Bureau did not receive comment on proposed comments 4(a)(2)-1 through 4(a)(2)-3, but the Bureau is making three technical corrections to these provisions to improve clarity. First, the Bureau has added the phrase “after the compliance date set forth in § 1040.5(a)” to the first sentence of comment 4(a)(2)-1, so the comment now provides that § 1040.4(a)(2) sets forth requirements only for providers that enter into pre-dispute arbitration agreements for a covered product or service after the compliance date set forth in § 1040.5(a). Accordingly, the requirements of § 1040.4(a)(2) do not apply to a provider that does not enter into a pre-dispute arbitration agreement with a consumer.” This edit ensures that the comment accurately reflects the requirements of the Rule by noting that providers are subject to § 1040.4(a)(2) only with respect to pre-dispute arbitration agreements that they enter into after the compliance date. Second, the Bureau has revised the first sentence of comment 4(a)(2)-2 to reflect that § 1040.4(a)(2)(iii)(A) requires providers to amend existing agreements to include either the 4(a)(2)(i) or the 4(a)(2)(ii) provisions—rather than to include an amendment with language unique from those two provisions, as specified in the proposal. Third, the Bureau has removed the phrase “stating the provision” from the first sentence of proposed comment 4(a)(2)-3, so the sentence in the comment now provides that § 1040.4(a)(2)(iii) requires a provider that enters into a pre-dispute arbitration agreement that does not contain the provision required by § 1040.4(a)(2)(i) or (ii) to either ensure the agreement is amended to contain a specified provision or to provide any consumers to whom the agreement applies with written notice.” This revision reflects the fact that the written notice contains different language than the 4(a)(2)(i) and 4(a)(2)(ii) provisions.
Additionally, the Bureau is adding comment 4(a)(2)-4 to clarify the relationship between comment 2(c)-2, which explains that delegation provisions are pre-dispute arbitration agreements within the meaning of § 1040.2(c), and § 1040.4(a)(2), which requires providers to include specified language in their pre-dispute arbitration agreements. Comment 4(a)(2)-4 clarifies that if a provider has included in its pre-dispute arbitration agreement the language required by § 1040.4(a)(2), and the provider's pre-dispute arbitration agreement contains a delegation provision, the provider must include the language required by § 1040.4(a)(2) in the delegation provision itself. Thus the 4(a)(2) provision must be included in two places—in both the delegation provision and the pre-dispute arbitration agreement to which it relates—unless the latter pre-dispute arbitration agreement includes the 4(a)(2) provision and the optional sentence specified in § 1040.4(a)(2)(iv)(C) discussed above. In that case, the provider need not include the 4(a)(2) provision separately within the delegation provision.
As described above, the Bureau received several comments on proposed § 1040.4(a)(2) generally (as opposed to comments on its individual provisions). In response to the State regulator commenter that requested clarification, the Bureau affirms that, based on the plain meaning of the regulatory text, the 4(a)(2) provisions apply not only to class actions brought under Federal and State consumer protection laws, but to any class actions brought against providers concerning covered products and services. In response to the industry
In response to the industry commenter that requested that the final rule state expressly that proposed § 1040.4(a)(2) does not apply to any transaction that originated with an excluded person pursuant to proposed § 1040.3(b), the Bureau declines to revise § 1040.4(a)(2) in this manner because it would be inconsistent with the overall framework of the rule. Under the rule, agreements that initially originated between a consumer and an excluded person can become subject to § 1040.4 generally in two situations: First, where an agreement was initially entered into by an excluded person before the compliance date and then entered into by a provider after the compliance date, and second, where an agreement was initially entered into by an excluded person after the compliance date and then relied on by a provider.
The Bureau also declines, in response to the consumer advocate's comment, to reframe the 4(a)(2) provisions as express relinquishments of a provider's right to use the contract to stop the consumer from being part of a class action. The Bureau notes that it has not framed the required contract provisions in the proposal and final rule in terms of rights; instead, the provisions constitute an agreement not to undertake specified conduct. The Bureau believes that the framing of the rule affords consumers the intended protections and allows for those protections to be stated in plain language.
The Bureau further declines to adopt additional disclosure requirements in response to the comment from the trade association of lawyers who represent investors. In response to the association's recommendations that the Bureau require providers to include a 4(a)(2) provision in all pre-dispute arbitration agreements and send a separate notice containing the language to consumers with existing agreements, the Bureau believes that this requirement would impact some pre-dispute arbitration agreements that are beyond the scope of agreements covered by section 1028. Moreover, the Bureau does not believe that specific disclosure requirements (
The Bureau also declines to require providers to identify in their agreements which products are covered or to provide separate contracts for covered and non-covered products. The Bureau believes that these requirements would be significantly more burdensome than inserting a provision supplied by the Bureau. At the same time, the benefits to consumers from such requirements would be limited. The Bureau acknowledges that, where a contract is for both covered and non-covered products, it may not be immediately apparent to most consumers which products are subject to the provision. However, the Bureau believes that consumers can obtain this information, for example, by reviewing any information the provider voluntarily provides in the agreement about these products (as discussed below), by contacting their provider or by checking the Bureau's Web site for more information about the scope of the rule. The Bureau also notes that the 4(a)(2)(ii) provision is intended to communicate the consumer's dispute resolution rights not only to the consumer, but also courts and third parties such as potential purchasers, which are likely to either know which products are covered or conduct an appropriate analysis to make an informed determination.
The Bureau also declines to make use of the 4(a)(2)(ii) provision mandatory when a contract is for both covered and non-covered products and services. The Bureau believes that most providers will have a strong incentive to use the optional 4(a)(2)(ii) provision instead of the 4(a)(2)(i) provision, because it will make clear to consumers, attorneys, and judges that the provision applies only to class action claims concerning covered products. A provider of a covered and a non-covered product could use the language in 4(a)(2)(i). Although that would not be required by the rule, if they did so, that language may apply to the non-covered product as well. As a result, the Bureau believes that most providers providing covered and non-covered products will use the optional 4(a)(2)(ii) provision.
The Bureau further notes, in response to the industry commenter's recommendation that providers be given the option to disclose which products are subject to the provision and which are not, nothing in § 1040.4(a)(2) would prevent providers from including this information in their arbitration agreements; indeed, the Bureau encourages providers to do so.
The Bureau also declines to replace the 4(a)(2)(i) and 4(a)(2)(ii) provisions with a single provision, as an industry commenter suggested. The Bureau believes that, where a contract is for both covered and non-covered products, the rule should permit providers to use the optional 4(a)(2)(ii) provision because that language is consistent with the scope of the rule as well as the scope of section 1028. The Bureau also does not believe, as the commenter suggested, that § 1040.4(a)(2) would effectively require lenders to use separate loan agreements for loans that lenders make directly and loans obtained from dealers or other financial institutions.
In response to the consumer advocate commenter's concern that the optional 4(a)(2)(ii) provision would create additional hurdles for consumers in class actions by explicitly addressing the issue of coverage, the Bureau disagrees. The Bureau would not characterize the question of coverage as a hurdle for consumers as application of a law or regulation can be an appropriate threshold question in any litigation. Providers may raise it to the extent they deem it relevant and courts will address it regardless of which provision the contracting party uses.
With respect to proposed § 1040.4(a)(2)(iii), the Bureau declines to require providers to amend their agreements—instead of sending the optional notice—wherever providers have the authority to amend their agreements unilaterally or wherever amending the agreement is not “contractually impossible.” The Bureau believes this approach would be burdensome to providers, because it may not be clear whether a provider can unilaterally change the terms. The Bureau further notes that, even where providers send the notice instead of
Additionally, the Bureau declines to take additional steps that several commenters suggested would increase the binding effect of the notice on third parties. The Bureau declines to use the phrase “neither we nor anyone else” or “no one” in the notice because it is not possible for a notice to bind third parties and it would be misleading to suggest otherwise to consumers. The Bureau also declines to require contracts between providers and third parties to waive the third parties' right to rely on pre-dispute arbitration agreements in class actions, because Dodd-Frank section 1028(b) authorizes the Bureau to regulate the use of an agreement “between a covered person and a consumer.” The Bureau further declines to require that providers “consider the notice to be part of the agreement;” supply the notice whenever the agreement is requested by a third party; store a record of the notice in the same way the provider would store an amendment so that the documents together would be considered the complete agreement; or add language to the notice stating that the provider considers its promise to not stop the consumer from being part of a class action to be binding on third parties. Such requirements would effectively transform the notice into an amendment, and, for the reasons described in the previous paragraph, the Bureau declines to require providers to amend the agreement in situations where it has permitted a notice.
The Bureau also declines to forbid providers from relying on arbitration agreements in individual suits if the provider has not included the required contract provision or to state that non-compliant arbitration agreements may not be severed or reformed after litigation has commenced. Because the Bureau's Study showed that providers rarely face individual suits, the Bureau does not believe that banning reliance on non-compliant arbitration agreements in such suits would meaningfully change providers' incentives to include the required contract provision. Further, the Bureau believes that title X penalties—which the Bureau and State attorneys general may seek for violations of the rule, including failure to include the required provision—will adequately deter potential violations.
Finally, the Bureau declines to add a provision stating that non-compliant arbitration agreements are null and void. Where a provider fails to comply with the rule by omitting the contract provision required by § 1040.4(a)(2), § 1040.4(a)(1) still prevents the provider from relying on an arbitration agreement in a class action. For this reason, declaring that a non-compliant pre-dispute arbitration agreement is null and void, and thus unenforceable, would not be necessary because pursuant to § 1040.4(a)(1), the agreement is already unenforceable with respect to class actions. Further, the Bureau believes that providers will be deterred from intentionally omitting the required contract provision because such an omission would violate the rule and subject the provider to title X penalties.
Dodd-Frank section 1028(d) states that any rule prescribed by the Bureau under section 1028(b) shall apply to any pre-dispute arbitration agreement “entered into” after the compliance date. Consistent with section 1028(d), proposed § 1040.4(a)(1), § 1040.4(a)(2), and § 1040.4(b) used the term “entered into” or “entering into” to describe when the requirements imposed by those provisions would begin to apply to a particular agreement.
Proposed comment 4-1.i would have provided three illustrative examples of when a provider enters into a pre-dispute arbitration agreement. First, proposed comment 4-1.i.A would have explained that a provider enters into a pre-dispute arbitration agreement where it provides to a consumer a new product that is subject to a pre-dispute arbitration agreement, and the provider is a party to the agreement. The Bureau stated in the proposal that it did not interpret this example to include new charges on a credit card covered by a pre-dispute arbitration agreement entered into before the compliance date. Second, proposed comment 4-1.i.B would have explained that a provider enters into a pre-dispute arbitration agreement where it acquires or purchases a product covered by proposed § 1040.3 that is subject to a pre-dispute arbitration agreement and becomes a party to that agreement, even if the person selling the product is excluded from coverage under proposed § 1040.3(b). Third, proposed comment 4-1.i.C would have explained that a provider enters into a pre-dispute arbitration agreement where it adds a pre-dispute arbitration agreement to an existing product. The Bureau stated in the proposal that it interpreted Dodd-Frank section 1028(b) to authorize the Bureau to require that providers comply with proposed § 1040.4 to the extent they choose to add pre-dispute arbitration agreements to existing consumer agreements after the compliance date.
Proposed comment 4-1.ii would have provided two illustrative examples of when a provider
The Bureau noted in the proposal that comment 4-1.ii.A would include a provider's modification, amendment, or implementation of the terms of a pre-dispute arbitration agreement itself. The Bureau also stated, however, that a provider enters into a pre-dispute arbitration agreement where the modification, amendment, or implementation constituted the provision of a new covered product.
Second, proposed comment 4-1.ii.B would have stated that a provider does not enter into a pre-dispute arbitration agreement where it acquires or purchases a product that is subject to a pre-dispute arbitration agreement but does not become a party to that agreement.
Proposed comment 4-2 would have clarified that § 1040.4(a)(1) applies to a provider even where the provider itself does not enter into a pre-dispute arbitration agreement. Proposed comment 4-2.i would have explained that, under § 1040.4(a)(1), a provider cannot rely on a pre-dispute arbitration agreement entered into
Proposed comment 4-2.ii would have illustrated comment 4-2.i with an example. The proposed comment would have stated that, where a debt collector collecting on consumer credit covered by § 1040.3(a)(1)(i) has not entered into a pre-dispute arbitration agreement, § 1040.4(a)(1) nevertheless prohibits the debt collector from relying on a pre-dispute arbitration agreement entered into by the creditor after the compliance date with respect to any aspect of a class action filed against the debt collector concerning its covered debt collection products or services. The comment would have then noted that, similarly, § 1040.4(a)(1) prohibits the debt collector from relying with respect to any aspect of such a class action on a pre-dispute arbitration agreement entered into by a merchant creditor who was excluded from coverage by § 1040.3(b)(5) after the compliance date.
The Bureau received several comments on proposed comment 4-1. More than two dozen commenters—primarily consumer advocates, consumer law firms, public-interest consumer lawyers, and nonprofits—urged the Bureau to expand its interpretation of “entered into” such that product agreements entered into before the compliance date would be subject to § 1040.4 if modified after the compliance date.
A nonprofit commenter and a consumer advocate commenter recommended that the Bureau interpret “entered into” yet more expansively. The nonprofit commenter recommended that the Bureau subject all agreements to the rule, regardless of when they were entered into. The consumer advocate commenter stated that after a period of no more than one year, all existing contracts should be subject to the rule.
In contrast, an industry commenter stated that the final rule should adopt the proposal's approach to this issue by retaining comment 4-1.ii.A as proposed. Another commenter, a public-interest consumer lawyer, recommended that the Bureau remove proposed comment 4-1.ii.A and leave the question of whether modifications constitute “entering into” to the courts when they have occasion to interpret part 1040.
In addition, a number of commenters addressed the relationship between proposed comments 4-1.i.A and 4-1-ii.A,
Other commenters addressed the proposal's application to acquirers and purchasers of covered products. An industry commenter stated that a provider who was not a party to the original agreement between a company and a consumer should not be subject to the rule, even if the provider acquires or purchases a covered product after the compliance date or if the product agreement states that third parties (such as purchasers and assignees) may enforce the agreement. According to the commenter, such a third party already had rights in the arbitration agreement before the compliance date; therefore, the agreement is not newly entered into as to that third party. Another industry commenter stated that pre-dispute arbitration agreements originally entered into by excluded persons, such as automobile dealers, should not be subject to the rule when entered into by providers after the compliance date because, according to the commenter, the enforceability of a contract provision cannot depend on the identity of the party enforcing it. An industry commenter asked the Bureau to clarify how the rule would apply where a bank acquires another institution after the compliance date and account holders might receive a new account agreement from the acquiring institution. A trade association of consumer lawyers stated that the rule should cover providers that receive assignments of contracts. Another trade association of consumer lawyers stated that it supported the Bureau's proposed application of the rule to acquirers and purchasers.
Other commenters expressed concerns about comment 4-1.ii.B.
Finally, a consumer advocate commenter expressed concern about the first sentence of proposed comment 4-1, which prefaced the comment's examples of when providers do and do not enter into agreements for purposes of proposed § 1040.4 by stating, “Section 1040.4 applies to providers that enter into pre-dispute arbitration agreements after the [compliance date].” The commenter asserted that this sentence is inaccurate because proposed § 1040.4(a)(1) would have applied to providers that do not themselves enter into pre-dispute arbitration agreements.
Having considered the issues raised by commenters, the Bureau is finalizing comments 4-1 and 4-2, containing its interpretation of the term “entered into” in this Part with certain modifications as described below.
The Bureau continues to interpret the phrase “entered into” in Dodd-Frank section 1028(d) as generally including circumstances in which a person agrees to undertake obligations or gains rights in an agreement. However, the Bureau notes that the rule does not treat every conceivable circumstance in which a person gains rights in a pre-dispute arbitration agreement to constitute entering into the agreement. For example, a person who is not a party to an agreement but is entitled to use the agreement may gain third-party beneficiary rights, but as discussed in the section-by-section analysis of comments 4-1 and 4-2 below, that person would not generally be entering into the pre-dispute arbitration agreement for purposes of the rule.
The Bureau is adopting the examples in comment 4-1 largely as proposed, but with some additional clarifications as described below. As in the proposal, comment 4-1.i provides three illustrative examples of when a provider enters into a pre-dispute arbitration agreement after the compliance date for purposes of § 1040.4. Comment 4-1.i.A explains that a provider enters into a pre-dispute arbitration agreement when it provides to a consumer, after the compliance date, a new product or service covered by § 1040.3(a) that is subject to a pre-existing agreement to arbitrate future disputes between the parties, and the provider is a party to that agreement, regardless of whether that agreement predates the compliance date.
Further, as in the proposal, comment 4-1.ii provides two illustrative
Final comment 4-1 differs from the proposal in several respects. First, the Bureau has deleted the first sentence of proposed comment 4-1 (“Section 1040.4 applies to providers that enter into pre-dispute arbitration agreements after the [compliance date].”). The Bureau agrees with the consumer advocate commenter that the sentence would be inaccurate, given that § 1040.4(a)(1) applies to providers that do not themselves enter into pre-dispute arbitration agreements.
Second, the Bureau is adding additional clarifying language to comments 4-1.i.A and 4-1.i.B. This language clarifies an important aspect of the rule: That, for purposes of the rule, a provider enters into an agreement in the scenarios described in those comments even if the arbitration agreement was originally entered into before the compliance date. Therefore, final comment 4-1.i.A explains that when a person, before the compliance date, enters into an agreement to arbitrate future disputes with a consumer, and then provides the consumer with a new product that is subject to that agreement after the compliance date, the provider would be considered to be entering into that arbitration agreement for the new product after the compliance date for purposes of § 1040.4. Similarly, under final comment 4-1.i.B, when a person and consumer enter into a pre-dispute arbitration agreement for a product described in § 1040.3(a) before the compliance date, and a provider acquires or purchases the product after the compliance date (and becomes a party to that arbitration agreement), the acquiring or purchasing provider would be considered to be entering into the pre-dispute arbitration agreement for purposes of § 1040.4.
The Bureau is adopting these interpretations to clarify that providers cannot avoid application of the rule after the compliance date by linking new products or newly-acquired or newly-purchased products with arbitration agreements that predate the compliance date and purport to govern the provider's future relationship with the consumer. This language clarifies that when providing new products after the compliance date, providers will need to review their product agreements that predate the compliance date to determine whether the new product agreement is subject to a pre-existing pre-dispute arbitration agreement that was not subject to the rule. The Bureau notes that providers can alleviate any burden with respect to this review either by inserting language in the new product agreement stating that the new product agreement is not subject to arbitration, or by including the rule's required contract provision with respect to that new product so that, in effect, the provider is amending the application of any earlier arbitration agreement to the new product or service.
Third, the Bureau has revised comment 4-1.ii.A to clarify the relationship between comments 4-1.i.A and 4-1.ii.A. In the preamble to the proposal, the Bureau noted that, even though a provider does not enter into a pre-dispute arbitration agreement where it modifies the terms of a product, a provider
The Bureau declines to adopt commenters' recommendation that contractual modifications should not constitute “entering into” even if they constitute the provision of a new product. The Bureau does not agree with the industry commenter that stated that agreements originally entered into before the compliance date should always continue to be exempt, even if modified after the compliance date, as long as the underlying product continues to serve the purpose for which the consumer originally entered into the agreement. Dodd-Frank section 1028(d) authorizes any regulation issued by the Bureau under section 1028(b) to apply to any agreement between a consumer and covered person entered into after the compliance date. The Bureau believes that, when a provider provides a new product or service after the compliance date, the pre-dispute arbitration agreement for that product is entered into at that time with respect to that new product or service, regardless of whether the pre-dispute arbitration agreement had been entered into previously with respect to other products or services. Thus, section 1028(d) authorizes the Bureau to apply the rule, as to that new product or service, at that time. Further, the approach recommended by the industry commenter would undermine coverage of new agreements. Were the Bureau to adopt the approach recommended by the three industry commenters, providers could potentially evade the rule in perpetuity, with respect to existing consumers, by providing new products to their existing consumers through what such providers would assert are modifications of existing contracts. With respect to the comments that asked the Bureau to clarify what types of contractual modifications would, in its view, constitute the provision of a new product, the Bureau believes that such modifications include, without limitation, those that result in the provision of a new account (such as a deposit account or credit card account) or a new closed-end credit transaction.
Fifth, to conform to the rest of the regulatory text and commentary, the Bureau has revised comment 4-1.i.B and 4-1.ii.B to use the term “product or service”—not simply “product,” as in the proposal.
The Bureau declines to expand its interpretation of “entered into” for purposes of § 1040.4 to include situations where a provider purchases or acquires a product that is subject to a pre-dispute arbitration agreement, but does not become party to the pre-dispute arbitration agreement. The Bureau recognizes that sellers of loans may place two separate agreements into two different documents—a product agreement and a pre-dispute arbitration agreement. The Bureau understands this “de-coupling” may be common in automobile finance, for example. The Bureau also recognizes that buyers may purchase or acquire the product agreement and become a party to that agreement, without purchasing the pre-dispute arbitration agreement or becoming party to that agreement. In these circumstances, the buyer may become a third-party beneficiary to the pre-dispute arbitration agreement. However, the Bureau disagrees that, by not treating such a buyer to be entering into the pre-dispute arbitration agreement, the rule encourages evasions. Such a buyer does not, in fact, evade the rule. The buyer, though not entering into the pre-dispute arbitration agreement, nonetheless remains subject to the rule against reliance in a class action in § 1040.4(a)(1), which generally applies to a provider regardless of whether it has entered into the pre-dispute arbitration agreement. The provider would also be required to submit certain specified records concerning claims filed in arbitration pursuant to such pre-dispute arbitration agreements. While such a buyer would not be subject to the contract provision or notice requirements in § 1040.4(a)(2), the Bureau does not believe that is an evasion of the rule. That outcome is, rather, a natural reflection of the position the buyer is in vis-à-vis the pre-dispute arbitration agreement. Moreover, making the buyer subject to § 1040.4(a)(2) in these circumstances would be inconsistent with the rule's overall approach to coverage of third parties, such as debt collectors who are hired by a creditor and may acquire third-party beneficiary rights under a pre-dispute arbitration agreements.
The Bureau also declines to expand its interpretation of “entered into” for purposes of § 1040.4 such that agreements entered into before the compliance date would become subject to the rule if modified in ways that do not constitute the provision of a new product. As discussed above, numerous commenters asserted that that this approach would benefit consumers by increasing the number of agreements that would be subject to the rule over time, relative to the Bureau's proposed approach. The Bureau believes, however, that this would not yield such significant consumer protection benefits to warrant the additional complexity and uncertainty that such a standard would create.
First, this approach would not benefit consumers in markets for most covered products. The Bureau understands that product agreements for many covered products are not typically modified after they are entered into. (For example, agreements for closed-end credit products are rarely modified, and products that are provided on a one-time basis do not allow for an opportunity to amend the agreement). For the remaining products—among which credit cards and checking accounts are the most significant in terms of market size—the Bureau lacks data on the frequency of contractual modifications (and commenters did not cite any such data). However, regardless of how frequently modifications occur, the Bureau believes that the rule will apply to a significant majority of consumer agreements within a relatively brief period, even if the Bureau does not expand its interpretation of “entered into” to include modifications, due to the frequency of account turnover in these markets.
For these reasons, the Bureau believes that expanding its interpretation of “entered into” for purposes of § 1040.4 to include modifications generally (even when there is no provision of a new product) would not yield significant consumer benefit. At the same time, such an approach would increase the rule's complexity and uncertainty by requiring providers, the Bureau, other regulators, and the courts to determine, for purposes of the rule, what types of modifications of existing products constitute entering into and which do not. For example, determining what modifications are sufficiently “material” would be a complicated line-drawing process. For these reasons, the Bureau is not expanding its interpretation of “entered into” for the purposes of § 1040.4 to include modifications of existing contracts after the compliance date that do not represent the provision of a new product or service.
