Compliance Considerations: Federal Reserve Board Seeks Comments on Reg. M Proposed Rule

Philip Bohi, VP Compliance Education

On January 3, 2018, the Federal Reserve Board (“Board”) issued for public comment a Proposed Rule affecting Consumer Leasing Regulation M (“Reg. M”).  But, you may observe, is it not true that responsibility for rulemaking under Reg. M was transferred to the Consumer Financial Protection Bureau (“CFPB”) as part of the Dodd Frank Act?  The not-so-helpful answer is yes, but also no.

Under Dodd Frank, the CFPB was given rulemaking authority for those companies subject to the CFPB’s oversight.  For companies over which the CFPB was not granted oversight, the Board has retained rulemaking authority.  This phenomenon explains why the Code of Federal Regulations has instances of Reg. M located at 12 CFR § 213.1 et seqand 1013.1 et seq.  The first is the regulation maintained by the Board while the second is maintained by the CFPB