Similarly, the Bureau declines to expand its interpretation of “entered into” for purposes of § 1040.4 such that agreements entered into before the compliance date would be subject to the rule if the provider modifies the pre-dispute arbitration agreement (but not the overall product agreement after the compliance date). As described above, a commenter asserted that this approach would deter providers from amending their pre-dispute arbitration agreements after the compliance date to add class actions waivers and thus expand the reach of the proposal. The Bureau believes that some of the same considerations about complexity and uncertainty, described above, that warranted not expanding its interpretation of “entered into” to include modifications to product agreements also apply in the context of modifications to arbitration agreements themselves. Additionally, in response to the consumer law firm's comment that interpreting “entered into” to include modifications to arbitration agreements would deter providers from amending their pre-dispute arbitration agreements after the compliance date to add class action waivers, the Bureau does not believe that providers covered by the rule will have an incentive to add class
The Bureau also declines to subject all agreements to the rule regardless of when they were entered into (as requested by the nonprofit commenter) and to subject all existing contracts to the rule after a period of one year (as requested by the consumer advocate commenter). Section 1028(d) requires that any regulation prescribed by the Bureau shall apply to agreements entered into after the compliance date, and both of these approaches would cause the Bureau's rule to apply to some agreements not entered into after the compliance date. The Bureau also declines to adopt the public-interest consumer lawyer's recommendation to delete comment 4-1.ii.A. The Bureau believes the comment promotes a uniform approach to the application of the rule, which will thus facilitate compliance and reduce burden and uncertainty.
Moreover, the Bureau declines to adopt the interpretation requested by industry commenters that a provider does not enter into a pre-dispute arbitration agreement where, after the compliance date, it acquires or purchases a covered product that predated the compliance date. The Bureau disagrees with the industry commenter's assertion that an agreement is not entered into in this scenario because the acquirer or purchaser already had rights under the agreement. Even where an agreement states that it is enforceable by a purchaser, a
With respect to the assertion by a different industry commenter that acquirers or purchasers should not be subject to the rule because the enforceability of a contract provision cannot depend on the identity of the party enforcing it, the Bureau does not believe that this is accurate. Different parties to a contract may be subject to different regulatory requirements, some of which may limit their ability to enforce certain provisions. Thus, if a party has in fact entered into a contract after the compliance date, then that party may be subject to this rule, even if a different person entered into the contract before the compliance date and is not subject to the rule.
In response to the industry commenter that requested that the Bureau clarify how the rule applies in the context of bank acquisitions, the Bureau notes that, as comment 4-1.i.B explains, an acquiring bank enters into an acquired bank's pre-dispute arbitration agreements for purposes of § 1040.4 where it becomes a party to the acquired bank's arbitration agreements (or product agreements subject to arbitration agreements) after the compliance date, even if the agreements were entered into by the acquired bank before the compliance date.
The Bureau is finalizing comment 4-2 largely as proposed. The Bureau has revised comment 4-2 to refer to the compliance date (instead of the effective date) and has made other minor modifications to improve readability.
As discussed above in Part VI, while proposed § 1040.4(a) would have prevented providers from relying on pre-dispute arbitration agreements in class actions, it would not have prohibited covered entities from maintaining pre-dispute arbitration agreements in consumer contracts generally; nor would it have prevented providers from still invoking such agreements to compel arbitration in cases not filed as putative class actions. Thus, the Bureau separately considered in the proposal whether regulatory interventions pertaining to these “individual” arbitrations would be in the public interest and for the protection of consumers, as well as whether the findings for such interventions are consistent with the Bureau's Study. The Bureau ultimately decided not to propose to prohibit specific practices in individual arbitration, but rather to propose an ongoing monitoring regime in light of historical precedent suggesting that there could be risks to consumers in certain circumstances from biased arbitration administrators or other practices.
Accordingly, pursuant to its authority under sections 1028(b) and 1022(c)(4) of the Dodd-Frank Act, the Bureau proposed § 1040.4(b), which would have required providers to submit copies of certain arbitral records to the Bureau. Specifically, proposed § 1040.4(b)(1) would have required providers, for any pre-dispute arbitration agreement entered into after the compliance date, to submit copies to the Bureau of claims, judgments or awards, and certain other records concerning specific arbitration proceedings, as well as certain decisions by an arbitration administrator concerning the fairness of the underlying arbitration agreements. The Bureau explained in the proposal that it intended to develop, implement, and publicize an electronic submission process before the compliance date if proposed § 1040.4(b) were adopted. Proposed § 1040.4(b)(2) addressed the timing of records submissions, while proposed § 1040.4(b)(3) would have set forth the information that providers shall redact before submitting records to the Bureau.
Using the records collected and other sources, the Bureau stated that it intended to continue to evaluate the
Proposed comment 4(b)-1 would have clarified that providers are not required to submit records themselves if they arrange for another person, such as an arbitration administrator or an agent of the provider, to submit the records on the providers' behalf, but that the obligation to comply with § 1040.4(a) nevertheless remains on the provider. The provider must ensure that the person submits the records in accordance with § 1040.4(b).
Proposed comment 4(b)(3)-1 would have clarified that providers are not required to perform the redactions themselves and may arrange for another person, such as an arbitration administrator, or an agent of the provider, to redact the records. The obligation to comply with § 1040.4(b) nevertheless remains on the provider and thus the provider must ensure that the person redacts the records in accordance with § 1040.4(b).
As set forth in more detail below, the Bureau is finalizing § 1040.4(b)(1) through (b)(3) largely as proposed with the addition of two additional categories of records. In addition the Bureau is finalizing new provisions § 1040.4(b)(4) through (b)(6), which require the Bureau to redact and then publish to the internet the records received by the Bureau pursuant to § 1040.4(b)(1) through (b)(3).
The Bureau finalizes comment 4(b)-1, having received no comments on this specific commentary. The Bureau also finalizes proposed comment 4(b)(3)-1, renumbered as 4(b)-2, having received no comments on this specific commentary.
As stated above, proposed § 1040.4(b) would have required that, for any pre-dispute arbitration agreement entered into after the compliance date, providers submit a copy of the arbitration records specified by proposed § 1040.4(b)(1) to the Bureau, in the form and manner specified by the Bureau.
An industry commenter pointed to a reference in the proposal to section 1021(b) of the Dodd-Frank Act, which defines the Bureau's objectives to include “ensuring . . . [that] Federal consumer financial law is enforced consistently.” The commenter asserted that this section may grant the Bureau the authority to determine if Federal consumer financial law is being applied consistently, but does not grant the Bureau authority to determine whether arbitrators are applying Federal consumer financial law consistently thus this part of the proposal exceeded the Bureau's authority. Some commenters argued that the Bureau lacked authority to collect arbitration materials. One industry commenter argued that the monitoring proposal created a new and direct “channel” of supervision by the Bureau for small entities, which are generally not subject to the Bureau's examination authority. Another industry commenter expressed doubts over whether the Bureau could collect documents from financial institutions for which it was not the primary regulator. Another industry commenter argued that arbitration is not a consumer financial product or service and, therefore, cannot be regulated by the Bureau under its authority under section 1022(c), which permits market monitoring as to the “offering or provision of” consumer financial products.
Section 1040.4(b)(1) is largely finalized as proposed, with several additions set out below in § 1040.4(b)(1)(i) through (b)(1)(iii).
As to the comment that Dodd-Frank section 1021(b) does not give the Bureau authority to determine whether arbitrators are enforcing consumer financial laws consistently, the Bureau disagrees with the comment's premise. The Bureau cites provisions other than section 1021(b) as legal authority for the monitoring requirement.
As to various commenters that challenged the Bureau's authority to adopt the rule, the Bureau relies on sections 1028 and 1022 of the Dodd-Frank Act as set out in greater detail in the Parts V and VI.D, above. Those provisions authorize the Bureau to collect documents from providers of consumer financial products, even with regard to entities for which it does not exercise supervisory authority under sections 1024 through 1026. The Bureau finds that its market monitoring authority under section 1022 encompasses the dispute resolution mechanisms that providers of consumer financial products adopt to resolve conflicts with their customers. Contrary to the commenters' assertions, monitoring does not create a new de facto “channel” for examining small entities not subject to the Bureau's larger participant rulemakings. Monitoring simply permits the Bureau to understand fairness and quantity of the specific arbitration proceedings that arise. In any case, many providers that are not subject to the Bureau's supervision authority otherwise are subject to the Bureau's market monitoring authority and the Bureau's enforcement authority for unfair, deceptive, and abusive acts and practices. The Bureau believes consumers will benefit if records pertaining to individual arbitration proceedings are submitted to the Bureau. Further, as to the industry comment that arbitration is not a consumer financial product for purposes of collecting data under 1022(c) of the Dodd-Frank Act, the Bureau interprets its market monitoring under 1022(c)(1)), which authorizes “monitor[ing] for risks to consumers in the
With regard to the commenter that expressed doubts over whether the Bureau could collect documents from financial institutions for which it was not the primary regulator, the Bureau disagrees, given the affirmative grant of authority to the Bureau under sections 1022 and 1028 of the Dodd-Frank Act. The Bureau has routinely interpreted its section 1022 market monitoring authority to reach all entities covered by the Dodd-Frank Act.
Proposed § 1040.4(b)(1)(i) would have required, in connection with any claim filed by or against the provider in arbitration pursuant to a pre-dispute arbitration agreement entered into after the compliance date, that providers submit: (A) The initial claim form and any counterclaim; (B) the pre-dispute arbitration agreement filed with the arbitrator or administrator; (C) the judgment or award, if any, issued by the arbitrator or arbitration administrator; and (D) if an arbitrator or arbitration administrator refuses to administer or dismisses a claim due to the provider's failure to pay required filing or administrative fees, any communication the provider receives from the arbitrator or an arbitration administrator related to such a refusal.
Specific comments relating to each of the individual proposed categories of records are discussed separately below. Separately, the Bureau received several general comments that suggested expansions in the categories of records subject to the submission requirement of proposed 1040.4(b)(1)(i) and urged the Bureau to exclude some providers from complying with the proposed requirement.
One consumer advocate commenter suggested that the Bureau should require providers to submit a number of other documents or data related to the timing of arbitration proceedings (including the date on which the statement of claim was filed, the date on which the provider paid administration or arbitration fees, the date on which the arbitration hearing was held, and the date on which the award was issued) to permit the Bureau to understand how often providers delayed arbitration proceedings. The consumer advocate commenter also suggested that the Bureau should require providers to submit information on the relationship of the administrator with the parties, including any
Another consumer lawyer commenter suggested that the Bureau should require providers to submit information to the Bureau on the protected group status of consumers—including race, ethnicity and gender—subject to pre-dispute arbitration agreements, whether or not the consumers were parties to an arbitration proceeding, so that the Bureau and others can analyze the disparate impact of such agreements on protected groups. The consumer lawyer commenter noted that, in its experience, pre-dispute arbitration agreements are used to deter formal claims by consumers before they are raised generally, that this deterrence has a disparate impact on protected groups, and that the Bureau should thus collect data on protected group status to analyze this. The commenter suggested that such data on the protected group status of consumers should be collected in such a way that it is not disclosed inappropriately to the arbitrator, such that the arbitrator could make decisions without access to the protected group status of consumer participants to arbitrations. The commenter admitted that it was unsure, practically, how the Bureau could collect this information and avoid disclosure to the arbitrator.
A Tribal commenter requested that the Bureau exclude Tribal entities from complying with the formal aspects of the monitoring proposal and suggested instead that the Bureau could receive similar information by collaborating with Tribal regulatory bodies to potentially engage in information sharing.
Based on the Bureau's responses to more general comments on arbitral records, and for the more specific reasons set out below in the section-by-section analyses of § 1040.4(b)(1)(i)(A) through (i)(E), the Bureau is finalizing § 1040.4(b)(1)(i). Section 1040.4(b)(1)(i) sets forth what arbitration related documents providers must submit, largely as proposed, with the addition of one new category of arbitration-related record in new (b)(1)(i)(B), which requires the submission of answers to initial claims and counterclaims.
The Bureau disagrees that the final rule should require providers to submit additional types of documents suggested by commenters, other than one category of document set out in § 1040.4(b)(1)(i)(B) below. The Bureau believes that the documents required by § 1040.4(b)(1)(i) capture significant data on the timing of arbitration proceedings and any delays. Specifically, the documents the Bureau will receive—claims, answers to claims, and awards—will themselves show dates and permit the Bureau to determine the time between filing and awards in many cases. The submission of additional documents on timing would likely increase burden on providers without a clear benefit to consumers, the policymaking of the Bureau, or others.
The Bureau also disagrees with the consumer advocate commenter that the final rule should require the submission of records, information or
The Bureau agrees with a consumer advocate commenter that the receipt of information on the protected group status of consumers subject to pre-dispute arbitration agreements, whether or not the consumers were parties to an arbitration proceedings, could be potentially useful in analyzing the disparate impact of such agreements on protected groups. However, the Bureau views the collection of such data about consumers that were deterred from making claims at all as impracticable in the context of this rulemaking. The consumer lawyer admitted in its comment the difficulties of devising a practicable means to obtain such information without drawing the attention of arbitrators to the protected group status of the consumer.
The Bureau disagrees with the comment that Tribal entities should be excluded from the monitoring proposal because the Bureau could instead collaborate with Tribal regulatory bodies to engage in information sharing. The Bureau believes that practically speaking, this part of the proposal should have no or minimal impact on most Tribal entities, given that the final rule's exemption. The Bureau also believes that those entities that do use arbitration agreements should find it simpler and less time-consuming to comply with the relatively simple provisions of the rule, rather than waiting for collaborations between different Tribal regulatory bodies and the Bureau to develop
Proposed § 1040.4(b)(1)(i)(A) would have required providers to submit any initial claims filed in arbitration pursuant to a pre-dispute arbitration agreement and any counterclaims. By “initial claim,” the Bureau meant the filing that initiates the arbitration, such as the initial claim form or demand for arbitration.
One industry commenter suggested that proposed § 1040.4(b)(1)(i) should be modified to require that providers submit only the “substance of” initial statements of claims and any counterclaim in arbitration. The industry commenter reasoned that consumers often submit additional documents as attachments to statements of claim, such as bank statements, that would require extensive and burdensome redactions.
Section 1040.4(b)(1)(i)(A) is finalized as proposed. The Bureau concludes that a statement of claim is necessary to understand the nature of a dispute. As discussed in detail above, the Bureau believes that collecting claims will permit the Bureau to monitor arbitrations on an ongoing basis and identify trends in arbitration proceedings, such as changes in the frequency with which claims are filed, the subject matter of the claims, and who is filing the claims. Based on the Bureau's expertise in handling and monitoring consumer complaints as well as monitoring private litigation, the monitoring of claims will also help the Bureau identify business practices that harm consumers.
The Bureau disagrees that providers should be permitted to summarize the “substance of” initial statements of claims simply because consumers may attach additional documents to statements of claim that may require redaction before submission. The Bureau believes that any redaction burden will be limited in cost, even for lengthier additional documents, based on its experience of having reviewed statements of claim in the course of the Study,
In the final rule, the Bureau is adopting new § 1040.4(b)(1)(i)(B) (proposed § 1040.4(b)(1)(i)(B) is renumbered as § 1040.4(b)(1)(i)(C)), which requires that providers should also submit answers to arbitration statements of claim.
The Bureau is adopting § 1040.4(b)(1)(i)(B) in response to several commenters' concern that the original proposal, which only required the submission of initial claims and counterclaims, could result in a one-sided presentation of the facts in an arbitration proceeding, especially where no award was issued. Specifically, the Bureau adopts the suggestion by one Tribal commenter that providers be required to submit answers to initial claim filings.
As the Study demonstrated, most arbitration proceedings do not result in a final award or judgment issued by a neutral arbitrator.
Proposed § 1040.4(b)(1)(i)(B) would have required providers to submit, in connection with any claim filed in arbitration by or against the provider, the pre-dispute arbitration agreement filed with the arbitrator or arbitration administrator. The Bureau noted in the proposal that, due to concerns relating
A nonprofit commenter and a consumer advocate commenter suggested that all entities covered by the rule should submit all pre-dispute arbitration agreements covered by the rule to the Bureau. The same nonprofit commenter suggested that all amendments to pre-dispute arbitration agreements should also be subject to the submission requirement, and that any information on pre-dispute arbitration agreements that require hearings in fora inconvenient to consumers should be submitted to the Bureau. Another consumer advocate suggested that entities supervised by the Bureau that are also providers under the rule be required to submit all of their covered pre-dispute arbitration agreements to the Bureau. These commenters argued that such additional steps were warranted because they believed that individual arbitration proceedings themselves were problematic and unfair to consumers, that smaller providers were not likely to drop their pre-dispute arbitration agreements, and that pre-dispute arbitration agreements themselves could be reviewed for unfairness to consumers.
Proposed § 1040.4(b)(1)(i)(B), renumbered in this final rule as § 1040.4(b)(1)(i)(C), is finalized as proposed. By collecting the pre-dispute arbitration agreement in filed arbitrations, the Bureau will be able to monitor the impact that particular clauses in an agreement have on the conduct of arbitrations. The Bureau disagrees with consumer advocate commenters that this provision should be expanded to require all providers to submit pre-dispute arbitration agreements to the Bureau. The Bureau noted in its proposal that, due to concerns relating to burden on providers and the Bureau itself, the Bureau did not propose to collect all pre-dispute arbitration agreements that are provided to consumers. None of the comments suggested ways to mitigate such burdens. Further, the Bureau believes that many providers that use pre-dispute arbitration agreements, but will not be required by § 1040.4(b)(1)(i)(C) to submit such agreements to the Bureau because they are not a party to an arbitration proceeding, may be required by other Bureau regulations to submit pre-dispute arbitration agreements in any case. Pursuant to Regulation Z, credit card issuers are already required to submit their consumer agreements to the Bureau.
Proposed § 1040.4(b)(1)(i)(C) would have required providers to submit the judgment or award, if any, issued by the arbitrator or arbitration administrator in an arbitration subject to proposed § 1040.4(b). This proposed requirement was intended to reach only awards issued by an arbitrator that resolved an arbitration and not settlement agreements that are not incorporated into an award. The Bureau believes that the proposed submission of these awards would aid the Bureau in its ongoing review of arbitration and help the Bureau assess whether arbitrations are being conducted fairly and without bias.
An industry commenter suggested that the Bureau should not collect awards or judgments for a number of reasons, including that the proposal would discourage arbitrators from making explicit findings, knowing that the Bureau might subject the provider to further scrutiny, and that the proposal would put the onus on arbitrators to assess the fairness of arbitration agreements when it is the role of courts to analyze the fairness of such agreements.
Proposed § 1040.4(b)(1)(i)(C), renumbered as § 1040.4(b)(1)(i)(D), is finalized as proposed. As discussed in detail in Part VI.D, the Bureau disagrees with the industry commenter that argued that this provision of the rule may disincentivize arbitrators from making certain findings. Indeed, the Bureau believes publication will make arbitrators more deliberative in their decision-making, and that this is in the public interest and for the protection of consumers. The Bureau agrees with the commenter that suggested that this provision may also subject some providers to further Bureau scrutiny, especially if they are repeatedly involved in arbitrations. The Bureau believes that such an outcome is a potential benefit. The Bureau believes that it is in the public interest and for the protection of consumers to subject certain providers—especially those that have multiple final awards against them from consumers on the same issue—to further scrutiny from the Bureau, other regulators, and the public regarding the providers' business and compliance practices. Overall, the Bureau believes that the submission of awards will aid the Bureau in its ongoing review of arbitration and help the Bureau assess whether arbitrations are being conducted fairly and without bias.
Proposed § 1040.4(b)(1)(i)(D) would have applied where an arbitrator or arbitration administrator refuses to administer or dismisses a claim due to the provider's failure to pay required filing or administrative fees. If this were to occur, proposed § 1040.4(b)(1)(i)(D) would have required the provider to submit any communication the provider receives from the arbitration administrator related to such a refusal or dismissal. As the proposal explained with regard to communications relating to nonpayment of fees, the Bureau understands that arbitrators or administrators, as the case may be, typically refuse to administer an arbitration proceeding if filing or administrative fees are not paid. The Bureau understands that arbitrators or administrators will typically send a letter to the parties indicating that the arbitration has been suspended due to nonpayment of fees.
Where providers successfully move to compel a case to arbitration (and obtain its dismissal in court), but then fail to pay the arbitration fees, consumers may be left unable to pursue their claims in
Proposed § 1040.4(b)(1)(i)(D) would have required providers to submit communications from arbitration administrators related to the dismissal or refusal to administer a claim for nonpayment of fees even when such nonpayment is the result of a settlement between the provider and the consumer. The Bureau believed this requirement would have prevented providers who engage in strategic nonpayment of arbitration fees to claim, in bad faith, ongoing settlement talks to avoid the disclosure to the Bureau of communications regarding their nonpayment. The Bureau had anticipated that companies submitting communications pursuant to proposed § 1040.4(b)(1)(i)(D) could indicate in their submission that nonpayment resulted from settlement and not from a tactical maneuver to prevent a consumer from pursuing the consumer's claim. Further, as stated above in the discussion of proposed § 1040.4(b)(1)(i)(C), the Bureau would have required submission of the underlying settlement agreement or a notification that a settlement has occurred.
One consumer advocate commenter suggested that the Bureau should require providers to submit a number of other documents or data related to costs and fees in arbitration proceedings, including documents on the arbitration and administrative costs paid by providers and consumers in arbitration to ensure that the Bureau would be aware of general cost levels, documents relating to requests or grants of a reduction in arbitration costs for the consumer to see how often providers helped make arbitration proceedings affordable for consumers.
Proposed § 1040.4(b)(1)(i)(D), renumbered as § 1040.4(b)(1)(i)(E), is finalized as proposed. The Bureau believes this provision will provide transparency as to fee practices generally, and that companies submitting communications pursuant to final § 1040.4(b)(1)(i)(E) can indicate in their submission that nonpayment resulted from settlement. The Bureau believes that the general attention to this issue will discourage providers from claiming in bad faith that the nonpayment of fees is due to ongoing settlement talks when in fact they are engaged in a tactical maneuver to prevent a consumer from pursuing the consumer's claim.
The Bureau disagrees with consumer advocate commenters that it should require that providers submit additional records on the cost of the arbitration. The Bureau does not believe that the additional data commenters have suggested collecting would be useful enough to justify the additional burden it would pose to collect and analyze such documents. The final rule already addresses the most serious cost-related issue identified in the Study and § 1040.4(b)(1)(i)(E) requires the submission of records pertaining to a party's refusal to pay required arbitrator or administrator costs or fees. There may be some incremental benefit to receiving further documents detailing costs, such as documents on
Proposed § 1040.4(b)(1)(ii) would have required providers to submit to the Bureau any communication from an arbitrator or arbitration administrator related to a determination that a provider's pre-dispute arbitration agreement does not comply with the administrator's fairness principles, rules, or similar requirements. The Bureau was concerned about providers' use of arbitration agreements that may violate arbitration administrators' fairness principles or rules. Several of the leading arbitration administrators maintain such principles or rules, which the administrators use to assess the fairness of the company's pre-dispute arbitration agreement.
The Bureau believed that requiring submission of communications from administrators concerning agreements that do not comply with arbitration administrators' fairness principles or rules would allow the Bureau to monitor which providers could be attempting to harm consumers or discourage the filing of claims in arbitration by mandating that disputes be resolved through unfair pre-dispute arbitration agreements. The Bureau also believed that requiring submission of such communications could further discourage covered entities from inserting pre-dispute arbitration agreements in consumer contracts that do not meet arbitrator fairness principles or rules.
Proposed comment 4(b)(1)(ii)-1 would have clarified that, in contrast to the other records the Bureau proposes to collect under proposed § 1040.4(b)(1), proposed § 1040.4(b)(1)(ii) would have required the submission of communications both when the
Proposed comment 4(b)(1)(ii)-2 would have clarified that what constitutes an administrator's fairness principles or rules pursuant to proposed § 1040.4(b)(ii)(B) should be interpreted broadly. Further, that comment would have provided current examples of such principles or rules, including the AAA's Consumer Due Process Protocol and the JAMS Policy on Consumer Arbitrations Pursuant to Pre-Dispute Clauses Minimum Standards of Procedural Fairness.
The Bureau did not receive specific comments addressing the requirement in proposed § 1040.4(b)(1)(ii) that providers submit communications related to non-compliance with an arbitration administrator's fairness protocols. The Bureau received comments that implicated proposed § 1040.4(b)(1)(ii) from a consumer advocate that argued that the Bureau should promulgate specific due process or fairness standards for the content of pre-dispute arbitration agreements or the actual actions of providers in the course of arbitration proceedings rather than relying on the administrators to do so. The consumer advocate commenter asserted that individual arbitration itself is unfair and systematically favors providers and urged that if the Bureau is not going to prohibit arbitration altogether it should prescribe minimum standards for arbitration.
The Bureau finalizes § 1040.4(b)(1)(ii) as proposed. For the reasons set out above in Part VI.B, the Bureau disagrees that it should adopt due process or fairness standards or should otherwise regulate provider conduct in arbitration proceedings. In the absence of additional data presented by commenters showing systematic unfairness in individual arbitrations, the Bureau believes that requiring providers to submit correspondence from administrators on the non-compliance of pre-dispute arbitration agreements with administrator due process or fairness rules will aid the Bureau in identifying potential widespread unfairness to consumers while imposing minimal burden. In addition, the Bureau expects to use its supervisory function and may review other data—including credit card agreements and prepaid account agreements that providers are or will be required to submit to the Bureau
The Bureau is also finalizing comments 4(b)(1)(ii)-1 and -2 as proposed, having received no comments on this specific commentary.
Prior to the publication of the monitoring proposal, consumer advocates and some other stakeholders had expressed concern that a proposal under consideration similar to proposed § 1040.4(b) that the Bureau described in its SBREFA Outline would allow the Bureau to monitor certain arbitration trends, but not to monitor or quantify the claims that consumers may have been deterred from filing because of the existence of a pre-dispute arbitration agreement. In particular, consumer advocates and some other stakeholders had expressed concern that pre-dispute arbitration agreements discourage consumers from filing claims in court or in arbitration and discourage attorneys from representing consumers in such proceedings.
After the publication of proposed § 1040.4(b), other consumer lawyer and consumer advocate commenters suggested that the Bureau require providers to submit records anytime they rely on a pre-dispute arbitration agreement, specifically in the context of court filings in which, for instance, a party invokes a pre-dispute arbitration agreement to compel arbitration. The commenters asserted that requiring providers to submit litigation filings that rely on pre-dispute arbitration agreements would be an important means of monitoring the extent to which providers were using such filings to block individual litigation from proceeding (insofar as they could no longer be used to block class actions). More specifically, commenters suggested that the addition of such data would make it clear whether providers filed such motions to move consumers to arbitration as a preferred forum for formal dispute settlement instead of litigation, or whether providers were filing motions to compel arbitration to discourage consumers from proceeding at all. According to commenters, the absence of arbitration proceedings corresponding to motions made in litigation to compel arbitration would suggest that providers may have used arbitration agreements as a means to suppress claims outright, thus discouraging consumers from filing any type of formal claim.
In response to these comments and other concerns, the Bureau adopts new § 1040.4(b)(1)(iii), which requires providers to submit certain records that providers file in court. Specifically, new § 1040.4(b)(1)(iii)(A) requires that a provider submit to the Bureau any motion or filing sent by that provider to a court that relies on a pre-dispute arbitration agreement. Pursuant to this provision, providers are required to submit motions attempting to dismiss, defer, or stay any aspect of a case in court where such motions rely in whole or in part on an arbitration agreement. The Bureau believes that collecting materials related to the invocation of an arbitration agreement will aid it in determining the frequency with which providers compel arbitration in response to individual litigation claims, the content of such motions to compel, and whether such claims actually end up being heard in arbitration rather than simply disappearing. The Bureau also agrees with the concern expressed by consumer advocates and some other
The Bureau also finalizes new § 1040.4(b)(1)(iii)(B), which requires that the provider submit to the Bureau the pre-dispute arbitration agreement relied on in the provider's motion to dismiss, defer or stay a case, which the provider is required to submit pursuant to § 1040.4(b)(1)(iii)(A). The Bureau believes that § 1040.4(b)(1)(iii)(B) is needed to capture all pre-dispute arbitration agreements relied on in documents responsive to new § 1040.4(b)(1)(iii)(A). While such pre-dispute arbitration agreements are often attached to motions to dismiss or stay that are filed to compel arbitration, the Bureau has noted, in reviewing such records during the course of the Study, that occasionally some documents are simply cross-referenced to other documents filed in the litigation. The Bureau believes that it is important to gather data on the frequency of filings relying on pre-dispute arbitration agreements, and whether the content of such arbitration agreements discourages or induces a consumer (or her attorney) to file the same claim against the provider in arbitration rather than litigation.
The Bureau also adopts new commentary to clarify the application of § 1040.4(b)(1)(iii). Comment 4(b)(1)(iii)-1 clarifies that § 1040.4(b)(1)(iii)(A) requires the submission of court filings only if they rely on pre-dispute arbitration agreements entered into after the compliance date set forth in § 1040.5(a). Providers are only required to submit the initial motion relying upon a pre-dispute arbitration agreement; they need not submit later response documents, such as a consumer's opposition to the motion, or a provider's reply.
New comment 4(b)(1)(iii)-2 sets out examples of certain types of court documents that do not trigger the obligation under § 1040.4(b)(1)(iii)(A) to submit records to the Bureau because they are not relying upon an arbitration agreement in support of an attempt to seek dismissal, deferral, or stay of any aspect of a case.
Proposed § 1040.4(b)(2) would have stated that a provider shall submit any record required by proposed § 1040.4(b)(1) within 60 days of filing by the provider of any such record with the arbitration administrator and within 60 days of receipt by the provider of any such record filed or sent by someone other than the provider, such as the arbitration administrator or the consumer. The Bureau proposed a 60-day period for submitting records to the Bureau to allow providers a sufficient amount of time to comply with these requirements. The Bureau proposed what it believed to be a relatively lengthy deadline because it expected that providers would continue to face arbitrations infrequently,
A group of State attorneys general commenters agreed generally with proposed § 1040.4(b)(2), stating that some manner of timing obligation was needed to ensure that providers did not delay submitting required records to the Bureau. The group of State attorneys general also suggested that the Bureau establish a penalty regime for providers that fail to comply with proposed § 1040.4(b)(2). An industry commenter requested a good cause exception from proposed § 1040.4(b)(2) in the event of natural disasters or unforeseen technical errors, on the grounds that any inadvertent non-compliance would result in further class action liability.
The Bureau finalizes § 1040.4(b)(2) as proposed. The Bureau does not agree with the group of State attorneys general that a new penalty regime is necessary to obtain the compliance of providers. The Bureau believes that the Dodd-Frank Act already contains sufficient penalty mechanisms to incentivize compliance with the deadlines set by § 1040.4(b)(2).
The Bureau also disagrees with the industry commenter that said that an explicit “good cause” exception is necessary given the time providers have to submit records required by § 1040.4(b)(1). The commenter did not explain why a 60-day period was insufficient to cope with unexpected delays in complying with a relatively simple requirement—to electronically send a small quantity of documents to the Bureau. As to the industry commenter's concern that late-filing records in violation of § 1040.4(b)(2) could lead to class action liability, there is no private right of action for a
Proposed § 1040.4(b)(3) would have required providers to redact certain specific types of information that can be used to directly identify consumers before submitting arbitral records to the Bureau pursuant to proposed § 1040.4(b)(1). The Bureau endeavors to protect the privacy of consumer information. Additionally, as discussed more fully above, the Bureau had proposed § 1040.4(b), in part, pursuant to its authority under Dodd-Frank section 1022(c)(4), which provides that the Bureau may not obtain information “for purposes of gathering or analyzing the personally identifiable financial information of consumers.” The Bureau stated that it had no intention of gathering or analyzing information that directly identifies consumers. At the same time, the Bureau sought to minimize the burden on providers by providing clear instructions for redaction.
Accordingly, the Bureau had proposed § 1040.4(b)(3), which would require that providers, before submitting arbitral records to the Bureau pursuant to proposed § 1040.4(b), redact nine specific types of information that directly identify consumers. The Bureau believed that these nine items would be easy for providers to identify and, therefore, that redacting them would impose minimal burden on providers. Proposed comment 4(b)(3)-1 would have clarified that providers are not required to perform the redactions themselves and may assign that responsibility to another entity, such as an arbitration administrator or an agent of the provider.
Pursuant to proposed § 1040.4(b)(3)(i) through (v), the Bureau would have required providers to redact names of individuals, except for the name of the provider or arbitrator where either is an individual; addresses of individuals, excluding city, State, and zip code; email addresses of individuals; telephone numbers of individuals; and photographs of individuals from any arbitral records submitted to the Bureau. The Bureau noted that, with the exception of the names of providers or arbitrators where either are individuals, information related to
Proposed § 1040.4(b)(3)(ii) would have required redaction of street addresses of individuals, but not cities, States, and zip codes. The Bureau believes that collecting such high-level location information for arbitral records could, among other things, help the Bureau match the consumer's location to the arbitral forum's location in order to monitor issues such as whether consumers are being required to arbitrate in remote fora, and could assist the Bureau in identifying any local or regional patterns in consumer harm as well as arbitration activity. The Bureau believes that collecting city, State, and zip code information would pose limited privacy risk, and that any residual risk would be balanced by the benefit derived from collecting this information.
Proposed § 1040.4(b)(3)(vi) through (ix) would have required redaction from any arbitral records submitted to the Bureau, of account numbers, social security and tax identification numbers, driver's license and other government identification numbers, and passport numbers. These redaction requirements would not have been limited to information for individual persons because the Bureau believes that the privacy of any account numbers, social security, or tax identification numbers should be maintained to the extent they may be included in arbitral records.
The Bureau noted that it did not broadly propose to require providers to redact all types of information that could be deemed to be personally identifiable financial information (PIFI). Because Federal law prescribes a broad definition of PIFI,
The Bureau did not receive comments that addressed the specific categories of redactions set out in § 1040.4(b)(3)(i) through (ix). Some comments expressed more general privacy concerns about the Bureau's proposed collection of materials, although these comments did not explicitly acknowledge that the Bureau had proposed to require redactions or state whether the proposed redactions actually addressed their concerns. Some industry commenters expressed general concerns that the submission of arbitration records would expose consumers to a risk of privacy and data security violations. These comments did not detail the nature of this risk. Another industry commenter expressed concern that the Bureau was forcing the exposure of the private data of consumers without their consent. Another industry commenter argued that the submission requirement compromised the privacy of the provider's employees.
The Bureau finalizes § 1040.4(b)(3)(i) through (ix) as proposed. The more general comments concerning privacy, data security, and employee confidentiality are addressed in Part VI.D. No comments suggested specific additional redactions to further minimize privacy risks to consumers or other parties, or suggested that additional categories of PIFI are likely to be included in records submitted under § 1040.4(b)(1). The Bureau continues to believe that the redaction requirements substantially reduce privacy and data security risks. To address the concern one industry commenter expressed about the privacy of its employees' names, the Bureau affirms that § 1040.4(b)(3)(i), which requires the redaction of the names of all individuals other than the arbitrator or the provider, applies to the names of providers' employees.
The Bureau also finalizes proposed comment 4(b)(3)-1, now renumbered as comment 4(b)-2, as set out above. The Bureau received no comments on whether providers should be permitted to have another entity perform redactions, such as an arbitration
The Bureau stated in the proposal that it intended to publish arbitral records collected pursuant to proposed § 1040.4(b)(1). The Bureau had considered whether to publish such records individually or in the form of aggregated data. Prior to publishing such records, the Bureau stated that it would have ensured that they had been redacted, or that the data was aggregated, in accordance with applicable law, including Dodd-Frank section 1022(c)(8), which requires the Bureau to “take steps to ensure that proprietary, personal, or confidential consumer information that is protected from public disclosure under [the Freedom of Information Act or the Privacy Act] or any other provision of law[] is not made public under this title.”
The Bureau sought comment on the publication of the records that would have been required to be submitted by proposed § 1040.4(b)(1), including whether it should limit publication of particular items even after redaction based on particular consumer privacy concerns or whether commenters had other confidentiality concerns. Along similar lines, in the past some plaintiff's attorneys had noted their frustration with arbitral privacy. Some plaintiff's attorneys had noted in the past, for example, that arbitration did not allow them to file cases that can develop the law (because the outcomes are usually private and do not have precedential effect).
A number of commenters expressed general support for the Bureau's stated intention to publish the records it would receive. Academic, State attorneys general, and nonprofit commenters agreed that the Bureau should publish records it received. Specifically, academic commenters supported the publication of arbitration-related records and noted the importance of the publication of such records to academic research on consumer arbitration, which otherwise relied on the limited amount of data that arbitral administrators permitted non-parties to review. Academic, State attorneys general, and consumer advocate commenters also noted that the importance of such records to help regulators, including the Bureau and other State and Federal entities, analyze the impact of arbitration agreements on consumers. Consumer advocate commenters also suggested that the transparency created by publishing records would improve the quality of arbitrator decisions because arbitrators would know that their decisions would be scrutinized, would help providers that were not parties to the arbitration understand what activities might run afoul of the law, and might help consumers themselves learn to avoid harms.
A number of other commenters generally opposed the Bureau's stated intention of publishing records received. Several industry commenters expressed the concern that plaintiff's attorneys would review the published arbitration-related records and file frivolous claims, including class action litigation and individual arbitration proceedings regarding the claims made in the published records. A commenter that is an association of State regulators opposed the publication of records on the grounds that it would lead to more class action cases, which would exacerbate the difficulties of regulators' assessing the risks posed by class actions to providers. An industry commenter expressed the concern that the published records themselves would be the subject of class action litigation against providers that made any errors in redacting submitted records as required by proposed § 1040.4(b)(1), or that failed to include the language required by proposed § 1040.4(a)(1) in pre-dispute arbitration agreements. The commenter also suggested that the Bureau itself pursue any important information derived from the records rather than permitting third parties to review and exploit such information.
Another industry commenter suggested that the Bureau should not publish arbitral records because the Bureau's existing consumer complaint database already serves a similar function in publishing data on consumer disputes.
A commenter that is an association of State regulators opposed the Bureau's publication of records on the grounds that such a rule may conflict with State laws regarding the confidentiality of arbitral records. Industry commenters opposed the publication of records on the grounds that the rule would disregard confidentiality as a standard feature of arbitration.
Finally, some industry commenters requested an additional round of notice and comment on the Bureau's intent to publish records, especially to comment on the particulars of the process by which the Bureau intends to collect, secure, and disseminate arbitration data.
The Bureau is finalizing new § 1040.4(b)(4), under which the Bureau shall establish and maintain on its Web site a central repository of the records collected pursuant to § 1040.4(b)(1). Section 1040.4(b)(4) requires that the Bureau make the arbitration-related records it collects from providers easily accessible and retrievable by the public on its Web site. In practice, the Bureau expects to comply with this rule by publishing the records, further redacted, if necessary, in accordance with new § 1040.4(b)(5), as discussed below, as PDF files. The Bureau expects that such records will be made searchable by the text of the records, as well as by date, the name of the arbitration administrator, the name of the provider and the type of consumer financial product or service at issue.
As discussed in detail in Part VI.D, the Bureau continues to believe it is important to publish the records it collects, with appropriate redactions. The Bureau believes that its experience with the Study and other market monitoring efforts has clarified the importance of publishing arbitration records to assist research (by academics and policymakers) on consumer finance arbitration and to help regulators, including the Bureau and other State and Federal bodies, to analyze consumers' experiences with arbitration and determine if further action is needed. The Bureau agrees that the publication of these records—including records on the resolution of arbitrations (many of which will not be available in published litigation records)—will also assist parties in arbitration and litigation more accurately determine whether their claims or defenses are likely to succeed or fail. The Bureau understands from the Study that most records pertaining to consumer financial arbitrations are kept private. However, such privacy is not inherent to arbitration, given that other arbitration fora publish individual arbitration records by default (such as FINRA), and
As discussed above in connection with final § 1040.4(b)(1)(i)(D), the Bureau agrees with consumer advocate commenters that suggested that collecting and publishing records might improve the quality of some arbitrators' decisions because they know that their decisions may be more broadly scrutinized. The records that the Bureau reviewed in the Study suggested that arbitration awards were short or summary in nature at least compared to reasoned decisions in litigation; the Bureau believes that if publication results in more fulsome arbitrator decisions, this would be an added benefit of the rule.
The Bureau further agrees with the consumer advocate commenter that suggested that the publication of records will likely help providers understand what activities might run afoul of the law, and would help consumers learn about certain harmful practices resulting in arbitral awards for consumers. For example, the AAA consumer arbitration records the Bureau reviewed in the course of its Study contained filings on subjects that were not found in individual litigation. The Bureau agrees with industry commenters that the publication of records may lead to some class action litigations, but the Bureau disagrees that any increase is necessarily detrimental, as set out in its analysis of class actions in the findings section above. The Bureau disagrees that the act of producing the records themselves would be the subject of class action litigation against providers. While providers may make errors in redacting records as required by § 1040.4(b)(3) or may make errors in inserting into pre-dispute arbitration agreements the language required under § 1040.4(a)(1), the rule is not privately enforceable and the Bureau will further review and redact records before publishing. In any event, the Bureau does not expect such class actions could occur given the low number of arbitrations per company. The Bureau agrees that it should pursue and further investigate important information derived from the records it receives. The Bureau disagrees however that this information should be limited to the Bureau alone rather than to the public and other enforcement agencies. Making arbitration records transparent via publication would permit third parties—including private litigants and other regulators—to also monitor arbitration for fairness issues.
The Bureau disagrees with the industry commenter that suggested that the Bureau's existing consumer complaint database can serve the same function as a dedicated page or area on the Bureau's Web site focused on arbitral records and that an arbitration database would be duplicative of the complaint database. The complaint database is not designed to receive or publish the variety of arbitration records that providers are required to submit pursuant to this rule.
The Bureau disagrees with industry commenters as it does not believe that the Bureau's publication of records would conflict with State laws on the confidentiality of arbitral records. Published records will be redacted, by providers and by the Bureau, and thus the Bureau will take steps to appropriately reduce re-identification risk to individuals who are parties to the arbitrations. The Bureau also disagrees with industry commenters that confidentiality is standard in consumer arbitration. As noted above, many other arbitration administrators publish their decisions, most notably AAA and FINRA, which publishes records in all arbitrations without redacting the names of individuals. The AAA, further, already publishes some case-level information on individual consumer arbitrations.
The Bureau disagrees with the industry commenter that an additional round of notice and comment is necessary to detail the process by which the Bureau intends to collect, secure and disseminate arbitration data. The proposal specifically solicited comments on the Bureau's intention to publish arbitration-related records, and sought comments on how the Bureau should publish arbitration-related records it received.
The Bureau expects to release details of how providers should comply with the requirements of § 1040.4(b) in due course. The Bureau expects that such instructions will be published in the
The Bureau sought comment on the publication of the records that would have been required to be submitted by proposed § 1040.4(b)(1), including whether it should limit publication of particular items even after redaction based on particular consumer privacy concerns or whether commenters had other confidentiality concerns.
Industry commenters asserted that the collection of both public and non-public information by financial regulators poses a threat to consumer privacy. One industry commenter argued that the collection of even redacted records, combined with other publicly available information, could be used to re-identify consumers. One industry commenter expressed skepticism about permitting government regulators to collect data because of data security issues at financial regulators and reports about data security at the Bureau.
For the reasons provided below, the Bureau is finalizing new § 1040.4(b)(5),
The Bureau disagrees with the industry commenter that said that the Bureau's collection of public and non-public information by financial regulators poses a threat to consumer privacy. Section 1040.4(b)(3) will require providers to redact personal and financial information before the records ever reach the Bureau. In addition, the Bureau will employ the same data security measures that it employs for other sensitive data that it currently maintains.
The Bureau adopts final § 1040.4(b)(6), under which the Bureau shall begin to make records submitted to the Bureau by providers under final § 1040.4(b)(1) accessible and retrievable by the public on the Bureau's Web site no later than July 1, 2019, and at least annually each year thereafter for documents received by the end of the prior calendar year.
The Bureau believes that making records available on a timely basis will make them most useful to third parties. For instance, State and Federal regulators may need access to recent records if they are to be effectively responsive to potentially problematic business practices or unfairness in arbitration proceedings early in their existence. Similarly, private attorneys may need access to recent records to more effectively guide their forecasting of the success of claims and defenses in arbitration and litigation. Were the Bureau to delay such action, the information could become stale and less useful. The Bureau believes based on its experience with other data posting that an annual cycle strikes an appropriate and practicable balance in light of Bureau resources.
Proposed § 1040.5 would have set forth the compliance date for part 1040 as well as a limited and temporary exception to compliance with proposed § 1040.4(a)(2) for certain consumer financial products and services. Below, the Bureau addresses the comments received on these proposed provisions.
Dodd-Frank section 1028(d) states that any regulation prescribed by the Bureau under section 1028(b) shall apply to any agreement between a consumer and a covered person entered into “after the end of the 180-day period beginning on the effective date of the regulation, as established by the Bureau.” As the proposal stated, the Bureau interprets this language to mean that the rule may begin to apply on the 181st day after the effective date, as this day would be the first day “after the end of” the 180-day period starting on the effective date as is required by section 1028(d). Given that the Bureau proposed an effective date of 30 days after publication of the rule in the
The Bureau proposed a 30-day effective date based on Administrative Procedure Act (APA) section 553(d), which requires that, with certain enumerated exceptions, a substantive rule be published in the
Three commenters—a consumer advocate, an individual, and a research center—urged the Bureau to adopt § 1040.5(a) as proposed. An industry trade association commenter stated that it supported § 1040.5(a) as long as the rule “is not retroactive to accounts opened prior to the implementation date.” Other commenters requested that the Bureau modify the compliance period. Two industry commenters urged the Bureau to adopt a longer compliance period. One of these industry commenters, a trade association representing the consumer credit industry, requested a compliance period of 18 months, which would be an additional 11 months beyond what the Bureau had proposed. The commenter asserted that the Bureau had underestimated how time-consuming the required contractual changes would be for some providers. For example, according to the commenter, many States have a single document rule that limits the ability of vehicle finance companies to modify contracts with an addendum or side letter, so that such companies need sufficient time to modify the agreements themselves and provide them to dealers well before the effective date. The commenter also stated that one of its members had more than 200 forms that the provider would need to revise, check, correct, review, and approve. According to the commenter, finance companies typically modify contracts in batches; each batch can take three to five months; and that printing, distribution, and implementation would take additional time. The commenter also asserted that removing a “Notice of Arbitration” signature box would cause programming issues for automobile dealers. Additionally, the commenter also stated that if the Bureau does not extend the compliance date, it should adopt a safe harbor within which providers would not face potential consequences for having non-compliant agreements so long as the provider does not enforce the arbitration agreements in a class action.
The other industry commenter, a small-dollar lender, requested a compliance period of 452 days. This commenter stated that it would need to revise its agreements to include the contract provision required by proposed § 1040.4(a)(2) and that it may also remove its arbitration provisions. The commenter noted that it had at least 113 separate consumer agreements or disclosure documents containing arbitration agreements. According to the commenter, 211 days is not enough time to program, test, and deploy 113 new agreements, especially given that it uses four different point-of-sale software systems (in addition to its primary software package). The commenter also noted that it would need to destroy non-complaint hard-copy agreements at each
The Bureau is finalizing § 1040.5(a) as Proposed except that it is extending the effective date by an additional 30 days, to 60 days after publication in the
Regarding the industry trade association's comment about retroactivity, the Bureau notes that the rule would not have retroactive effect. As is explained above in the section entitled “Comments on the Bureau's Interpretation of
The Bureau is adopting a compliance period that is one month longer than the compliance period in the proposal, for a total of approximately eight months, and declines to adopt a longer compliance period because the Bureau does not believe that the contractual change required by this rule will take more than eight months to implement (except for certain prepaid providers, as is discussed below). The Bureau acknowledges—as noted by the industry trade association commenter and small-dollar lender commenter—that some providers will need to implement revisions to a large number of consumer agreements and related forms. However, the Bureau believes that the revisions required for each document will be modest, and the Bureau notes that providers do not provide evidence to the contrary. The rule requires only that providers insert either the provision mandated by § 1040.4(a)(2)(i) or the alternative provision permitted by § 1040.4(a)(2)(ii)—and the Bureau has already provided the specific language for these provisions with a view toward reducing burden. Because both of these revisions are modest, the Bureau believes that making them will not impose a substantial burden, even where providers have multiple agreements. And by making the effective date 30 days later than it had proposed, the Bureau is providing additional time for this to be completed. The Bureau believes that providers can make these modest revisions and update their software or deliver hard copies of agreements, as needed, within 241 days.
The Bureau has carefully considered whether providers of certain products may have difficulty complying within 241 days and is adopting a temporary exception for pre-packaged general-purpose reloadable prepaid card agreements under § 1040.5(b). In addition, the Bureau expects that the vast majority of providers could continue to provide non-compliant hard-copy agreements as long as they simultaneously gave consumers a notice or amendment including the required provision as part of the agreement. The Bureau is aware, as the industry trade industry commenter noted, that providers subject to a single-document rule will not be able to use a separate notice or amendment. For this reason, the Bureau has considered whether such providers should be eligible for the temporary exception in § 1040.5(b). The Bureau has decided not to make such providers eligible for the § 1040.5(b) exception, because the Bureau believes—for the reasons stated in the paragraph above—that the compliance period affords enough time to update consumer agreements while complying with applicable single-document rules. As a result, the Bureau does not believe a safe harbor is needed.
As described above, § 1040.5(a) states that compliance with part 1040 is required starting on the 241st day after publication of the final rule in the
As the proposal stated, however, the Bureau assessed whether this compliance period may pose special difficulties for providers of certain types of products. The Bureau was concerned that providers of certain types of GPR prepaid cards may not be able to ensure that only compliant products are offered for sale or provided to consumers after the compliance date. Prepaid providers typically enclose cards in a package that contains a card and a cardholder agreement.
For these reasons, proposed § 1040.5(b) would have established a limited exception from proposed § 1040.4(a)(2)'s requirement that the provider's pre-dispute arbitration agreement contain a specified provision by the compliance date. Proposed § 1040.5(b) would have stated that proposed § 1040.4(a)(2) shall not apply to a provider that enters into a pre-dispute arbitration agreement for a general-purpose reloadable prepaid card if certain conditions are met. For a provider that could not contact the consumer in writing, proposed § 1040.5(b)(1) would have set forth the following conditions: (1) The consumer
As the proposal stated, this exception would have permitted prepaid card providers to avoid the considerable expense of pulling and replacing packages at retail stores while adequately informing consumers of their dispute resolution rights, where feasible, due to the notification requirement in proposed § 1040.5(b)(2). The proposal also noted that proposed § 1040.5(b)(2) would not have imposed on providers an obligation to obtain a consumer's contact information. Where providers
In the proposal, the section-by-section analysis clarified that providers availing themselves of the exception in proposed § 1040.5(b) would still have been required to comply with proposed § 1040.4(a)(1) and proposed § 1040.4(b) as of the compliance date. Pursuant to proposed § 1040.4(a)(1), such providers would still have been prohibited, as of the compliance date, from relying on a pre-dispute arbitration agreement entered into after the compliance date with respect to any aspect of a class action concerning any of the consumer financial products or services covered by proposed § 1040.3. The amended pre-dispute arbitration agreement submitted by providers in accordance with proposed § 1040.5(b)(2)(ii) would have been required to include the provision required by proposed § 1040.4(a)(2)(i) or the alternative permitted by proposed § 1040.4(a)(2)(ii). In addition, providers would still have been required to submit certain arbitral records to the Bureau, pursuant to proposed § 1040.4(b), in connection with pre-dispute arbitration agreements entered into after the compliance date. The Bureau also stated in the proposal that it did not anticipate that permitting prepaid providers to sell existing card stock containing non-compliant agreements would affect consumers' shopping behavior, as, currently, consumers are typically unable to review the enclosed terms and conditions before purchasing a GPR prepaid product (although the Bureau would expect that corresponding product Web sites would contain an accurate arbitration agreement).
The Bureau received several comments on proposed § 1040.5(b). A consumer advocate commenter urged the Bureau not to adopt proposed § 1040.5(b), expressing concern that the provision would give providers an incentive to package a large supply of cards before the compliance date in an effort to use misleading agreements for as long as possible after the compliance date. The commenter requested that, if the Bureau adopts § 1040.5(b), the Bureau should (1) add commentary stating that, even for providers covered by § 1040.5(b), proposed § 1040(a)(1) continues to apply; (2) limit the exception to GPR prepaid cards not in the provider's possession after the compliance date (as opposed to GPR prepaid cards packaged before the compliance date); (3) limit the exception to GPR prepaid cards packaged 60 days after
Additionally, a research center commenter stated that the Bureau should craft the exception narrowly and apply it only where necessary. The commenter pointed out that, even though proposed § 1040.4(a)(1) would still apply, it may be unclear whether a given agreement is covered by § 1040.4(a)(1), as there may not be evidence of whether the consumer purchased the prepaid card (and thereby entered into the agreement) before or after the compliance date.
The Bureau also received a comment from an industry trade association representing prepaid card providers. This commenter expressed concern that the proposal would be burdensome for providers in combination with the Bureau's prepaid account rule (which, after the close of the comment period for this rule, the Bureau published in November 2016).
The Bureau adopts § 1040.5(b) and comment 5(b)(2)-1 as proposed with a minor revision to comment 5(b)(2)-1 for clarity.
The Bureau is persuaded that adding a comment clarifying that § 1040.4(a)(1) remains in effect, even where the temporary exception applies, would help consumers better understand their rights, and providers better understand their obligations, under the rule. For this reason, the final rule includes new comment 5(b)-1, which states that, where § 1040.4(a)(2) does not apply to a provider that enters into a pre-dispute arbitration agreement on or after the compliance date by virtue of the temporary exception in § 1040.5(b)(2), the provider must still comply with § 1040.4(a)(1), which generally prohibits reliance on a pre-dispute arbitration agreement in a class action related to a covered consumer financial product or service. The Bureau declines to limit the
The Bureau also declines to limit the exception to GPR prepaid cards packaged no more than 60 days after publication in the
The Bureau disagrees with the research center's comment that it may be unclear whether a given prepaid card agreement is subject to § 1040.4(a)(1) because there may not be evidence of when the consumer purchased the card (and, consequently, whether the consumer entered into it before or after the compliance date). Based on its knowledge of the prepaid card market, the Bureau believes that, while the provider may not know the identity of the consumer unless the card is registered, the provider does know, for a particular card, when the consumer purchased it (and, accordingly, whether that occurred before or after the compliance date).
Regarding the industry trade association commenter's concern about compliance burden due to the Bureau's final prepaid account rule, the Bureau believes these concerns are misplaced. As stated above, the Bureau recognizes that compliance with part 1040 may be more difficult or costly for some prepaid providers because of the way some prepaid products are packaged and sold. For this reason, the Bureau is adopting § 1040.5(b). However, the Bureau does not believe that compliance with part 1040 will impose a substantial burden on prepaid providers in conjunction with the Bureau's finalization of the prepaid account rule. Both rules require revisions to account agreements. However, both rules also contain lengthy compliance periods (approximately 18 months for the prepaid account rule, including an additional six months the Bureau provided industry to give it sufficient time to implement the rule,
In developing this final rule, the Bureau has considered the potential benefits, costs, and impacts as required by section 1022(b)(2) of the Dodd-Frank Act. Specifically, section 1022(b)(2) calls for the Bureau to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services, the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act, and the impact on consumers in rural areas.
In the proposal, the Bureau set forth a preliminary analysis of these effects, and the Bureau requested comments and submissions of additional data that could inform the Bureau's analysis of the benefits, costs, and impacts of the proposal. In response, the Bureau received a number of comments on the topic. The Bureau has consulted, or offered to consult with, the prudential regulators, the Federal Housing Finance Agency, the Federal Trade Commission, the U.S. Department of Agriculture, the U.S. Department of Housing and Urban Development, the U.S. Department of the Treasury, the U.S. Department of Veterans Affairs, the U.S. Commodity Futures Trading Commission, the U.S. Securities and Exchange Commission, and the Federal Communications Commission. The consultations regarded consistency with any prudential, market, or systemic objectives administered by such agencies. The Bureau has chosen to consider the benefits, costs, and impacts of the final provisions as compared to the status quo in which some, but not all, consumer financial products or services providers in the affected markets (see § 1040.2(c), defining the entities covered by this rule as “providers”) use arbitration agreements.
The Bureau invited comment on all aspects of the data that it has used to analyze the potential benefits, costs, and impacts of the proposed provisions.
The Bureau also discussed and requested comment on several potential alternatives, including ones that would be applicable to larger entities as well as smaller entities, which it listed in the proposal's Initial Regulatory Flexibility Analysis (IRFA) and also referenced in its Section 1022(b)(2) Analysis. A further detailed discussion of potential alternatives considered is provided in Section G of this Section 1022(b)(2) Analysis and in the Final Regulatory Flexibility Analysis (FRFA) in Part IX below.
In this analysis, the Bureau focuses on the benefits, costs, and impacts of the two major elements of the final rule: (1) The requirement that providers with arbitration agreements include a provision in the arbitration agreements they enter into 180 days after the effective date of the rule stating that the arbitration agreement cannot be invoked in class litigation, and the related prohibition that would forbid providers from relying on such an agreement in a case filed as a class action; and (2) the requirement that providers using pre-dispute arbitration agreements submit certain records relating to arbitral proceedings and certain court records to the Bureau.
The impact of submitting arbitral and court records to the Bureau is expected to be minor, as identified in this analysis and the Bureau's PRA analysis further below. This impact is slightly higher than the PRA impact estimated in the proposal, principally due to the addition of § 1040.4(b)(1)(i)(B) and (b)(1)(iii), which requires providers to submit answers to arbitration claims and arbitration motions filed in court to the Bureau.
Given that the Bureau takes the status quo as the baseline, the analysis below focuses on providers that currently have arbitration agreements. Providers that currently use arbitration agreements can be divided into two categories. The first category is comprised of providers that currently include arbitration agreements in contracts they enter into with consumers. For these providers, which constitute the vast majority of providers using arbitration agreements, the Bureau believes that the final class rule will result in the change from virtually no exposure to class litigation to at least as much exposure as is currently faced by those providers with similar products or services that do not use arbitration agreements.
The second category includes providers that use arbitration agreements contained in consumers' contracts entered into by another covered person, such as another provider. This category includes, for example, debt collectors and servicers who, when sued by a consumer, invoke an arbitration agreement contained in the original contract formed between the original provider and the consumer. For these providers, the additional class litigation exposure caused by the final rule will be somewhat less than the increase in exposure for providers of the first type because the providers in this second category are not currently uniformly able to rely on arbitration agreements in their current operations. For example, debt collectors typically collect both from consumers whose contracts contain arbitration agreements and from consumers whose contracts do not contain arbitration agreements. Thus, these debt collectors already face class litigation risk, but this risk will increase, at most, in proportion to the fraction of the providers' consumers whose contracts contain arbitration agreements.
The analysis below applies to both types of providers. For additional clarity and to avoid unnecessary duplication, the discussion is generally framed in terms of the first type of provider (which faces virtually no exposure to class claims today), unless otherwise noted. The Bureau estimates below the number of additional Federal class actions and putative class proceedings that are not settled on a class basis for both types of providers.
Before considering the benefits, costs, and impacts of the proposed provisions on consumers and covered persons, as required by section 1022(b)(2), the Bureau provided the economic framework through which it considered those factors in order to more fully inform the rulemaking, and in particular to describe the market failure that is the basis for the final rule.
The Bureau's economic framework assumes that when Congress and States have promulgated consumer protection laws that are applicable to consumer financial products and services (“the underlying laws”) they have done so to address a range of market failures, for example, asymmetric information. The underlying laws need enforcement mechanisms to ensure providers conform their behavior to these laws. In analyzing and finalizing both the class proposal and the requirement to submit arbitral records, the Bureau is focusing on a related market failure: Reduced incentives for providers to comply with the underlying laws, due to an insufficient level of enforcement.
While the Bureau assumes that the underlying laws address a range of
The Bureau believes, based on its experience and expertise in overseeing consumer finance markets, that in general the current incentives to comply are weaker than the economically efficient levels. That is, in general, the economic costs of increased compliance are currently less than the economic benefits stemming from compliance. Thus, increased compliance due to the additional incentives provided by the final rule would, in general, be justified by the economic benefits of this increased compliance. It may be, however, that in some particular cases or particular markets compliance is already at or above the optimal level, such that the increased compliance due to the final rule will lower economic welfare. The data and methodologies available to the Bureau do not allow for an economic analysis of the optimal level of compliance on a law-by-law or market-by-market basis.
The Bureau also believes it may be useful to clarify what this rulemaking is not intended to address. In particular, contrary to the view expressed by several commenters, the Bureau is not attempting to address any lack of transparency surrounding arbitration agreements per se. The Bureau is in general concerned about consumer awareness of contract terms and the ability of consumers to make informed choices about consumer financial products and services. However, the Bureau does not at this time have a basis to believe that any such lack of transparency leads to harm for consumers in this specific context, as it does not have a basis to believe that individual arbitration is inferior to individual litigation. As discussed in Part VI, the data on this issue from the Study was inconclusive. Instead, the Bureau in this rulemaking is focused on a concern that the lack of an effective class mechanism inherent in arbitration agreements provides insufficient deterrence, which the Bureau believes leads to sub-optimal levels of compliance.
A research center commenter argued that the Bureau does not have an empirical basis to conclude that current levels of deterrence are sub-optimal. An association of State regulators also stated that it was troubled by the fact that the Bureau had not quantified current levels of providers' investment in compliance in order to determine whether those investments are inadequate, and believed a study of that issue would provide a stronger foundation for rulemaking. A debt collection industry trade association asserted that its members already have substantial incentives to comply with the law, in part because there is uncertainty as to whether they can rely upon creditors' arbitration agreements.
The Bureau acknowledged in the proposal and acknowledges again here that the existing degree of compliance is difficult to quantify, and the Bureau does not have data available to quantify the level of compliance or the current level of investments in compliance. The Bureau requested data on these subjects, but commenters did not provide additional data as to either of these. The Bureau recognizes that existing compliance incentives may be stronger in markets where providers do not contract directly with consumers and thus there may be uncertainty as to whether providers can rely on a given creditor's arbitration agreements. At the same time, to the extent certain markets already have greater incentives to comply, the impact of the final rule on those markets will be correspondingly less. In any event, as noted above in the section 1028 findings, from its own experience and expertise the Bureau believes the level of compliance is generally less than optimal, despite the fact that providers face existing consequences for illegal behavior separate from class action exposure.
The Bureau likewise acknowledges that it does not have data to quantify the level of investment in compliance across the 50,000 firms affected by this rule. As discussed further below, the Bureau's experience indicates that quantifying compliance costs is challenging for any individual firm as these costs tend to be diffused across multiple parts of financial institutions and are also hard to distinguish from costs that are incurred to enhance customer service, mitigate reputational risks, and related activities. The Bureau does not believe it is feasible to quantify these costs across all of the affected firms. The Study showed that class litigation is currently the most effective private enforcement mechanism for most claims in markets for consumer financial products or services in providing monetary incentives (including forgone profits due to in-kind or injunctive relief) for providers to comply with the law.
The relative efficacy of class litigation—as compared to individual dispute resolution, either in courts or before an arbitrator—in achieving these incentives is not surprising. As discussed in Part VI, the potential legal harm per consumer arising from violations of law by providers of consumer financial products or services is frequently low in monetary terms. Moreover, consumers are often unaware that they may have suffered legal harm. For any individual, the monetary compensation a consumer could receive if successful will often not be justified by the costs (including time) of engaging in any formal dispute resolution process even when a consumer strongly suspects that a legal harm might have occurred. This is confirmed by the Study's nationally representative survey of credit card holders.
An automotive dealer industry commenter argued that the market failure described here does not apply to large-value transactions, such as motor vehicle sales, because the amount of alleged injury in such markets is large enough that consumers' claims will not be negative-value. It is true that individual claims are less likely to have a negative expected value in arbitration if the consumer harm is larger. However, in the Bureau's experience, small dollar claims can arise even for larger-balance loans, and in other markets, such as deposits, the balance in the account is not necessarily correlated with the amount of harm. For example, misconduct involving miscellaneous fees on a loan or deposit account may create a large number of negative-value claims, regardless of the size of the underlying account balance. Commenters did not provide support for the claim that disputes concerning automobile finance transactions are for significantly higher dollar amounts than other credit products. In any event, even a claim valued at several thousand dollars may not be positive-value, depending on the costs in time and legal fees of bringing an action and the probability of success.
The Bureau's economic framework also takes into account other incentives that may cause providers to conform their conduct to the law: There are at least two other important mechanisms, which are both described here. The first incentive is the economic value for the provider to maintain a positive reputation with its customers, which will create an incentive to comply with the law to the extent such compliance is correlated with the provider's reputation. As the Study showed, many consumers might consider switching to a competitor if the consumer is not satisfied with a particular provider's performance.
However, economic theory suggests that these other incentives (including reputation and public enforcement) are insufficient to achieve optimal compliance.
More specifically, reputational concerns will create the incentive for a firm to comply with the law only to the extent legally compliant or non-compliant conduct would be visible to consumers and affect the consumer's desire to keep doing business with the firm, and even then, with a lag.
Economic theory also suggests that regardless of whether relief is warranted
Furthermore, economic theory suggests that providers will decide how to resolve informal complaints by weighing the expected profitability of the consumer who raises the complaint against the probability that the consumer will indeed stop patronizing the provider, rather than legal merit per se. In the Bureau's experience, some companies implement this through profitability models which are used to cabin the discretion of customer service representatives in resolving individual disputes. Indeed, providers may be more willing to resolve disputes favorably for profitable consumers even in cases where the disputes do not have a legal basis, than for consumers that are not profitable but whose claims have a legal basis. A research center commenter agreed that firms do this, but argued that this is rational for them to do so. As discussed above in Part VI, this is precisely the market failure the rule is intended to address—that it is not always in the providers' private interest to avoid harming consumers without external enforcement of some kind. By reducing the collective action problem inherent in small claims, class actions provide a source of external enforcement that is currently missing for providers using arbitration agreements.
Public enforcement could theoretically bring some of the same cases that would not be brought by private enforcement absent the rule. However, public enforcement resources are limited relative to the thousands of firms in consumer financial markets. Public enforcement resources also focus only on certain types of claims (for instance, violations of State and Federal consumer protection statutes but not the parties' underlying contracts).
An industry commenter argued that individual arbitration itself can solve the market failure by strengthening incentives to resolve disputes informally before providers have to pay arbitration filing fees. The commenter noted that such agreements generally contain fee-shifting provisions that require providers to pay consumers' upfront filing fees, and that this gives providers an incentive to provide an informal resolution to claims below the value of the filing fee. The Bureau notes that such incentives would only be relevant if consumers have an incentive to file arbitration claims in the first place. The commenter did not assert that consumers would have such incentives,
As noted above, however, there is little if any empirical support for such an argument. The Bureau has only been able to document several hundred consumers per year actually filing arbitration claims,
Additionally, the Bureau believes that this argument is flawed conceptually as well. The Bureau disagrees that, even for consumers who are aware of the legal harm, the presence of arbitration agreements changes many negative-value individual legal claims into positive-value arbitrations and, in turn, creates additional incentives for providers to resolve matters internally. As discussed in more detail in Part VI, above, consumers weigh several other costs besides filing fees before engaging in any individual dispute resolution process, including arbitration. It still takes time for a consumer to learn about the process, to prepare for the process, and to go through the process. There is also still a risk of losing and, if so, of possibly having initial filing fees shifted back to the consumer. Accordingly, the Bureau is not convinced that the difference in upfront filing fees makes a substantial difference to consumers' overall evaluation. As discussed above, consumers' incentive to pursue an individual claim depends upon the expected value of the claim—the net payoff from success or failure adjusted for the probability of success or failure respectively—not just the payoff from a successful claim.
Some industry trade association commenters expressed doubt that class actions would resolve any market failure of the type described here, due to the small average payments to consumers. In the view of these commenters, consumers will not have sufficient incentive to file claims in class actions because of the small average monetary recovery involved for class members. As discussed in more detail in the section 1028(b) findings, a significant portion of cases resulting in settlements lead to automatic distributions.
One industry association also pointed to low claims rates in claims-made
In general, if the extant laws were adopted to solve some underlying market failures, it means that, by definition, the market could not resolve these failures on its own. Therefore, given the Bureau's assumptions outlined above, a practice that lowers providers' incentive to follow these laws, in this case arbitration agreements, that can be invoked in class litigation, would be a market failure since it would allow the underlying market failures to persist or reappear. The providers, and the market in general, would be unable to resolve this market failure for the same reasons that the providers would not be able to solve the underlying market failures in the first place.
Any law restricting two parties' freedom to contract (for example, a mandatory disclosure or a limit on some financing terms in a consumer finance statute) introduces the following friction: To comply with the law, these two parties will agree to a different contract or not contract at all. Each of these options was available to the parties before the law was adopted, but at the time the parties chose to contract more efficiently from the parties' perspectives, at least to the extent that both parties had a choice. However, to the extent that the law was adopted to fix a market failure, this friction is exactly what is preventing that market failure from occurring: The introduction of the contracting friction is necessary for the underlying market failure to be alleviated, as opposed to being a potential source of inefficiency that could be reduced by using boilerplate contracts.
That underlying market failure could be, for example, a negative externality exerted by the firm's and its customer's contract on third parties. In a theoretical model, this would imply that the laws were endogenously chosen to correct pre-existing market failures. And this fact means that an ability to sign an efficient contract from the bilateral perspective that lowers the incentives to comply with the law is welfare-reducing since this law was supposedly passed exactly to ensure that the incentive to comply with the law is there and because this incentive alleviates another market failure.
The final rule requires providers to include language in their arbitration agreements stating that the agreement cannot be used to block a class action with respect to those consumer financial products and services that would be covered by the final rule and prohibits providers from invoking such an agreement in a case filed as a class action with respect to those consumer financial products and services. The final rule also prohibits third-party providers facing class litigation from relying on such arbitration agreements. Finally, the final rule requires that providers using pre-dispute arbitration agreements redact and submit certain records relating to arbitral proceedings to the Bureau.
The Bureau believes that the final class rule will have three main effects on providers with arbitration agreements: (1) They will have increased incentives to comply with the law in order to avoid exposure to class litigation; (2) to the extent they do not act on these incentives or acting on these incentives does not prevent class litigation filed against them, the additional class litigation exposure will ultimately result in additional litigation expenses and potentially additional class settlements; and (3) they will incur a one-time cost of changing language in consumer contracts entered into 180 days after the rule's effective date, or an ongoing cost associated with providing contract amendments or notices in the case of providers who acquire pre-existing contracts that lack the required language in their arbitration agreements. Below, the Bureau refers to these three effects of the final class rule as, respectively, the deterrent effect, the additional litigation effect, and the administrative change effect. In addition, the final monitoring rule may have some effect on compliance through reputational effects, as is discussed in greater detail in Part VI, above.
In this Section 1022(b)(2) Analysis, the Bureau has elected not to discuss further any benefits from certain abstract considerations which the Bureau considers above in Part VI, such as promoting the rule of law. To the extent that individuals value any such impacts to society from the final rule, this would be a part of the benefits of the rule to consumers; however, the Bureau is not in a position to quantify these impacts for purposes of this Section 1022(b)(2) Analysis. The Bureau did not receive any comments disagreeing with this approach. Accordingly, while as discussed in Part VI above, the Bureau believes that the final rule is in the public interest due, in part, to reinforcing the rule of law, the discussion in this section focuses in particular on more concrete impacts on individual consumers and providers for purposes of this Section 1022(b)(2) Analysis.
As discussed above, class litigation exposure provides a deterrence incentive to providers, above and beyond other incentives they may have to comply with the law. So long as the level of class litigation exposure is related to the level of providers' compliance with laws (that is, so long as class litigation is not always brought randomly without regard to the merits of the individual case, such that higher levels of compliance will result in fewer class action lawsuits), providers would want to ensure more compliance than if there were no threat of class litigation.
At least two sources might inform a provider's determination of its profit-maximizing level of compliance in a regime in which there is potential class action exposure for non-compliance. First, the potential exposure can cause a provider to devote increased resources to monitoring and evaluating compliance, which can in turn lead the provider to determine that its compliance is not sufficient given the risk of litigation. Second, the potential exposure to class litigation can cause a provider to monitor and react to class litigation or enforcement actions (that could result in class litigation) against its competitors, regardless of whether the provider previously believed that its compliance was sufficient.
An industry commenter asserted that most class action claims are frivolous and that this reduces the potential deterrent effect of the rule because if claims are frivolous, no amount of increased compliance could eliminate the risk that a provider would be sued. Many consumer advocate and consumer law firm commenters took the opposite position, arguing that class actions serve to redress real consumer injury from illegal conduct. The Bureau acknowledges that some class actions filed may be frivolous in nature, but believes this would only be true in general if providers were always in full compliance with the law. This is because the ability of class actions to recover for consumers, and reward class action attorneys, bears a relationship to the merits of the cases. Defendants are more likely to procure the dismissal of frivolous claims, and less likely to settle such claims, than meritorious claims. Further, even where frivolous claims are settled, the settlements are likely to be smaller than for meritorious claims. For these reasons and those discussed in Part VI above, a meritorious case is more likely to be pursued than a frivolous one. The fact that class actions can be filed (and are more likely to be filed) for meritorious claims therefore creates a disincentive to break the law.
A class settlement could result in three types of relief to consumers: (1) Cash relief (monetary payments to consumers); (2) in-kind relief (free or discounted access to a service); and (3) injunctive relief (a commitment by the defendant to alter its behavior prospectively, including the commitment to stop a particular practice or follow the law).
When a class action is settled, the payment from the provider to consumers is intended to compensate class members for injuries suffered as a result of actions asserted to be in violation of the law and is a benefit to those consumers. However, this benefit to consumers is also a cost to providers.
Much of the discussion above also applies to in-kind and injunctive relief. In-kind relief is intended to compensate class members for injuries suffered as a result of actions asserted to be in violation of the law in ways other than by directly providing them with money. Injunctive relief is typically intended to stop or alter the defendant's practices that were asserted to be in violation of law. Both forms of relief benefit consumers. However, this benefit to consumers is also frequently a cost to providers (
Unlike with monetary relief, however, the benefits to consumers of injunctive relief may not be a mirror image of the costs to providers, and the cost of providing the relief might be lower than consumer's value of receiving the relief.
In general, economic theory behind optimal choices by firms in such contexts is ambiguous, at least as long as a solution consistent with the Coase Theorem is not available because of a particular pre-existing market friction (transactions costs).
The final class rule will mandate that providers with arbitration agreements include a provision in their future contracts stating that the provider cannot use the arbitration agreement to block a class action. This administrative change will require providers to incur expenses to change their contracts going forward, and amend contracts they acquire or provide a notice.
The final rule will also require that providers using pre-dispute arbitration agreements submit certain records relating to arbitral and certain court proceedings to the Bureau. This will require providers to incur additional expenses when such an agreement is invoked, with some one-time expense of establishing a procedure for accomplishing such a task and some recurring expense for each incidence.
Given that providers using arbitration agreements have chosen to do so and will be limited in their ability to continue doing so by the final rule, these providers are unlikely to experience many notable benefits from the Bureau's final rule.
Providers' costs correspond directly to the three aforementioned effects of the final class rule and to the fourth effect, which arises from the final monitoring rule: (1) Providers will experience costs to the extent they act on additional incentives for ensuring more compliance with the law; (2) providers will spend more to the extent that the exposure to additional class litigation actually materializes; (3) providers will incur a one-time administrative change cost or ongoing amendment or notices costs; and (4) providers will incur ongoing administrative costs from the requirement to submit arbitral and certain court records to the Bureau. The Bureau considers each of these effects in turn. To the extent providers pass these costs through to consumers, providers' costs will be lower. Providers' pass-through incentives are discussed further below.
Persons exposed to class litigation have a significant monetary incentive to avoid class litigation. The final rule prohibits providers from using arbitration agreements to limit their exposure to class litigation. As a result, providers may attempt to lower their class litigation exposure (both the probability of being sued and the magnitude of the case if sued) in a multitude of ways. All of these ways of lowering class litigation exposure will likely require incurring expenses or forgoing profits. The investments in (or the costs of) avoiding class litigation described below, and other types of investments for the same purpose, would likely be enhanced by monitoring the market and noting class litigation settlements by competitors, as well as actions by regulators. Providers will also likely seek to resolve any uncertainty regarding the necessary level of compliance by observing the outcomes of such litigation. These investments might also reduce providers' exposure to public enforcement.
The Bureau has previously attempted to research the costs of complying with Federal consumer financial laws as a general matter, and found that providers themselves often lack data on compliance costs.
An association of State regulators expressed concern that the compliance costs of the proposal could be substantial, and that requiring institutions to incur those costs could pose safety and soundness concerns for the depository institutions that the association's members supervise. The commenter urged the Bureau to engage in a more rigorous analysis of current and future compliance costs before
A credit union industry commenter disagreed with the Bureau's analysis of the costs of additional compliance. In the view of this commenter, the costs to credit unions of complying with existing laws and regulations are excessive, and the increase in class action liability for those that now employ arbitration agreements would make these costs worse for credit unions. However, as the commenter noted and as the Study showed, most credit unions currently do not use pre-dispute arbitration agreements. The class provision will not impose costs on entities that do not currently use arbitration agreements.
As noted, the Bureau believes that, as a general matter, the final rule will increase at least some providers' incentives to invest in additional compliance. The Bureau believes that the additional investment will be significant, but cannot predict precisely what proportion of firms in particular markets will undertake which specific investments (or forgo which specific activities) described below.
However, economic theory offers general predictions on the direction and determinants of this effect. Whether and how much a particular provider invests in compliance will likely depend on the perceived marginal benefits and marginal costs of investment. For example, if the provider believes that it is highly unlikely to be subject to class litigation and that even then the amount at stake is low (or the provider is willing to file for bankruptcy if necessary to ward off a case), then the incentive to invest is low. Conversely, if the provider believes that it is highly likely to be subject to class litigation and that the amount at stake would be large if it is sued, then the incentive to invest is high.
Providers' calculus on whether and how much to invest in compliance may also be affected by the degree of uncertainty over whether a given practice is against the law, as well as the size of the stakes and the ability of the provider to mitigate the legal risk. Where uncertainty levels are very high and providers do not believe that they can be reduced by seeking guidance from legal counsel or regulators or by forgoing a risky practice that creates the uncertainty, providers may have less incentive to invest in lowering class litigation exposure under the logic that such actions will not make any difference in light of the residual uncertainty about the underlying law. In the extreme case, if a provider believes that class litigation is completely unrelated to compliance, then the provider will rationally not invest in lowering class litigation exposure at all: The deterrent effect is going to be absent. However, as discussed above, if success in a class action is related to the merit of the claim, there will be an incentive on the part of attorneys to bring claims with merit and therefore an incentive on the part of providers to invest in compliance. Indeed, the Bureau believes that many providers know that class litigation is indeed related to their actual compliance with the law and adherence to their contracts with consumers.
Providers who decide to make compliance investments may take a variety of specific actions with different cost implications. First, providers may spend more on general compliance management. For example, upon the effective date of the rule, a provider may decide to go through a one-time review of its policies and procedures and staff training materials to minimize the risks of future class litigation exposure. This review might result in revisions to policies and additional staff training. There may also be an ongoing component of costs arising from periodic review of policies and procedures and regularly updated training for employees, as well as third-party service providers, to mitigate conduct that could create exposure to class litigation.
In addition, providers may incur costs due to changes in the consumer
Some of the compliance changes that providers may make are relatively inexpensive changes in business processes that nonetheless are less likely to occur in the absence of class litigation exposure. Three examples of such investments in compliance follow. First, under the FDCPA, debt collectors are not allowed to contact a consumer at an unusual time or place which the collector knows or should know to be inconvenient to the consumer.
As a second example, consider a bank stopping an Automated Clearing House (ACH) payment to a third party at a consumer's request. While important to a consumer, absent the possibility of class litigation, the bank's primary incentive to ensure that the ACH payment is discontinued is to maintain a positive reputation with this particular consumer.
The third example is a creditor sending a consumer an adverse action notice explaining the reasons for denial of a credit application.
Additional investments in compliance are unlikely to eliminate additional class litigation completely, at least for some providers.
To provide an estimate of costs related to class settlements of incremental class litigation that would be permitted to proceed under the proposal, the Bureau developed preliminary estimates using the data underlying the Study's analysis of Federal class settlements over five years (2008 to 2012), the Study's analysis of arbitration agreement prevalence, and additional data on arbitration agreement prevalence collected by the Bureau through outreach to trade associations in several markets during the development of the proposal.
Any inaccuracy in the prevalence numbers affects the estimates below. For example, if prevalence is actually higher in a particular market than the number used by the Bureau, then the actual costs to providers (and benefits to consumers) will be higher. In this example, the increases in across all markets costs to providers and benefits to consumers (stemming from the relief to class members) are not necessarily symmetric, since the Bureau's estimates are market-by-market.
To estimate the impact of the rule the Bureau used the Study data to estimate the percentage of providers in each market with an arbitration agreement. The Bureau had classified each case in the Study by the North American Industry Classification System (NAICS) code that most closely corresponded to the consumer financial product or service at issue in the case.
The Bureau's estimate of additional Federal class litigation costs is based upon the set of Federal class settlements analyzed in the Study, with adjustments to align those data with the scope of the proposal, which was somewhat narrower.
The resulting set of 312 cases used to estimate impact of the proposal on Federal class litigation, as well as the 117 excluded cases described above, were listed in the proposal. The Bureau notes that the total amount of payments and attorney's fees—the two statistics that the Bureau uses for its estimates in this Section 1022(b)(2) Analysis—for the 312 cases are not materially different than the totals for the aforementioned 419 cases used in the Study. That is largely a function of the fact that the additions and subtractions were for the most part relatively small class actions that did not contribute materially to the amount of aggregate gross or net relief.
Many of the cases not used to estimate the impact of the rule in the Bureau's Section 1022(b)(2) Analysis were EFTA ATM “sticker” cases, in which noncustomers had sued ATM operators for failing to comply with the historical requirement in EFTA to post a “sticker” on the ATM disclosing certain information concerning ATM fees. A research center commenter argued that a consistent approach would have been to also exclude FDCPA claims against debt collectors, which the Bureau did not exclude. In the commenter's view, both types of cases are not subject to arbitration, and the commenter believes that including FDCPA cases and excluding EFTA ATM sticker cases biases the Bureau's estimates in favor of the rule. The Bureau disagrees with this comment. The Bureau believes that it is not appropriate to include EFTA ATM sticker cases in its analysis because those cases concerned rights of persons using an ATM machine who were not holders of an account at the institution offering the ATM (and which in some cases may have been a merchant). A financial institution providing ATM services to noncustomers is not a product or service covered by the rule. The commenter's analogy between that service and debt collection is not apposite because debt collection is specifically covered by the rule.
With regard to the Bureau's estimations overall, the accuracy of the estimates is limited by the difficulty that often arises in data analysis of disentangling causation and correlation, namely unobserved factors than can affect multiple outcomes. As noted above, the core assumptions underlying the Bureau's estimates are that the settlements identified in the Study were all brought against providers without an arbitration agreement and that providers with arbitration agreements affected by the rule will be subject to class settlements to the same extent as providers without arbitration agreements today. The first assumption is a conservative one: It is likely that some of the settlements involved providers with arbitration agreements that they either chose not to invoke or failed to invoke successfully, in which event the Bureau's incidence estimates are overstated. On the other hand, similar to issues discussed above with regard to estimating compliance-related expenditures, it may be that some other underlying factor (such as a general difference in risk tolerance and management philosophy) might prompt providers that use arbitration agreements today to take a different approach to underlying business practices and product structures than providers who otherwise appear similar but have never used arbitration agreements. This might make providers who use arbitration agreements today more prone to class litigation than providers who do not, and increase both the costs to providers and benefits to consumers discussed below.
The Bureau also generally assumed for purposes of the estimation that litigation data from 2008 to 2012 were representative of an average five-year period. However, the Bureau recognizes that the Bureau's own creation in 2010 may have increased incentives for some providers to increase compliance investments, although it did not begin enforcement actions until 2012. To the extent that the existence and work of the Bureau, including its supervisory activity and enforcement actions, increased compliance since 2010 in the markets the final rule will affect, the estimates of costs to providers and the benefits to consumers going forward will be overestimates.
To provide a more specific illustration of the Bureau's methodology, suppose for example that out of 1,000 providers in a particular market (NAICS code), 20 percent currently use arbitration agreements, and the Bureau found 40 class litigation settlements over five years. That implies that 800 providers (1,000 − 1,000 * 20 percent) did not use arbitration agreements and the overall exposure for these 800 providers was 40 cases total, for a rate of 5 percent (40/800) for five years. In turn, this implies that the 200 providers (1,000 * 20 percent) that currently use arbitration agreements would be expected to face, collectively, 10 class settlements in five years (200 * 5 percent), or two class settlements per year (10/5).
In the Study, the Bureau reported both the amount defendants agreed to provide as cash relief (gross cash relief) and the amount that public court filings established a defendant actually paid or was unconditionally obligated to pay to class members because of either submitted claims, an automatic distribution requirement, or a pro rata distribution with a fixed total amount (payments).
The Study documented relief provided to consumers and attorney's fees paid to attorneys for the consumers,
By reviewing the cases used in Section 8 of the Study, the Bureau documented lodestar multipliers in about 10 percent of the settlements. The average multiplier across those cases was 1.71, and thus the Bureau uses this number for calculations below.
The Bureau also notes that the estimates provided below are exclusively for the cost of additional Federal class litigation filings and settlements. The Bureau did not attempt to monetize the costs of additional State class litigation filings and settlements because limitations on the systems to search and retrieve State court cases precluded the Bureau from developing sufficient data on the size or costs of State court class action settlements. Based on the Study's analysis of cases filed, the Bureau believes that there is roughly the same number of class settlements in State courts as there is in Federal courts across affected markets;
An industry commenter argued that some laws result in many more cases being pursued at the State level than the Federal level. The Bureau agrees that some claims involving some laws may be more commonly asserted in one forum or another, but disagrees that this means that the total number of State court class actions is likely to be higher than the total number of Federal class actions. In the Study, the Bureau sampled three States and several additional counties to examine the level of class action litigation in courts in those jurisdictions, and, extrapolating from the sample, found the State class actions were approximately as common as Federal class actions.
The same industry commenter also asserted that State class actions can have more variable litigation costs than Federal class actions. The commenter argued that State courts lacked controls, expertise, and oversight to create consistent outcomes, and this may lead to unpredictable costs. The commenter did not cite data on this point. Congress adopted CAFA to address many of the concerns raised by the commenter. To assess whether CAFA was sufficient to address these concerns, the Bureau would need data post-dating the adoption of CAFA, as CAFA limited the cases that could be maintained in State court. The Bureau is not aware of any data that post-dates the adoption of CAFA. Further, even if costs are more variable, this does not mean that on average they are higher.
A State regulator commenter argued that State court class actions are more costly to litigate than Federal class actions of similar size. The commenter asserted that differences in State laws regarding the procedure used for class actions could increase the length and complexity of the process to certify a class action under a particular State's laws. The commenter provided no evidence to support this assertion. Moreover, this would only be relevant in cases where the parties are litigating the issue of certification. The commenter also provided no reason to believe that costs would be higher if the matter is resolved in any of a number of other ways, including a class settlement, a non-class settlement, or litigating a dispositive motion. In light of the requirements of CAFA, which generally limit the amount of relief available in multi-state class action claims in State courts to $5 million, the Bureau believes that State court class actions may be more expensive relative to the size of the injury involved, but mainly because there are fixed costs involved in litigating a class action, and State court class actions are likely less complex and involve fewer consumers.
A research center commenter made several criticisms of the methodology described above, all relating to the ratio of attorney's fees to consumer recovery in class actions. First, the commenter argued that the Bureau's approach for calculating the average ratio of attorney's fees to consumer payments is flawed because it overweights the impact of certain large settlements involving litigation over depositories' overdraft programs. Second, the commenter questioned the results of the Bureau's aggregate calculation, pointing to a study by one of the comment's authors that found much higher ratios. Finally, the commenter argued the Bureau's decision to include FDCPA cases in its analysis but not EFTA ATM sticker cases, discussed above, biases its calculations.
The Bureau disagrees with the commenter's specific critiques,
Regarding the much higher ratios of attorney's fees to consumer payments in the study conducted by one of the authors of the comment compared the Bureau's estimates, the Bureau disagrees that this is due to problems with its analysis. The main portion of the discrepancy between the Bureau's analysis and that of the commenter is in the set of cases used for analysis. As noted above in Part VI, if the study cited by the commenter had used the same definition of relevant cases as the Bureau's impacts analysis, it would have obtained substantially similar results to those of the Bureau.
Regarding the specific choice to include FDCPA cases in its analysis, the Bureau disagrees with the commenter that this creates a bias. Removing debt collectors from the Bureau's analysis would not make the Bureau's estimates—the ratio of class action attorney's fees to consumer recovery—more favorable to class actions. Debt collection cases make up a majority of the new class action lawsuits the Bureau estimates will occur as a result of the rule, as illustrated in Table 1. Removing them would reduce the count of cases by about half. Debt collection cases on average involve lower fees but also lower payments to consumers; however, the ratio of attorney's fees to consumer payments is higher for debt collection cases than class actions in other industries, and so the overall ratio of attorney's fees to consumer recovery would be somewhat lower if debt collectors were excluded.
The Bureau estimates that the final class rule will create class action exposure for about 53,000 providers (those who fall within the coverage of the final rule and currently have an arbitration agreement).
These numbers should be compared to the number of accounts across the affected markets. While the total number of all accounts across all markets is unavailable, there are, for example, hundreds of millions of accounts in the credit card market alone. Thus, averaged across all markets, the monetized estimates provided above amount to less than one dollar per account per year. However, this exposure could be higher for particular markets.
Many cases also feature in-kind relief.
In addition to the costs of Federal class actions as discussed above, the Bureau assumes that providers who become subject to class actions as a result of the rule will enter into a similar number of class settlements in State court, however, with markedly lower amounts paid out to consumers and attorneys on both sides.
The Bureau performed a similar analysis to estimate the number of cases that will be filed as putative class actions but not result in a class settlement. Based on the data used in the Study, the Bureau believes that roughly 17 percent of cases that are filed as class litigations end up settling on a classwide basis.
In order to estimate the costs associated with these incremental Federal putative class actions, the Bureau notes that the Study showed that an average case filed as a putative class action in Federal court takes roughly 2.5 times longer to resolve if it is settled as a class case than if it is resolved in any
For the purposes of the first defense cost estimate, the Bureau assumed that putative class action cases that are not settled on a class basis (for whatever reason) cost 40 percent (1 divided by 2.5) as much to litigate. Therefore, the Bureau estimated that these additional 501 Federal class cases that do not settle on a class basis will result in $76 million per year in defense costs to providers. The Bureau did not include in this estimate recovery amounts in these putative class cases that did not result in a class settlement, as the Bureau believes those are negligible amounts (for example, a few thousand dollars per case that had an individual settlement). Based on similar numbers of Federal and State cases, it is likely that there will also be an additional 501 State cases filed that do not settle on class basis, whose cost the Bureau does not estimate due to the lack of nationally representative data; however, these cases will likely be significantly cheaper for providers.
The Bureau believes that the calculation above might be an overestimate of time spent on such cases because both defendant's and plaintiff's attorneys frequently come to the conclusion, relatively early in the case that the case will not result in a class settlement. Once such a conclusion is reached, the billable hours incurred by either side (in particular the defense) are likely significantly lower than for a case that is headed towards a class settlement, even if the final outcome of the two cases might be achieved in comparable calendar time. Similarly, many cases are resolved before discovery or motions on the pleadings; such cases are cheaper to litigate. In other words, at some point early in many putative class actions, the case becomes effectively an individual case (in terms of how the parties and their counsel treat the stakes of it), and from that point on, its cost should be comparable to the cost of an individual case (as opposed to a case settled on a classwide basis). The calculation above assumes that this point of transition to an individual case is the last day of the case.
In contrast, the Bureau also calculated the impact of making the opposite assumption that from the first day of the case the parties (in particular, the defense) know that the case is not going to be settled on a classwide basis. Using this assumption, the 501 class cases cost as much to defend as 501 individual cases. Using $15,000 per individual case as a defense cost estimate, the cost of these 501 cases would be approximately $8 million per year.
The Bureau notes that for several markets the estimates of additional Federal class action settlements are low.
The Bureau notes that providers might attempt to manage the risks of increased class litigation exposure by opting for more comprehensive
Regarding the total costs to providers over a five year period, three industry trade associations asserted that accounting for State class actions could as much as double the total costs to providers from additional class action litigation, to $5.2 billion. The commenters apparently were extrapolating from the Bureau's observation in the proposal that the incidence of additional State class litigation might be similar to the incidence of additional Federal class litigation.
The Bureau acknowledges again that the total additional litigation costs to providers will exceed costs from Federal class actions presented in Table 1, as they do not account for the costs of State class actions. The Bureau also acknowledges again that it does not have reliable data to estimate the cost of additional State class actions. However, as discussed above, the Bureau disagrees that the cost of State class actions are likely to be anywhere near the full cost of Federal class action litigation. Most State court class actions will seek smaller amounts of monetary relief than Federal court class actions, sometimes considerably so, due to the fact that class actions seeking more than $5 million in relief generally can be removed to Federal court under CAFA.
Several industry commenters expressed the view that the Bureau should have generally considered costs to additional firms beyond those considered in the Section 1022(b)(2) Analysis in the proposal. Specifically, automobile dealer industry commenters expressed the view that the rule would have a significant impact on them because increased suits against indirect automobile lenders would increase the costs on dealers, who would be obligated to reimburse the indirect automobile lenders pursuant to indemnification clauses that are included in many contracts between dealers and indirect automobile lenders. An industry trade association commenter expressed a related view that merchants would be affected by the rule despite the exemption for merchants providing interest-free credit for their own nonfinancial goods or services because the rule would apply to servicers, collectors, and debt buyers (both initial and downstream). The increased costs incurred by those providers, in the view of the industry trade association, would be passed along to the merchants. As a result, the rule would impose costs on merchants “indirectly,” in the view of this commenter.
In its Section 1022(b)(2) Analysis, the Bureau analyzes costs and benefits to covered persons whose conduct is regulated by the rule. Although automobile dealers and merchants who originate consumer credit transactions are covered persons under Dodd-Frank section 1002(6), they are not subject to the Bureau's rulemaking authority in circumstances described in sections 1027 and, in the case of automobile dealers, section 1029 of the Dodd-Frank Act.
Providers that currently have arbitration agreements (or who purchase contracts with arbitration agreements that do not include the Bureau's language) will also incur administrative expenses to make the one-time change to the arbitration agreement itself (or a notice to consumers concerning the purchased contract). Providers are likely to incur a range of costs related to these administrative requirements.
The Bureau believes that providers that currently have arbitration agreements will manage and incur these costs in one of three ways. First, the Bureau believes that some providers rely exclusively on third-party contract forms providers with which they already have a relationship, and for these providers the cost of making the required changes to their contracts is negligible (
Second, there may be providers that perform an annual review of the
Third, there are likely to be some providers that use contracts that they have highly customized to their own needs (relative to the first two categories above) and that might not engage in annual reviews. These will require a more comprehensive review in order to either change or remove the arbitration agreement.
The Bureau believes that smaller providers are likely to fall into the first category. The Bureau believes that the largest providers fall into either the second or the third category. On average across all categories, the Bureau believes that the average provider's expense for the administrative change to be about $400. This consists of approximately one hour of time from a staff attorney or a compliance person and an hour of supporting staff time. Given the Bureau's estimate of approximately 48,000 providers that use arbitration agreements,
Some industry commenters asserted that their costs from the required administrative changes would be higher than the Bureau's estimates, as described above and in the proposal. A small dollar credit industry commenter asserted that it had more than 100 separate consumer agreements that would need to be updated across multiple systems, in addition to hardcopies at retail storefronts. A trade association for installment lenders argued that the addition of the Bureau-required contract language would require conforming changes throughout its members' consumer agreements. The Bureau acknowledges that some providers may have particular circumstances that will lead to above average costs, even if they do not fall into the third category of providers above, with highly customized contracts. The Bureau noted in the proposal that some providers have multiple contracts: For example, some credit card issuers have filed dozens of contracts with the Bureau.
In addition to the one-time change described directly above, some providers could be affected on an ongoing or sporadic basis in the future as they acquire existing contracts as the result of regular or occasional activity, such as a merger. Section 1040.4(a)(2)(iii) will require providers who become a party to an existing contract with a pre-dispute arbitration agreement that does not already contain the language mandated by § 1040.4(a)(2) to amend the agreement to include that provision, or send the consumer a notice indicating that the acquirer will not invoke that pre-dispute arbitration agreement in a class action.
For example, buyers of medical debt could incur additional costs as a result of additional due diligence they undertake to determine which acquired debts arise from consumer credit transactions (that will be subject to final rule), or alternatively by the additional exposure created from sending consumer notices on debts that did not arise from credit transactions (
A prepaid card industry commenter argued that the Bureau should have further considered the administrative burden of the proposal in concert with the burden imposed by the Bureau's recent Prepaid Accounts Rule. The commenter asserted without explanation that prepaid card providers would be compelled to revise their card packaging and disclosures twice in a short space of time. The Bureau disagrees that it should account for the costs of the Prepaid Accounts Rule, which itself accounts for its own costs.
Comments from automobile dealers asserted that the proposed class rule would lead to inclusion of the mandated language in form retail installment sale contracts and lease forms by exempt motor vehicle dealers. These dealers expressed concern that the Bureau's proposal did not allow for the use of the language that would preserve the arbitration agreement of the dealers because given that they typically sell their loans to entities that would be providers under the proposal, those providers will in effect mandate dealers' use of compliant arbitration agreements even if the Bureau does not apply its rule to dealers. As noted in the section-by-section analysis of the rule, the Bureau has updated the contract provision that can be used in this situation to further clarify that it does not result in the coverage of, or impact on, excluded persons.
There will also be a minor cost related to the final rule's requirements regarding sending records to the Bureau related to providers' arbitrations and certain court cases. In the Study, the
With regard to the cost of submitting arbitral and certain court records generated by the final rule, some commenters disputed as low the amount estimated by the Bureau, suggesting that there would be additional unaccounted for burden of redacting records and ensuring privacy. As discussed in more detail in Part VI, however, the Bureau expects that the rule will not lead to additional burden because the Bureau provides a specific list of information types that must be redacted. Providers will not have to make additional redactions to ensure privacy in general. The Bureau, rather than providers, will bear any further cost of redacting information beyond those types listed in the rule to ensure privacy.
In addition to the costs of submission of records listed above, one commenter asserted that the private nature of arbitration benefits all parties involved, and as such publication of arbitral records will act as a cost toward both parties. For firms, this takes the form of a reputational cost from the details of their disputes with consumers being made public. (The commenter's arguments regarding benefits to consumers are discussed separately below.) The Bureau acknowledges that publication of arbitral awards with rulings adverse to firms may have some impact on the reputation of those firms, although the Bureau notes that the number of arbitration cases that results in such awards is so small—36 per year in the markets analyzed in the Study
Some commenters asserted that publication of arbitral records will provide an opportunity for plaintiffs to find companies susceptible to litigation, and thus indirectly impose a heavy cost burden on those firms. The Bureau again notes that the number of arbitral awards favoring individual consumers is miniscule relative to the size of the various markets covered by the rule. Moreover, as one commenter asserted, publication of arbitral records could actually create a more efficient private enforcement market, as consumers may be more likely to realize they have a valid claim if they see that an arbitral decision was made in favor of consumers with similar claims.
As also discussed in Part VI, the Bureau acknowledges that most providers will pass through at least portions of some of the costs described above to consumers. This pass-through can take multiple forms, such as higher prices to consumers or reduced quality of the products or services they provide to consumers. The rate at which firms pass through changes in their marginal costs onto prices or interest rates charged to consumers is called the pass-through rate.
A pass-through rate of 100 percent means that an increase in marginal costs would not be absorbed by the providers, but rather would be fully passed through to the consumers.
Determining the extent of pass-through involves evaluating a trade-off between volume of business and margin (the difference between price and marginal cost) on each customer served. Any amount of pass-through increases price, and thus lowers volume. A pass-through rate below 100 percent means that a firm's margin per customer is lower than it was before the provider had to incur the new cost. Economic theory suggests that, without accounting for strategic effects of competition, the pass-through rate ends up somewhere in between the two extremes of: (1) No
Economic theory does not provide useful guidance about what the magnitude of the pass-through of marginal cost is likely to be with regard to the final rule. The Bureau believes that providers might treat the administrative costs of the class rule as fixed, while the administrative costs for submission of arbitral and certain court records will primarily have a marginal component for each actual submission. Whether the costs due to additional compliance are marginal depends on the exact form of this spending, but most examples discussed above would likely qualify as largely fixed. The Bureau believes that providers might treat a large fraction of the costs of additional class litigation as marginal: Payments to class members, attorney's fees (both defendant's and plaintiff's), and the cost of putative class cases that do not settle on a class basis. The extent to which these marginal costs are likely to be passed through to consumers cannot be reliably predicted, especially given the multiple markets affected. Empirical studies are mostly unavailable for the markets covered. Empirical studies for other products, mainly consumer package goods and commodities, do not produce a single estimate.
The available pass-through estimates for the consumer financial products or services are largely for credit cards, where older literature found pass-through rates of close to 0 percent.
More directly related to the proposal, the Study analyzed the effect on prices of several large credit card issuers agreeing to drop their arbitration agreements for a period of time as a part of a class settlement.
Several commenters stated that the class rule would increase costs beyond the Bureau's estimates in the proposal's Section 1022(b)(2) Analysis. In general, these commenters asserted that various costs, including litigation discovery, costs of State court actions, and the costs of non-class settlements would all be passed on to consumers. As the commenters did not directly take issue with any of the Bureau's estimates of these costs, the Bureau interprets these comments as asserting that all such costs will be passed through. As neither the Bureau nor other researchers or commenters have been able to develop a quantitative model to estimate a specific pass-through rate in markets for consumer financial products and services, the commenters' view, if true, would not be inconsistent with the Bureau's assumption that pass-through will be between 0 and 100 percent.
An industry commenter asserted that the potential for pass-through of costs to consumers must be analyzed by focusing on individual companies facing class actions, not averaging across an entire market of consumer accounts. The commenter asserted that individual companies facing class actions may be forced out of business by the additional class action litigation exposure if they cannot pass the costs through to consumers and stay in business. The Bureau disagrees, as this would ignore the issue of pass-through of compliance costs incurred by providers that are not subject to such a suit. As discussed above, the Bureau also believes that it is important, given the size of the markets at issue, to evaluate cost estimates relative to the number of accounts and consumers. More specifically, the Bureau recognizes that the rule will have the greatest impact on those providers whose compliance is least robust, as those providers will either spend more to bring their compliance up to an appropriate level to avoid class liability or are more likely to be subject to class liability. The Bureau does not agree that, to the extent that the pass-
Credit union industry commenters asserted that the risk or magnitude of pass-through costs to consumers is effectively greater for credit unions, because unlike traditional banks, credit unions are owned by their members. The Bureau agrees that, at least for any credit unions that use arbitration agreements, this may be true, if somewhat tautological. In general, a cost to a firm must either be passed on to consumers through higher prices or to the owners of the firm through reduced profits. To the extent that credit union customers are also owners, such costs will ultimately fall to consumers one way or another. Nonetheless, given that the Bureau's preliminary conclusion was only that pass-through was likely greater than zero, and given that most credit unions currently do not use arbitration agreements and so will not be affected by the rule, the Bureau's analysis is not meaningfully altered by this comment.
Some industry commenters argued that pass-through would be especially high in their specific industry. For example, a small dollar lending industry commenter argued that profit margins in that industry are so thin that costs would have to be passed on, or else firms would go out of business. Again, the Bureau acknowledges that full pass-through is possible, but the Bureau believes that even full pass-through will not impose substantial burden on individual consumers.
A research center commenter asserted that large financial services firms adjust price more slowly than smaller firms and firms in other sectors, and that this explains the lack of price response from the issuers studied by the Bureau. The Bureau has no evidence to suggest that price responses by credit card issuers are so slow that they would not have been captured by the analysis in the Study, and the commenter did not provide any evidence to support this assertion; nor did any credit card issuer or other provider come forward with such evidence, even anecdotally.
Consumers will benefit from the class rule to the extent that providers will have a larger incentive to comply with the law; from the class payments in any class settlement that occurs due to a provider not being able to invoke an arbitration agreement in a class proceeding; and, from any new compliance with the law consumers experience as a result of injunctive relief in a settlement or as a result of changes in practices that a provider adopts in the wake of the settlement to avoid future litigation.
As noted above and in Part VI, the primary effect of the rule on consumers will be to provide a deterrent against harmful conduct on the part of providers, resulting in additional investments in compliance. Consumer benefits due to providers' larger incentive to comply with the law are directly related to the aforementioned investments by providers to reduce class litigation exposure. Specifically, consumers would benefit from the forgone harm resulting from fewer violations of law. A full catalog of how all laws applicable to affected products benefit consumers when they are followed is far beyond the scope of this analysis. However, a few examples of types of benefits are offered. These benefits could take a form that is easier to monetize—for example, a credit card issuer voluntarily discontinuing (or not initiating) a charge to consumers for a service that generates $1 of benefit to consumers for every $10 paid by consumers; a depository institution ceasing to charge overdraft fees with respect to transactions for which the consumer has sufficient funds on deposit at the time the transaction settles to cover the transaction; or, a lender ceasing to charge higher rates to minority than non-minority borrowers. Or this could take a form that is harder to monetize—for example, a debt collector investing more in insuring that the correct consumers are called and in complying with various provisions limiting certain types of contacts and calls under the FDCPA and TCPA; or, a creditor taking more time to assure the accuracy of the information furnished to a credit reporting agency or to investigate disputes of such information.
Just as the Bureau is unable to quantify and monetize the investment that providers would undertake to lower their exposure to class litigation, the Bureau is unable to quantify and monetize the extent of the consumer benefit that would result from this investment or particular subcategories of investment, such as improving disclosures, improving compliance management systems, expanding staff training, or other specific activities. The Bureau requested comment on any representative data sources that could assist the Bureau in both of these quantifications, but did not receive any responses.
The Bureau also believes consumers will benefit from the reporting requirement via improved monitoring for potential biases in administration of arbitration (as was alleged in the case of NAF, discussed in Part II above), as well as other potential harms in the use of arbitration agreements. Some commenters disputed this, arguing that the Bureau's existing database of complaints serves as a direct substitute. That is, in their view, the public already has access to consumers' complaints about providers, and more information through the submission of arbitral awards is unnecessary. However, the Bureau believes that the monitoring proposal would produce different and supplemental information that is important. Perhaps most importantly, the monitoring provision will provide the Bureau and the public insight into how the arbitration process is serving consumers who enter into it. In addition, while the Bureau's complaint process serves as an effective avenue through which a consumer can complain to a provider, the Bureau does not adjudicate claims. The Bureau does not decide on the merits of a complaint, and firms are not required to provide any response to consumer complaints submitted through the portal. Absent settlement by the affected entities, arbitration features legally binding decisions on the merits of a case by a third party that can serve as a means by which the public can better understand potential areas of non-compliance.
Consumers will also benefit from class payments that they receive from settlements of additional class actions. According to the calculation above, this benefit would be on the order of $342 million per year for Federal class
Moreover, as noted above as well, the Bureau believes that there will also be significant benefits to consumers when settlements include injunctive relief.
Consumers may also benefit to the extent that they prefer to engage in disputes through the court system, rather than through arbitration. A research center's comment provided the results of its survey which they stated indicated that 89 percent of 1,008 consumers surveyed would like to be able to participate in class actions against a bank who had charged them for a fee or services they did not request. An industry association comment criticized the research center survey for, among other things, not asking about arbitration as an alternative, and several industry association comments asserted the Bureau should survey consumer preferences for arbitration. The latter, the Bureau believes, is less relevant given the infrequent use of arbitration and its potential to continue under the rule. Other industry commenters asserted that consumers prefer arbitration, although they only cited the purportedly attractive features of arbitration, rather than empirical data on actual consumer preferences. In any event, the research center survey concerning class actions focused on a particular example in a particular market, and its results may not extend to other situations in other markets.
The cost to consumers is mostly due to the aforementioned pass-through by providers, to the extent it occurs, as discussed above and in Part VI. The Bureau does not repeat this general discussion here.
A second possible impact could occur if some providers decide to remove arbitration agreements entirely from their contracts, although there is no empirical basis to determine the proportion of providers that would do so, and the Bureau believes it is unlikely that many, if any, providers will do so.
As discussed in detail in Part VI, the Bureau continues to believe that the results of the Study were inconclusive as to the benefits to consumers of individual arbitration versus individual litigation.
In short, if a consumer initiates a formal dispute relating to a consumer financial product or service, it is possible that the consumer would fare somewhat better in individual arbitration than in individual litigation.
The Bureau requested comment on both providers' incentives to drop arbitration agreements altogether and on quantification of consumer benefit or cost of individual arbitration over and above individual litigation. A number of industry commenters asserted that providers would drop individual arbitration agreements.
Commenters made two points. First, they asserted that companies subsidized individual arbitration, requiring significant upfront expenses on filing fees and other costs, for the purpose of avoiding class action exposure. Thus, in their view, it would be unprofitable to subsidize individual arbitration if companies cannot in turn prevent class actions. Second, the commenters asserted that the decision to drop arbitration agreements would occur because it is not cost-effective to support a dual-track system of litigation (on a class or putative class basis) and individual arbitrations. However, this reasoning conflicts with available facts.
As discussed above in Part VI findings, the upfront costs of individual arbitration are likely more than offset by the reduced cost compared to litigating in court.
A third possible cost to consumers could arise if, as discussed above, some providers decide that a particular feature of a product makes the provider more susceptible to class litigation, and therefore decide to remove that feature from the product. A provider might make this decision even if that feature is actually beneficial to consumers and does not result in legal harm to consumers. In this case, consumers would incur a cost due to the provider's over-compliance with respect to this particular decision. The Bureau is not aware of any data showing this theoretical phenomenon (over-compliance) to be prevalent among providers who currently do not have an arbitration agreement or any reason to believe this would be likely among providers who will be required to forgo using their arbitration agreement to block class actions. The Bureau requested comment on the extent of this phenomenon in the context of the proposal but did not receive any responses.
A nonprofit commenter and some industry commenters posited a fourth possible cost to consumers, arguing that consumers value the private nature of individual arbitration, and that the monitoring provision of the rule could compromise this. These commenters also asserted that consumers' private financial information could be released as a result of this provision if the arbitral records are made public and consumers are re-identified using public information. Taking the second argument first, the Bureau notes that several measures will sufficiently reduce re-identification risk. While providers must submit records redacted of certain personal identifiers, the Bureau will take the primary responsibility, prior to publication, for redacting any additional information needed to minimize the risk of re-identification.
The prevalence of arbitration agreements for large depository institutions is significantly higher than that for smaller depository institutions.
Thus, using the same method discussed above to estimate additional class settlements (and putative class cases) among depository institutions with no more than $10 billion in assets suggests that the final rule will have practically no effect that could be monetized. Specifically, the calculation predicts approximately one additional Federal class settlement and about three putative Federal class cases over five years involving depositories below the $10 billion threshold after the class rule takes effect.
However, there might be other ways in which impacts on smaller depository institutions, and smaller providers in general, would differ from impacts on larger providers. The Bureau describes some of these in this Section 1022(b)(2) Analysis.
One possibility might be that the managers of smaller providers (depository institutions or otherwise) are sufficiently risk averse, or generally sensitive to payouts, such that putative class actions have an
There is a significant amount of academic finance literature suggesting that management should not be risk averse, unless the case involves a possibility of a firm going bankrupt in case of a loss.
The bargaining theory literature generally suggests that the party with deeper pockets and relatively less at stake will be the party that gets the most out of the settlement.
Finally, given the considerably lower frequency of class litigation for smaller providers, it is possible that it is not worth the cost for smaller providers to invest in lowering class litigation exposure. This might also explain the relatively lower frequency of arbitration agreement use by smaller depositories.
Rural areas might be differently impacted to the extent that rural areas tend to be served by smaller providers, as discussed above with regard to depository institutions with less than $10 billion in assets and below with regard to providers of all types that are below certain thresholds for small businesses. In addition, markets in rural areas might also be less competitive. Economic theory suggests that less competitive markets would have lower pass-through with all else being equal; therefore, if there were any price increase due to the proposal, it would be lower in rural areas.
Given hundreds of millions of accounts across affected providers and the numerical estimates of costs above, the Bureau expects the additional marginal costs due to additional Federal class settlements to providers to be negligible in most markets. Each of the product markets affected has hundreds of competitors or more. Thus, the Bureau does not believe that this final rule will result in a noticeable impact on access to consumer financial products or services.
The Bureau does not believe that access to consumer financial products or services will be diminished due to effects on providers' continued viability or, as discussed below in Part IX, due to effects on providers' access to credit to facilitate the operation of their businesses. It is possible that consumers might experience temporary access concerns if their particular provider were sued in a class action. These concerns might become permanent if such litigation significantly depleted the provider's financial resources, potentially resulting in the provider exiting the market.
Of course, the incentive for a class counsel to pursue a case to the point where it would cause a defendant's bankruptcy is low because this would leave little or no resources from which to fund a remedy for consumers in a class settlement or any fees for the class counsel and could make the process longer. In addition, the potential consumers of this provider presumably have the option of seeking this consumer financial product or service from a different company that is not facing a class action, and thus a bankruptcy scenario is substantially more of an issue for the particular provider affected than for the provider's customers. Moreover, especially given the low prevalence of cases against smaller providers outlined above and the amounts of documented payments to class members, the Bureau does not believe that out of the Federal class settlements analyzed in the Study, many settlements threatened the continued existence of the defendant and the resulting access to credit or other consumer financial products or services.
A Congressional commenter also stated his view that the class rule would likely cause financial institutions to increase their cash reserves held to mitigate litigation risk. The commenter stated that this increase in cash reserves, in turn, could reduce the amount of cash that institutions have available to lend to consumers and small businesses, or to invest in technology upgrades and employee retention. The commenter referred to this effect as creating “dead capital.” To the extent that financial institutions self-insure in this fashion, the Bureau does not believe it will substantially impact consumers' access to credit, as the overall costs of the rule are small relative to the size to the relevant markets.
In developing the proposal and the final rule, the Bureau considered several potential alternative approaches in light of whether these potential alternatives would achieve the goals of the rulemaking with less burden on industry. The Bureau discussed some of these potential alternatives in the IRFA included in the proposal, and noted in the Section 1022(b)(2) Analysis that it also considered them in that context. The Bureau discusses potential alternatives further here, both in general and in light of comments received regarding potential alternatives.
Beyond these general classes of potential alternatives, commenters suggested other limitations to the class rule, which the Bureau has discussed in Part VII. Some commenters suggested exempting claims under specific statutes, discussed in Part VI and Part VII,
For these reasons, and for the reasons discussed below for the other potential alternatives, the Bureau concludes that none of these potential alternatives would accomplish the goals of the class rule of promoting more effective compliance and remediation for non-compliance with laws providing for a private right of action applicable to covered consumer financial products and services, while minimizing any significant burden on providers.
One Member of Congress suggested the Bureau consider limiting the percentage of attorney's fees that an attorney can demand “in a lawsuit.” However, the Bureau does not believe that lawsuit complaints typically state the amount of attorney's fees sought. Thus, such an alternative would amount to introducing a new pleading requirement on consumer class actions or a cap on the fees that could be awarded at the settlement stage—something that is the province of Congress and the courts and would not be appropriate for the Bureau to regulate. Moreover, the Bureau does not believe information needed to estimate the attorney's fees sought is reliably available at the outset of a case. As the Study showed, the dollar value of consumer harm and the size of the class are rarely pleaded in consumer class complaints.
Several industry commenters suggested that instead of prohibiting firms from using pre-dispute arbitration agreements to bar class actions, the Bureau should instead require firms to give consumers more choice regarding whether and how they enter into arbitration agreements. These proposals took a variety of forms, including requiring firms to allow consumers to either to opt in to or opt out of pre-dispute arbitration agreements, a mandated disclosure of the existence and details of an arbitration agreement, and consumer education initiatives.
The Bureau discusses its concerns with each of these variations in turn below. However, the fundamental problem with this class of potential alternatives is that it does not address the market failure that the rulemaking is intended to address—the fact that consumers often lack awareness that they have a legal claim and, moreover, that when they are aware of such claims, many are negative-value claims that cannot practicably be pursued in any formal dispute resolution forum (whether litigation or arbitration) on an individual basis. Both of these factors reduce firms' incentives to comply with the laws (and thereby correct the market failures the laws were enacted to address).
Moreover, because the market failure identified in this rule relates to what happens when a claim does arise (and the consequences for compliance and remedies), it cannot be ameliorated by increasing consumers' knowledge and understanding
None of the commenters that suggested these potential alternatives articulated how the proposed alternatives would accomplish the Bureau's goals.
With respect to the specific alternatives suggested, the Bureau received some comments that suggested
For many of the same reasons already discussed, the Bureau believes that requiring opt-out arrangements would not meet the objectives of the proposal because they would not alleviate the market failure that the class rule seeks to address. Opt-out agreements will not make consumers aware they have a legal claim in the future, nor will such agreements make negative-value claims worth pursuing. The timing of decisions becomes a factor as well—consumers generally choose whether to be part of an arbitration agreement at the outset of their customer relationship, while firms make compliance decisions continually over time.
Furthermore, even if the Bureau's goals in this rulemaking was to enhance informed consumer decision-making with respect to the potential risks and benefits of entering into adhesion contracts that contain arbitration agreements, there is reason to doubt that mandated opt-out provisions would be effective in promoting informed consumer decision-making, even if coupled with consumer education or improved or additional disclosures. Although there is limited evidence specific to the context of arbitration, there is extensive academic literature showing that consumers frequently do not opt to leave a default option, even if it would be advantageous for them to do so.
In a related series of comments, industry commenters, trade associations and a nonprofit commenter also suggested that the Bureau mandate new disclosures to accompany arbitration agreements that block class actions as an alternative to the class rule. These commenters focused on the problem of lack of consumer awareness about the possible future consequences of entering into an arbitration agreement. In support, these commenters cited to the Bureau's lack of consumer education on arbitration and the Bureau's support of improved disclosure in other contexts. The Bureau's primary focus in this rulemaking, however, is not the problem that improved disclosure purports to fix. Thus, the market failure this rule seeks to address would remain even if the Bureau mandated the best possible form of disclosure proposed by some commenters, including, among other features, plain language and large, clear fonts on pages separate from the rest of the financial contract, coupled with increased consumer education efforts (whether by the providers, regulators, or both). Moreover, as discussed in Part VI, above, the disparity in numbers between the few hundred consumers who currently pursue individual claims in arbitration and the tens of millions annually who are part of a putative class makes it difficult to imagine that any kind of information intervention could bridge the difference.
In any event, there is reason to doubt that disclosures would be very effective in raising consumer awareness, even coupled with consumer education or mandated opt-out provisions. The Study indicated that current consumer understanding of arbitration agreements is low.
In sum, the Bureau believes it is unlikely that firms would be able to implement an opt-out program that is effective at enabling informed choices. But more importantly, as noted above, a lack of consumer awareness and choice regarding pre-dispute arbitration clauses is not the market failure that the rule is trying to address, and even without the problems detailed above, disclosures or opt-in/opt-out provisions will not address the market failure of insufficient deterrence.
Some commenters suggested alternatives aimed at making individual arbitration easier, cheaper, or more desirable to consumers. These included proposals intended to lower the costs of arbitration, reduce barriers to entry, or increase the potential value of consumers' claims. The premise of these alternatives is that small dollar claims would be easier for consumers to prosecute as a result of these changes, the demand for individual arbitration would increase, and class action litigation would not be necessary.
Specifically, the commenters suggested that the Bureau mandate that providers incorporate certain features into their arbitration agreements such as advancement of filing fees and legal costs to consumers when they bring a claim; improving consumers' knowledge and understanding of the arbitration process for purposes of enabling them to file a claim in the event of a dispute; requiring easily accessible venues for arbitrations such as online forums and online filing of documents; and providing for rapid adjudication. These features all would, in the view of the commenters, lower the costs of entry to arbitration, so that fewer claims are negative-value claims. For purposes of this analysis, the Bureau considers all of these cost-reducing alternatives jointly as one alternative.
As an initial matter, even if demand for individual arbitration increased enough to be as strong a deterrent to illegal behavior as class action litigation, it is far from clear that this would reduce the burden to industry as compared to the class rule. The Study found only a few hundred claims related to consumer financial products filed each year by consumers, compared to millions who were part of a putative class. Even if only a small fraction of affected consumers filed arbitration claims, this would be several orders of magnitude more than firms currently face. A thousand-fold increase in individual arbitration claims could be more expensive to defend against than class actions. Moreover, even under ideal circumstances individual arbitration is not suited to providing prospective conduct relief.
That being said, the Bureau believes that reducing the costs of individual arbitration, while a laudable goal, would not increase demand for individual arbitration enough to provide a deterrent that would substitute for class action exposure. First, improved access to individual arbitration does nothing for consumers who are not aware that they have a legal claim. Second, the Bureau notes that many of the features suggested by commenters are already relatively common in arbitration agreements,
The Bureau also considered, in combination with the cost-reducing potential alternatives discussed above, an intervention suggested by an industry commenter and a nonprofit commenter that, in their view, would increase the perceived value of claims brought in individual arbitration. Specifically, commenters suggested that the Bureau mandate that arbitration agreements include clauses that provide for some additional payment to consumers in cases in which four conditions are satisfied: A company makes a settlement offer to the consumer, the consumer rejects the offer, an arbitrator makes an award in favor of the consumer, and the award provides for relief that exceeds the amount of the settlement offer. The premise of this intervention is that it would shift the balance of costs and benefits for consumers with a claim, increasing the demand for arbitration. However, although the commenters pointed to examples of these types of policies in existing agreements, they did not identify evidence that consumers actually pursue individual arbitration more often in response to the presence of such clauses, nor is the Bureau aware of any.
As with the cost-reducing options discussed above, the Bureau notes that conditionally increasing the payout to consumers from individual arbitration will not make consumers aware that they have a claim if they were not otherwise aware. Moreover, and for similar reasons as in the discussion regarding statutory damages in Part VI (whether providing for minimum recovery or punitive damages), the Bureau disagrees that the additional incentives would be large enough to persuade large numbers of consumers to pursue claims that they are aware of and that today they decline to pursue. In order for these incentives in arbitration agreements to make an impact, consumers must both be aware that they have a claim and believe an otherwise small claim also presents a meaningful opportunity for additional recovery. As to the latter, the Bureau does not believe these contract awards meaningfully increase the expected value of claims at the time consumers decide whether to pursue them. First, consumers must evaluate the potential likelihood of an arbitrator finding in their favor. Second, they must condition their expected additional payout on the likelihood that the firm will provide a settlement offer before judgment. Third, they must evaluate the likelihood that the firm will provide a settlement offer lower than the payout that might in the future be awarded by the arbitrator. Thus, any supplemental payout is contingent on decisions made by the consumer, the firm, and the arbitrator, and the actual expected supplemental payout is the value of that supplemental payout times these three separate probabilities, since a specific contingent outcome must occur in each of the conditions. That expected award, as it is a factor of several values less than or equal to one, is likely to be very small and difficult to accurately estimate. Because the resulting expected payout will still be small, it is unlikely that a low probability of a supplemental payment will make an otherwise negative-value claim positive even for a risk-neutral consumer. This expected payout is also only considered by the subset of consumers who understand they have a pursuable claim. Thus, the Bureau does not believe that conditional contract awards would increase the demand for
The Bureau generally considered potential alternatives related to public enforcement in the proposal, but received comments only on one particular potential alternative.
These comments stated that this potential alternative would reduce firms' exposure to unmeritorious cases because unlike class action attorneys, public regulators bring more meritorious cases. These commenters also stated consumers would benefit more because public regulators achieve more meaningful relief for consumers than class action attorneys, and do not charge their attorney's fees to providers. Accordingly, in the commenters' view, as long as a public regulator is aware of an issue, there is no need for class actions.
The commenters further argued that this alternative would address the market failure this rule seeks to address (reduced incentive to comply with the law) because it would not allow arbitration agreements to eliminate exposure. Rather, it would only allow companies to eliminate class exposure if they were willing to create public enforcement exposure (by self-reporting) or already are subject to public enforcement exposure (by virtue of a regulatory review of their conduct). The commenters also asserted that the alternative would accomplish the Bureau's goals with a reduced burden because providers would be able to block class actions which assert non-meritorious claims that public enforcement was not willing to assert, as well as follow-on class actions that in the commenters' view are unnecessary when public enforcement has already resolved the problem.
The Bureau acknowledges that public enforcement can be more efficient than private actions at achieving redress for consumers, compared to private actions. However, as discussed in Part VI above, due to resource constraints and limits on legal authority there are a number of reasons that a regulator may not pursue an action, or may achieve less than full redress, in spite of the merits of the underlying claims. This may particularly occur for violations with relatively low aggregate harm, as a regulator should reasonably prioritize a case with harm to thousands of consumers over one with harm to hundreds, even if consumers in both groups suffer equal individual harm. In addition, regulators are only authorized to bring certain types of legal claims. As such, providing a broad safe harbor for conduct self-reported to or investigated by public regulators would undermine the goals of the rule by removing the deterrent effect of class actions for such claims that public regulators cannot bring or reasonably prioritize.
Even if this were not true, the Bureau believes that the safe harbor articulated by the commenters would be infeasible in practice. Below the Bureau describes the problems with implementing the potential alternative suggested by the commenters. The Bureau also considered a more limited version of a safe-harbor for self-reporting, described below, but concludes that this would not provide a substantial reduction in burden, and would also be inconsistent with the goals of the rule.
Considering the version of the potential alternative proposed by commenters, the essential problem is that the mechanism to trigger the safe harbor is unworkable. To begin with, allowing a safe harbor to be raised in private litigation for conduct that is the subject of a regulatory investigation is incompatible with the procedures of such investigations.
Given the difficulties with a broad exemption for conduct self-reported to regulators, the Bureau also considered a more limited potential alternative. Specifically, the Bureau considered a safe-harbor for conduct violating a Federal consumer financial law (FCFL) enforced by the Bureau against the reporting person, which is reported to the Bureau. This potential alternative would avoid the issues discussed above that make the version proposed by commenters infeasible. Confidential investigations would not be implicated, and the Bureau would have legal authority to pursue an enforcement action if warranted. However, the Bureau's practical ability to pursue enforcement actions would still be subject to resource and prioritization constraints. Moreover, in light of the
Specifically, the Bureau believes that a safe harbor for conduct reported to it might decrease but would not minimize the burden of the rule on providers. While under the potential alternative making a self-report would shield a firm from class-action liability for FCFLs, it would not shield the firm from class-action liability under other claims. As the Study noted, more than 63 percent of Federal court class actions in selected markets asserted State law claims.
As a result, rather than reducing the burden to providers from frivolous lawsuits, the potential safe-harbor would instead compromise the deterrent effect of the rule. The Bureau believes this would primarily occur for law violations with relatively low aggregate harm. The Bureau's enforcement resources are limited, and the Bureau may not be able to bring enforcement actions in cases with low aggregate harm, even if an action would be justified in a world with unlimited resources. The proposed safe-harbor would thus block class actions with limited countervailing risk of public enforcement, lowering deterrence. In contrast, for violations with large aggregate harm, a self-report would also increase the likelihood of public enforcement by the Bureau, perhaps substantially. As a result, the Bureau believes that firms would only make an additional self-report if the avoided risk of class action liability outweighed the increased risk of Bureau action. Given these competing risks, the Bureau does not believe most providers would see sufficient benefit from the alternative to outweigh the costs of exercising it for serious violations of the law, save for cases where the provider would self-report anyway.
To summarize, after further consideration and for the reasons outlined above, the Bureau does not believe that a self-reporting exemption, including the one suggested by commenters, would be workable or promote the goals of this rulemaking. And while the Bureau has considered a narrower alternative that might be more workable as a practical matter, that alternative does not appear likely to reduce burden without compromising the ability of the rule to provide deterrence for certain violations, and thus also seems unlikely to accomplish the Bureau's goals.
The Regulatory Flexibility Act (RFA) generally requires an agency to conduct an Initial Regulatory Flexibility Analysis (IRFA) and a Final Regulatory Flexibility Analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements.
In the proposal, the Bureau did not certify that the proposal would not have a significant economic impact on a substantial number of small entities within the meaning of the RFA. Accordingly, the Bureau convened and chaired a Small Business Review Panel under SBREFA to consider the impact of the proposal on small entities that would be subject to the rule and to obtain feedback from representatives of such small entities. The Small Business Review Panel for the proposal is discussed in the SBREFA Report. The proposal also contained an IRFA pursuant to section 603 of the RFA, which among other things estimated the number of small entities that would be subject to the proposal. In this IRFA, the Bureau described the impact of the
Similar to its approach in the proposal, the Bureau is not certifying that the final rule will not have a significant economic impact on a substantial number of small entities. Instead, the Bureau has completed a FRFA as detailed below. However, the Bureau continues to believe that the arguments and calculations outlined both in the Section 1022(b)(2) Analysis and the FRFA below, as well as the comments received on the IRFA, strongly suggest that the final rule will not have a significant economic impact on a substantial number of small entities in any of the covered markets.
As the Bureau outlined in the SBREFA Report and discussed above, the Bureau considered a rulemaking because it was concerned that by blocking class actions, arbitration agreements reduce deterrent effects and compliance incentives in connection with the underlying laws. The Bureau was also concerned that consumers do not have sufficient opportunity to obtain remedies when they are legally harmed by providers of consumer financial products and services, because arbitration agreements effectively block consumers from participating in class proceedings. Finally, the Bureau was concerned about the potential for systemic harm if arbitration agreements were to be administered in biased or unfair ways. Accordingly, the Bureau considered proposals that would: (1) Prohibit the application of certain arbitration agreements regarding consumer financial products or services as to class litigation; and (2) require submission of arbitral claims, awards, and two other categories of documents to the Bureau. The rulemaking is pursuant to the Bureau's authority under sections 1022(b) and (c) and 1028 of the Dodd-Frank Act. The latter section directs the Bureau to study pre-dispute arbitration agreements in connection with the offering or providing of consumer financial products or services and authorizes the Bureau to regulate their use if the Bureau finds that certain conditions are met.
In accordance with section 603(a) of the RFA, the Bureau prepared an IRFA. In the IRFA, the Bureau estimated the possible compliance costs for small entities with respect to each major component of the rule against a pre-statute baseline. The Bureau requested comment on the IRFA.
Very few commenters specifically addressed the IRFA. A number of commenters suggested potential alternatives, some but not all of which were intended to reduce the burden of the rule on small entities. The Bureau discusses comments relating to a small entity exemption below, in section 6 of this FRFA. The Bureau discusses comments relating to other potential alternatives in Part VIII, above. As noted in those sections, the Bureau has decided not to adopt any of the potential alternatives suggested by commenters, as the Bureau believes that these potential alternatives will not substantially reduce burden to providers without compromising the objectives of the rule.
Several insurance industry commenters and their trade associations and an association of State insurance regulators expressed concern regarding whether, in the IRFA, the Bureau had even considered potential effects of the proposal on life insurers that may offer other consumer financial products or services. As is explained above in the section-by-section analysis of § 1040.3(a)(1), although an insurance company could be covered by the rule to the extent that it offers consumer financial products that are not part of the business of insurance, the Bureau believes it is unlikely that there are many, or even any, such firms.
In the FRFA, the Bureau has taken into account feedback received in interagency communications with the SBA.
As noted in the SBREFA Report, the Panel identified 22 categories of small entities that may be subject to the proposal. These were later narrowed (see discussion and table below with estimates of the number of entities in each market). The NAICS industry and SBA small entity thresholds for these 22 categories are the following:
For purposes of assessing the impacts of the proposals under consideration on small entities, “small entities” are defined in the RFA to include small businesses, small nonprofit organizations, and small government jurisdictions that would be subject to the proposals under consideration. A “small business” is defined by the SBA Office of Size Standards for all industries through the NAICS.
To arrive at the number of entities affected, the Bureau began by creating a list of markets that will be covered. The Bureau assigned at least one, but often several, NAICS codes to each market. For example, while payday and other installment loans are provided by storefront payday stores (NAICS 522390), they are also provided by other small businesses, such as credit unions (NAICS 522120). The Bureau estimated the number of small firms in each market-NAICS combination (for example, storefront payday lenders in NAICS 522390 would be such a market-NAICS combination), and then the Bureau added together all the markets within a NAICS code if there is more than one market within a NAICS code, accounting for the potential overlaps between the markets (for example, probably all banks that provide payday-like loans also provide checking accounts, and the Bureau does not double-count them, to the extent possible given the data).
The Bureau first attempted to estimate the number of firms in each market-NAICS combination by using administrative data (for example, Call Reports that credit unions have to file with the NCUA). When administrative data was not available, the Bureau attempted to estimate the numbers using public sources, including the Bureau's previous rulemakings and impact analyses. When neither administrative nor other public data was available, the Bureau used the Census's NAICS numbers. The Bureau estimated the number of small businesses according to the SBA's size standards for NAICS codes (when such data was available).
NAICS numbers were taken from the 2012 Economic Census, the most recent version available from the Census Bureau. The data provided employment, average size, and an estimate of the number of firms for each industry, which are disaggregated by a six-digit ID. Other industry counts were taken from a variety of sources, including other Bureau rulemakings, internal Bureau data, public data and statistics, including published reports and trade association materials, and in some cases from aggregation Web sites. For a select number of industries, usually NAICS codes that encompass both covered and not covered markets, the Bureau estimated the covered market in this NAICS code using data from Web sites that aggregate information from multiple online sources. The reason the Bureau relied on this estimate instead of the NAICS estimate is that NAICS estimates are sometimes too broad. For example, the NAICS code associated with virtual wallets includes dozens of other small industries, and would overestimate the actual number of firms affected by an order of magnitude or more.
Although the Bureau attempted to account for overlaps wherever possible, a firm could be counted several times if it participates in different industries and was counted separately in each data source. While this analysis removes firms that were counted twice using the NAICS numbers, some double counting may remain due to overlap in non-NAICS estimates. For the NAICS codes that encompass several markets, the Bureau summed the numbers for each of the market-NAICS combinations to produce the table of affected firms.
In addition to estimating the number of providers in the affected markets, the Bureau also estimated the prevalence of arbitration agreements in these markets. The Bureau first attempted to estimate the prevalence of arbitration agreements in each market using public sources. However, this attempt was unsuccessful.
The table below sets forth affected markets (and the associated NAICS codes) in which it appears reasonably likely that more than a few small entities use arbitration agreements. Some affected markets (and associated NAICS codes) are not listed because the number of small entities in the market using arbitration agreements is likely to be insignificant. For example, the Bureau did not list convenience stores (NAICS 445120). While consumers can cash a check at some grocery or convenience stores, the Bureau does not believe that consumers generally sign contracts that contain arbitration agreements with grocery or convenience stores when cashing checks; indeed, this is even less likely for check guarantee (NAICS 522390) and collection (NAICS 561440). For the same reason, currency exchange providers (NAICS 523130) are not listed on the table. The Bureau also did not list department stores (NAICS 4521) because the Bureau does not believe small department stores are typically involved in issuing their own credit cards, rather than partnering with an issuing bank that issues cards in the name of the department store.
Other notable exceptions were Other Depository Credit Intermediation (NAICS 522190) and Attorneys who Collect Debt (NAICS 541110). The Bureau believes that for these codes virtually all providers that are engaged in these activities are already reporting under other NAICS codes (for example, Commercial Banking, NAICS 52211, or collection agencies, NAICS 561440).
In addition, the final rule will apply to mortgage referral providers for whom referrals are their primary business. For example, the Bureau estimates that there are 7,007 entities classified as mortgage and nonmortgage brokers (NAICS 522310), 6,657 of which are small.
Merchants are not listed in the table because merchants generally will not be covered by the final rule, except in limited circumstances. For example, the Bureau believes that most types of financing consumers use to buy nonfinancial goods or services from merchants is provided by third parties other than the merchant or, if the merchant grants a right of deferred payment, this is typically done without charge and for a relatively short period of time. For example, a provider of monthly services may bill in arrears, allowing the consumer to pay 30 days after services are rendered each month. Thus the Bureau believes that merchants rarely offer their own financing with a finance charge, or in an amount that significantly exceeds the market value of the goods or services sold.
Similarly, the Bureau does not list Utility Providers (NAICS 221) because when these providers allow consumers to defer payment for these providers' services without imposing a finance charge, this type of credit is not subject to the final rule. In some cases, utility providers may engage in billing the consumer for charges imposed by a third-party supplier hired by the consumer. However, government utilities that are immune from suit as an arm of the State will be exempt and, with respect to private utility providers providing these services, the Bureau believes that these private utility providers' agreements with consumers, including their dispute resolution mechanisms, are generally regulated at a State or local level. The Bureau is not aware that those dispute resolution mechanisms provide for mandatory arbitration.
Further, the final rule will apply to extensions of credit by providers of whole life insurance policies (NAICS 524113) to the extent that these companies are ECOA creditors and that activity is not the “business of insurance” under the Dodd-Frank section 1002(15)(C)(i) and 1002(3) and arbitration agreements are used for such policy loans. However, it is unlikely that a significant number of such providers will be affected because a number of State laws restrict the use of arbitration agreements in insurance products and, in any event, it is possible that the loan feature of the whole life policy could be part of the “business of insurance” depending on the facts and applicable law.
The Bureau also does not believe that a significant number of new car dealers offer or provide consumer financial products or services that render these dealers subject to the Bureau's regulatory jurisdiction. As a result, New Car Dealers (NAICS 44111) and Passenger Car Leasing Companies (NAICS 532112) are not included in the table below; rather, the table covers dealer portfolio leasing and lending with the Used Car Dealer Category (NAICS 441120) and indirect automobile lenders with the Sales Financing category (NAICS 522220).
This analysis does not account for various types of entities that are indirectly affected (and thus would likely not need to change their
Small government entities at the State and local level, in theory, also could be affected to the extent they use arbitration agreements and are not an arm of the State. The Bureau does not have data indicating such use of arbitration agreements by such small government entities is widespread, however, and the Bureau did not receive any comments from these governmental providers, even though the proposal did not call for their complete exemption.
Similarly, the Bureau is unaware of the number of software developers (NAICS codes 511210 and 541511) that provide covered consumer financial products or services with arbitration agreements directly to consumers (such as payment processing products) that do not report in the NAICS codes listed either above or in the table below. The Bureau believes that the number of such software developers is low. The Bureau requested comment on this issue, and no commenters disputed this assertion.
Some merchants extending consumer credit with no finance charge may use third parties to service these transactions, as an industry trade association noted in its comment. Whether affiliated with the merchant or not, those persons may be covered by § 1040.3(a)(1)(v). When the merchant uses a pre-dispute arbitration agreement, there is a possibility that agreement could apply to third parties such as a servicer, depending on the facts and applicable law. The commenter did not provide data on how often such credit is extended, how often the merchants extending such credit use third parties to service it, how often the merchants use pre-dispute arbitration agreements, or how often the servicers may be covered by such agreements. The Bureau is not in a position to estimate how many third-party merchant servicers may be included in this coverage and as such does not include them in the table below.
Finally, the final rule expanded the scope from the proposal to include providers of credit repair services even when these services were unrelated to debt settlement (which was covered by the proposal). However, the Bureau believes that these credit repair providers were already counted in the table below under NAICS code 541990, and no update to the table is needed in that respect.
As discussed above in the Section 1022(b)(2) Analysis, the providers that use arbitration agreements will have to change their contracts to state that the arbitration agreements cannot be used to block class litigation. The Bureau believes that, given that the Bureau is specifying the language that must be used, this can be accomplished in minimal time by compliance personnel, who do not have to possess any specialized skills, and in particular who do not require a law degree.
Additionally, as discussed above, debt buyers and other consumer financial services providers who become parties to existing contracts with pre-dispute arbitration agreements that do not contain the required language would be
The final rule also includes a reporting requirement when covered entities exercise their arbitration agreements in individual lawsuits and in several other circumstances. Given the small number of individual arbitrations identified in the markets covered by the Study, the Bureau believes that there would be at most a few hundred small covered entities affected by this requirement each year, and most likely considerably fewer since most defendants that participated in arbitrations analyzed by the Study were frequent repeat players.
The Bureau requested comment on whether there are any additional costs or skills required to comply with reporting, recordkeeping, and other compliance requirements of the proposal that the Bureau had not mentioned in the IRFA. Although a number of commenters discussed the reporting, recordkeeping, and other compliance requirements of the proposal, as discussed in the Bureau's Section 1022(b)(2) Analysis above and the Bureau's PRA analysis below, none stated that there were additional costs or skills required beyond those described above. As noted in its Section 1022(b)(2) Analysis above, the Bureau believes that the vast majority of the final rule's impact is due to additional exposure to class litigation and to any voluntary investment (spending) in reducing that exposure that providers might undertake, including foregone profit from products or services that might lead to class action exposure. The Bureau believes that neither of these categories is a reporting, recordkeeping, or other compliance requirement; however, the Bureau discusses them below.
The costs and types of additional investment to reduce additional exposure to class litigation and the components of the cost of additional class litigation itself are described above in the Section 1022(b)(2) Analysis. As noted above, it is difficult to quantify how much all covered providers, including small entities, would invest in additional compliance.
With respect to additional class litigation exposure, using the same calculation as in the Section 1022(b)(2) Analysis, limited to providers below the SBA threshold for their markets,
While the expected cost per provider that the Bureau can monetize is about $200 per year from Federal class cases, these costs would not be evenly distributed across small providers. In particular, the estimates above suggest that about 25 providers per year would be involved in an additional Federal class settlement at a considerably higher expense than $200 per year, as noted in the Section 1022(b)(2) Analysis above. In addition, the additional Federal cases filed as class litigation that will end up not settling on class basis (121 per year according to the estimates above) are also likely to result in a considerably higher expense than $200. However, the vast majority of the 51,000 providers will not experience any of these effects.
As discussed above, these entities will also face increased exposure to State class litigation. While the Study's Section 6 reported similar numbers for State and Federal cases, it is likely that the State to Federal class litigation ratio is higher for small covered entities to the extent that they are more likely to serve consumers only in one State. However, as discussed above, the Bureau believes that State class litigation is also likely to generate lower costs than Federal litigation. The Bureau believes that these calculations strongly suggest that the final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the RFA.
The Bureau notes that the estimates are higher for small debt collectors than for other categories: Small debt collectors account for 22 of the 25 Federal settlements estimated above for small providers overall, and $5 million (out of $8 million for small providers) in costs combined. With about 4,400 debt collectors below the SBA thresholds, the estimates suggest a roughly 2 percent chance per year of being subject to an additional putative Federal class litigation, a lower than 1 percent chance of that resulting in a Federal class settlement, and an expected cost of about $1,100 per year from these additional settlements. The same State class litigation assumptions outlined above apply to smaller debt collectors.
As evident from the data and from feedback received during the SBREFA process, providers that are debt collectors might be the most affected relative to providers in other markets, despite the fact that debt collectors do not enter into arbitration agreements directly and already frequently collect on debt without an arbitration agreement in the original contract. However, for the reasons described above, the Bureau believes it is unlikely that class settlement amounts will in fact drive companies out of business. Indeed, as discussed above, debt collectors already face class litigation exposure in connection with a significant proportion of debt they collect. Much of that debt comes from creditors that do not have arbitration agreements, and even where the credit contract includes an arbitration agreement, collectors are not always
The Bureau described several potential alternatives above in the Section 1022(b)(2) Analysis. For the reasons discussed above, the Bureau believes that none of these are significant alternatives insofar as they would not accomplish the goal of the proposed rulemaking with substantially less regulatory burden. The Bureau discussed these alternatives both for SBA small providers and for larger providers as well. In addition to the general alternatives discussed above, the Bureau further considered an exemption for small entities, which the Bureau discusses here. In the proposal, the Bureau requested comment on whether to exempt smaller entities from the rule, including comment on how to structure any such exemption, and received a number of comments both for and against such an exemption.
A small business advocacy organization stated that the Bureau should exclude all small businesses from the class rule because, in its view, data concerning defense costs outlined in the SBREFA Report
Two credit union and community bank industry commenters also urged an exemption from the class rule for depository institutions with $10 billion or less in assets. In their view, the duty to consider the impact on these institutions under Dodd-Frank section 1022(b)(2)(A)(ii) feeds into the criteria for considering total assets of an institution for purposes of an exemption under Dodd-Frank section 1022(b)(3). These commenters stated that, in their view, institutions of this size are less likely to harm customers because of their relationship-based business model, and added that they are not subject to Bureau supervision or enforcement under Dodd-Frank. They further stated that institutions of this size have little choice but to settle class actions filed against them, because they cannot afford high attorney's fees and fear the imposition of crippling statutory damages on a classwide basis. Credit union industry commenters also emphasized that because credit unions are member owned, such costs also are passed on them not only as customers, but also in their capacity as owners. One credit union industry commenter also stated that exposure to class actions can lead smaller depository institutions to curtail product and service offerings. Finally, one community banking industry commenter stated that an exemption for smaller depository institutions should be adopted, since these are the institutions that are supervised and have ongoing customer relationships with incentives to treat customers fairly and, unlike certain nonbank markets such as payday lending, these institutions are not saturated already with arbitration agreements.
A consumer advocate urged against a small entity exemption because, in its view, an exemption would encourage businesses to structure their operations to avoid coverage under the class rule.
Considering the comments received and its own analysis and experience, the Bureau concludes that an exemption to the class rule for small entities would not reduce burden by any significant degree for most of the over 50,000 small entities covered by the rule because their burden is already relatively low given their low exposure to class actions. The Bureau is also concerned that such an exemption would potentially create significant unintended market distortions. Of course, any exemption to the class rule would reduce burden by allowing the exempted providers to shield themselves from class action liability. However, the Bureau has found that the rule is for the benefit of consumers and is in the public interest even after factoring in the costs that would be associated with the rule (see Part VI). In light of these findings, and the nature of the costs and benefits of the class rule, the Bureau evaluated a potential exemption to the class rule for small entities by considering whether such entities will be disproportionately burdened by the rule, compared to large entities.
The Bureau believes that the burden to small entities from the rule will be smaller relative to their size than the burden to larger providers. First, the Bureau estimated in the proposal that the vast majority of new class actions against small entities filed per year due to the class rule would be filed against small debt collectors.
At the same time, in the proposal the Bureau estimated just three additional Federal class action settlements per year against small entities that are not debt collectors. Assuming the same number of State class action settlements, and four times more class actions that do not settle on a class basis, this would mean 30 cases filed against the roughly 45,000 small entities that are not debt collectors. By comparison, the Bureau estimated that there would be 22 additional Federal class action settlements against small debt
Based on the Bureau's estimate of 30 additional Federal and State class action cases against roughly 45,000 small non-debt collectors, all else being equal (and the Bureau does not assume that is the case), there is only a 1-in-1,500 chance that any given firm would face an additional class action lawsuit each year. This is substantially lower than the risk for large firms that are not debt collectors. The Bureau estimates that there are 1,740 firms affected by the rule that are not small and that are not debt collectors, and that there would be roughly 560 additional putative Federal and State class actions lawsuits filed against these firms in a typical year, or a roughly 1-in-3 annual risk of an additional putative class action lawsuit.
The Bureau acknowledges that, as some commenters and SBREFA participants asserted, it may be that the occurrence of a class action lawsuit harms small entities more than large ones. Although damage claims and payments to consumers are presumably a direct function of a firm's size in most cases, those few small entities that do face a lawsuit could feel a greater impact than any given large business that faces such a suit given that there are likely fixed costs to defending a class action lawsuit (
Considering the facts available to it, the Bureau does not believe the differences in burden justify an exemption for small entities. In addition, the Bureau has other concerns regarding the small entity exemption suggested by commenters.
First, the risk of a class action lawsuit, while relatively low for small entities, will nonetheless provide a measure of deterrence. In particular, small entities with poor compliance practices are more likely to be the target of a class action, but might continue their poor practices or reduce compliance further if shielded from class action liability. Moreover, as discussed above in Parts VI and VIII, due to resource constraints, regulators will tend to prioritize public enforcement actions against violations of the law with larger aggregate harms. To the extent that this entails targeting larger entities, this potentially leaves class actions as the only feasible means of redress for customers of small entities that violate the law. At the same time, the Bureau believes that consumers have no effective means of avoiding the increased risk of harm that a small entity exemption would create when dealing with small providers. The size of particular institutions and their affiliates is not generally a matter of public record let alone known to individual consumers and the Study showed consumers already do not take arbitration agreements into account when selecting providers. Thus, consumers would have little means to avoid the greater risks they may be exposed to by small providers who are not covered by the rule.
Second, the Bureau also is concerned with the potential for market distortions or unfair or potentially arbitrary distinctions that a small entity exemption could create for market participants. The Bureau does not agree with the community bank industry commenter that suggested it would be appropriate to exempt smaller depository institutions even if the Bureau does not exempt providers of the same products who are nonbanks. Such differential exposure to legal risk based on the same conduct could create market distortions of the sort that the Bureau is charged with minimizing.
Third, even if all types of market participants were eligible for a small exemption, any such exemption still would be problematic. The Bureau believes that fashioning an appropriate threshold for a small-entity exemption would impose substantial complexity, particularly around how such a threshold would address the various markets covered by the final rule. As noted, other than a request for a threshold specific to depository institutions, the Bureau received no comments on how to adopt a broad threshold that could apply to providers that provide multiple different types of products and services only some of which are covered by the rule and with a variety of corporate structures. Furthermore, the Bureau is concerned that any threshold would be difficult to apply to small entities that are service providers to larger entities. In addition, complex legal questions would arise in situations in which a provider crossed over or dropped under the threshold after the rule takes effect.
Finally, with regard to the member-ownership structure of credit unions, the Bureau does not believe that issue pertains to the size of the credit union. Therefore, the concern expressed by commenters that credit unions already have sufficient incentives for compliance does not seem relevant to the specific issue of a potential small entity exemption.
Although SERs expressed concern that the proposal could affect costs that they bear when they seek out business credit to facilitate their operations, the Bureau believes based on its estimates derived from current litigation levels as discussed above that the vast majority of small providers' cost of credit will not be impacted by the final rule. The Bureau did not receive any comments on this subject in response to the proposal. Although the Bureau estimates a higher likelihood that a smaller debt collector would be subject to incremental class litigation at any given time, most of these entities are already subject to class litigation due to the fact that they may or may not be able to rely on an arbitration agreement from their clients. As such, the Bureau believes it is unlikely that these firms will experience an adverse impact on their cost of credit. In any event, the Study indicated that the majority of cases filed as class actions are resolved within a few months, such that any adverse impact is likely to be only temporary.
As noted in the SBREFA Report, SERs expressed concerns about how the
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501
This final rule contains information collection requirements that have not yet been approved by the OMB and, therefore, are not effective until OMB approval is obtained. The unapproved information collection requirements are listed below. A complete description of the information collection requirements, including the burden estimate methods, is provided in the information collection request (ICR) that the Bureau has submitted to OMB under the requirements of the PRA.
The Bureau believes that this final rule will impose the following two new information collection requirements (recordkeeping, reporting, or disclosure requirements) on covered entities or members of the public that would constitute collections of information requiring OMB approval under the PRA. Both information collections would apply to agreements entered into after the compliance date of the rule.
The first information collection requirement relates to disclosure requirements. The final rule will require providers that enter into arbitration agreements with consumers to ensure that these arbitration agreements contain a specified provision, with two limited exceptions as described below.
The final rule contains two exceptions to this first information collection requirement. Under the first exception, if a provider enters into an arbitration agreement that existed previously (and was entered into by another person after the compliance date),
The second information collection requirement relates to reporting requirements. The provision will require providers to submit specified arbitral and court records to the Bureau relating to any arbitration agreement entered into after the compliance date.
The Bureau received no comments specifically addressing the PRA notice, although some industry commenters made general comments regarding the expected burden of the proposal, including burdens accounted for in the PRA. As explained in detail in the Supporting Statement filed with this rule and available at
Pursuant to 44 U.S.C. 3507, the Bureau will publish a separate notice in the
The Bureau has a continuing interest in the public's opinion of its collections of information. At any time, comments regarding the burden estimate, or any other aspect of the information collection, including suggestions for reducing the burden, may be sent to the Consumer Financial Protection Bureau (Attention: PRA Office), 1700 G Street NW., Washington, DC 20552, or by email to
Banks, Banking, Business and industry, Claims, Consumer protection, Contracts, Credit, Credit unions, Finance, National banks, Reporting and recordkeeping requirements, Savings associations.
12 U.S.C. 5512(b) and (c) and 5518(b).
(a)
(b)
(a)
(b)
(c)
(d)
(1) A person as defined by 12 U.S.C. 5481(19) that engages in an activity covered by § 1040.3(a) to the extent that the person is not excluded under § 1040.3(b); or
(2) An affiliate of a provider as defined in paragraph (d)(1) of this section when that affiliate is acting as a service provider to the provider with which the service provider is affiliated consistent with 12 U.S.C. 5481(6)(B).
(a)
(1)(i) Providing an “extension of credit” that is “consumer credit” when performed by a “creditor” as those terms are defined in Regulation B, 12 CFR 1002.2;
(ii) “Participat[ing] in [ ] credit decision[s]” within the meaning of 12 CFR 1002.2(l) when performed by a “creditor” with regard to “consumer credit” as those terms are defined in 12 CFR 1002.2;
(iii)(A) Referring applicants or prospective applicants for “consumer credit” to creditors when performed by a “creditor” as those terms are defined in 12 CFR 1002.2; or
(B) Selecting or offering to select creditors to whom requests for “consumer credit” may be made when done by a “creditor” as those terms are defined in 12 CFR 1002.2;
(C) Except that this paragraph (a)(1)(iii) does not apply when the referral or selection activity by the creditor described in paragraphs (a)(1)(iii)(A) or (B) of this section is incidental to a business activity of that creditor that is not covered by this section;
(iv) Acquiring, purchasing, or selling an extension of consumer credit covered by paragraph (a)(1)(i) of this section; or
(v) Servicing an extension of consumer credit covered by paragraph (a)(1)(i) of this section;
(2) Extending automobile leases as defined by 12 CFR 1090.108 or brokering such leases;
(3)(i) Providing services to assist with debt management or debt settlement, modify the terms of any extension of consumer credit covered by paragraph (a)(1)(i) of this section, or avoid foreclosure;
(ii) Providing products or services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating;
(4) Providing directly to a consumer a consumer report, as defined by the Fair Credit Reporting Act, 15 U.S.C. 1681a(d), a credit score, as defined by 15 U.S.C. 1681g(f)(2)(A), or other information specific to a consumer derived from a consumer file, as defined by 15 U.S.C. 1681a(g), in each case except for a consumer report provided solely in connection with an adverse action as defined in 15 U.S.C. 1681a(k) with respect to a product or service that is not covered by this section;
(5) Providing accounts subject to the Truth in Savings Act, 12 U.S.C. 4301
(6) Providing accounts or remittance transfers subject to the Electronic Fund Transfer Act, 15 U.S.C. 1693
(7) Transmitting or exchanging funds as defined by 12 U.S.C. 5481(29) except when necessary to another product or service if that product or service:
(i) Is offered or provided by the person transmitting or exchanging funds; and
(ii) Is not covered by this section;
(8) Accepting financial or banking data or providing a product or service to accept such data directly from a consumer for the purpose of initiating a payment by a consumer via any payment instrument as defined by 12 U.S.C. 5481(18) or initiating a credit card or charge card transaction for the consumer, except by a person selling or marketing a good or service that is not
(9) Providing check cashing, check collection, or check guaranty services; or
(10) Collecting debt arising from any of the consumer financial products or services described in paragraphs (a)(1) through (9) of this section when performed by:
(i) A person offering or providing the product or service giving rise to the debt being collected, an affiliate of such person, or a person acting on behalf of such person or affiliate;
(ii) A person purchasing or acquiring an extension of consumer credit covered by paragraph (a)(1)(i) of this section, an affiliate of such person, or a person acting on behalf of such person or affiliate; or
(iii) A debt collector as defined by 15 U.S.C. 1692a(6).
(b)
(1)(i) A person regulated by the Securities and Exchange Commission as defined by 12 U.S.C. 5481(21); or
(ii) A person to the extent regulated by a State securities commission as described in 12 U.S.C. 5517(h) as either:
(A) A broker dealer; or
(B) An investment adviser; or
(iii) A person regulated by the Commodity Futures Trading Commission as defined by 12 U.S.C. 5481(20) or a person with respect to any account, contract, agreement, or transaction to the extent subject to the jurisdiction of the Commodity Futures Trading Commission under the Commodity Exchange Act, 7 U.S.C. 1
(2)(i) A Federal agency as defined in 28 U.S.C. 2671;
(ii) Any State, Tribe, or other person to the extent such person qualifies as an “arm” of a State or Tribe under Federal sovereign immunity law and the person's immunities have not been abrogated by the U.S. Congress;
(3) Any person with respect to a product or service described in paragraph (a) of this section that the person and any of its affiliates collectively provide to no more than 25 consumers in the current calendar year and to no more than 25 consumers in the preceding calendar year;
(4) A merchant, retailer, or other seller of nonfinancial goods or services to the extent such person:
(i) Offers or provides an extension of consumer credit covered by paragraph (a)(1)(i) of this section that is of the type described in 12 U.S.C. 5517(a)(2)(A)(i); and
(A) Is not subject to the Bureau's rulemaking authority under 12 U.S.C. 5517(a)(2)(B); or
(B) Is subject to the Bureau's rulemaking authority only under 12 U.S.C. 5517(a)(2)(B)(i) but not 12 U.S.C. 5517(a)(2)(B)(ii) or (iii); or
(ii) Purchases or acquires an extension of consumer credit excluded by paragraph (b)(4)(i) of this section.
(5) Any “employer” as defined in the Fair Labor Standards Act, 29 U.S.C. 203(d), to the extent it is offering or providing a product or service described in paragraph (a) of this section to its employee as an employee benefit; or
(6) A person to the extent providing a product or service in circumstances where they are excluded from the Bureau's rulemaking authority including pursuant to 12 U.S.C. 5517 or 5519.
(a)
(2)
(i) Except as provided elsewhere in this paragraph (a)(2) or in § 1040.5(b), a provider shall ensure that any such pre-dispute arbitration agreement contains the following provision: “We agree that neither we nor anyone else will rely on this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.”
(ii) When the pre-dispute arbitration agreement applies to multiple products or services, only some of which are covered by § 1040.3, the provider may include the following alternative provision in place of the one required by paragraph (a)(2)(i) of this section: “We are providing you with more than one product or service, only some of which are covered by the Arbitration Agreements Rule issued by the Consumer Financial Protection Bureau. The following provision applies only to class action claims concerning the products or services covered by that Rule: We agree that neither we nor anyone else will rely on this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.”
(iii) When the pre-dispute arbitration agreement existed previously between other parties and does not contain either the provision required by paragraph (a)(2)(i) of this section or the alternative permitted by paragraph (a)(2)(ii) of this section:
(A) The provider shall either ensure the pre-dispute arbitration agreement is amended to contain the provision specified in paragraph (a)(2)(i) or (a)(2)(ii) of this section or provide any consumer to whom the agreement applies with the following written notice: “We agree not to rely on any pre-dispute arbitration agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.” When the pre-dispute arbitration agreement applies to multiple products or services, only some of which are covered by § 1040.3, the provider may, in this written notice, include the following optional additional language: “This notice applies only to class action claims concerning the products or services covered by the Arbitration Agreements Rule issued by the Consumer Financial Protection Bureau.”
(B) The provider shall ensure the pre-dispute arbitration agreement is amended or provide the notice to consumers within 60 days of entering into the pre-dispute arbitration agreement.
(iv) A provider may add any one or more of the following sentences at the end of the disclosures required by paragraphs (a)(2)(i) and (ii) of this section:
(A)(
(
(B) “This provision does not apply to persons that are excluded from the Consumer Financial Protection Bureau's Arbitration Agreements Rule.”
(C) “This provision also applies to the delegation provision.” A provider using
(v) In any provision or notice required by this paragraph (a)(2), if the provider uses a standard term in the rest of the agreement to describe the provider or the consumer, the provider may use that term instead of the term “we” or “you.”
(vi) In any provision or notice required by this paragraph (a)(2), if a person has a genuine belief that sovereign immunity from suit under applicable law may apply to any person that may seek to assert the pre-dispute arbitration agreement, then the provision or notice may include, after the sentence reading “You may file a class action in court or you may be a member of a class action filed by someone else,” the following language: “However, the defendants in the class action may claim they cannot be sued due to their sovereign immunity. This provision does not create or waive any such immunity.” In the preceding sentence, the word “notice” may be substituted for the word “provision” when the included language is in a notice.
(vii) A provider may provide any provision or notice required by this paragraph (a)(2) in a language other than English if the pre-dispute arbitration agreement also is written in that other language.
(b)
(1)
(i) In connection with any claim filed in arbitration by or against the provider concerning any of the consumer financial products or services covered by § 1040.3:
(A) The initial claim and any counterclaim;
(B) The answer to any initial claim and/or counterclaim, if any;
(C) The pre-dispute arbitration agreement filed with the arbitrator or arbitration administrator;
(D) The judgment or award, if any, issued by the arbitrator or arbitration administrator; and
(E) If an arbitrator or arbitration administrator refuses to administer or dismisses a claim due to the provider's failure to pay required filing or administrative fees, any communication the provider receives from the arbitrator or an arbitration administrator related to such a refusal;
(ii) Any communication the provider receives from an arbitrator or an arbitration administrator related to a determination that a pre-dispute arbitration agreement for a consumer financial product or service covered by § 1040.3 does not comply with the administrator's fairness principles, rules, or similar requirements, if such a determination occurs; and
(iii) In connection with any case in court by or against the provider concerning any of the consumer financial products or services covered by § 1040.3:
(A) Any submission to a court that relies on a pre-dispute arbitration agreement in support of the provider's attempt to seek dismissal, deferral, or stay of any aspect of a case; and
(B) The pre-dispute arbitration agreement relied upon in the motion or filing.
(2)
(3)
(i) Names of individuals, except for the name of the provider or the arbitrator where either is an individual;
(ii) Addresses of individuals, excluding city, State, and zip code;
(iii) Email addresses of individuals;
(iv) Telephone numbers of individuals;
(v) Photographs of individuals;
(vi) Account numbers;
(vii) Social Security and tax identification numbers;
(viii) Driver's license and other government identification numbers; and
(ix) Passport numbers.
(4)
(5)
(6)
(a)
(b)
(1) For a provider that does not have the ability to contact the consumer in writing:
(i) The consumer acquires a general-purpose reloadable prepaid card in person at a retail store;
(ii) The pre-dispute arbitration agreement was inside of packaging material when the general-purpose reloadable prepaid card was acquired; and
(iii) The pre-dispute arbitration agreement was packaged prior to the compliance date of the rule.
(2) For a provider that has the ability to contact the consumer in writing:
(i) The requirements set forth in paragraphs (b)(1)(i) through (iii) of this section are satisfied; and
(ii) Within 30 days of obtaining the consumer's contact information, the provider notifies the consumer in writing that the pre-dispute arbitration agreement complies with the requirements of § 1040.4(a)(2) by providing an amended pre-dispute arbitration agreement to the consumer.
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i. While § 1040.2(c) defines “pre-dispute arbitration agreement” as an agreement between a covered person and a consumer, the rule's substantive requirements, which are contained in § 1040.4, apply only to “providers.” “Covered persons” as that term is defined in 12 U.S.C. 5481(6) include persons excluded from the Bureau's rulemaking authority under 12 U.S.C. 5517 and 5519. Therefore, the requirements contained in § 1040.4 would not apply to any such excluded persons entering into a pre-dispute arbitration agreement because they are not “providers,” by virtue of the definition in § 1040.2(d) which excludes persons described in § 1040.3(b) including its paragraph (b)(6) (under which any person is excluded under § 1040.3(b) to the extent it is not subject to the Bureau's rulemaking authority including under sections 1027 or 1029). The requirements in § 1040.4 could apply, however, to the use of any such pre-dispute arbitration agreement by a different person that meets the definition of provider in § 1040.2(d), when the pre-dispute arbitration agreement was entered into after the compliance date.
ii. For example, an automobile dealer that extends consumer credit is a covered person under 12 U.S.C. 5481(6). Its pre-dispute arbitration agreement would therefore fall within the scope of the definition in § 1040.2(c). However, an automobile dealer excluded from the Bureau's rulemaking authority in circumstances described by Dodd-Frank section 1029 would not be required to comply with the requirements in § 1040.4, because those requirements apply only to providers, and such dealers are excluded by § 1040.3(b)(6) and therefore are not providers under § 1040.2(d). The requirements in § 1040.4 would apply, however, to the use of the automobile dealer's pre-dispute arbitration agreement by a different person that meets the definition of provider, such as a servicer or purchaser or acquirer of the automobile loan, when the agreement was entered into after the compliance date.
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i. Examples of when a provider enters into a pre-dispute arbitration agreement for purposes of § 1040.4 include but are not limited to when the provider:
A. Provides to a consumer, after the date set forth in § 1040.5(a), a new product or service covered by § 1040.3(a) that is subject to a pre-existing agreement to arbitrate future disputes between the parties, and the provider is a party to that agreement, regardless of whether that agreement predates the date set forth in § 1040.5(a). When that agreement predates the date set forth in § 1040.5(a), § 1040.4 applies only with respect to any such new product or service;
B. Acquires or purchases after the date set forth in § 1040.5(a) a product or service covered by § 1040.3(a) that is subject to a pre-dispute arbitration agreement and becomes a party to that pre-dispute arbitration agreement, even if the seller is excluded from coverage under § 1040.3(b) or the pre-dispute arbitration agreement was entered into before the date set forth in § 1040.5(a); or
C. Adds a pre-dispute arbitration agreement after the date set forth in § 1040.5(a) to an existing product or service.
ii. Examples of when a provider does not enter into a pre-dispute arbitration agreement for purposes of § 1040.4 include but are not limited to when the provider:
A. Modifies, amends, or implements the terms of a product or service that is subject to a pre-dispute arbitration agreement without engaging in the conduct described in comment 4-1.i after the date set forth in § 1040.5(a). However, a provider does enter into a pre-dispute arbitration agreement for purposes of § 1040.4 when the modification, amendment, or implementation constitutes the provision of a new product or service. See comment 4-1.i(A).
B. Acquires or purchases a product or service that is subject to a pre-dispute arbitration agreement but does not become a party to the pre-dispute arbitration agreement that applies to the product or service.
2.
i. Pursuant to § 1040.4(a)(1), a provider that has not entered into a pre-dispute arbitration agreement cannot rely on any pre-dispute arbitration agreement entered into by another person after the compliance date specified in § 1040.5(a) with respect to any aspect of a class action concerning a consumer financial product or service covered by § 1040.3. In addition, pursuant to § 1040.4(b), the provider is required to submit certain specified records concerning claims filed in arbitration pursuant to such pre-dispute arbitration agreements. However, as discussed in comment 4(a)(2)-1, § 1040.4(a)(2) does not apply to providers that do not enter into pre-dispute arbitration agreements.
ii. For example, when a debt collector collecting on consumer credit covered by
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A. Seeking dismissal, deferral, or stay of any aspect of a class action;
B. Seeking to exclude a person or persons from a class in a class action;
C. Objecting to or seeking a protective order intended to avoid responding to discovery in a class action;
D. Filing a claim in arbitration against a consumer who has filed a claim on the same issue in a class action;
E. Filing a claim in arbitration against a consumer who has filed a claim on the same issue in a class action after the trial court has denied a motion to certify the class but before an appellate court has ruled on an interlocutory appeal of that motion, if the time to seek such an appeal has not elapsed or the appeal has not been resolved; and
F. Filing a claim in arbitration against a consumer who has filed a claim on the same issue in a class action after the trial court in that class action has granted a motion to dismiss the claim and, in doing so, the court noted that the consumer has leave to refile the claim on a class basis, if the time to refile the claim has not elapsed.
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i. The American Arbitration Association's Consumer Due Process Protocol; or
ii. JAMS Policy on Consumer Arbitrations Pursuant to Pre-Dispute Clauses Minimum Standards of Procedural Fairness.
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2. A submission does not rely on a pre-dispute arbitration agreement, for purposes of § 1040(b)(1)(iii), if it:
i. Objects to or seeks a protective order intended to avoid responding to discovery;
ii. Is only referred to in an answer to a complaint or a counterclaim; or
iii. Is only incidentally part of an attachment to a submission. For instance, if a motion attaches the entire consumer financial contract, including the pre-dispute arbitration agreement, but the motion does not cite or rely on the pre-dispute arbitration agreement, the provider is not required to submit the motion to the Bureau.
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Category | Regulatory Information | |
Collection | Federal Register | |
sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
Publisher | Office of the Federal Register, National Archives and Records Administration |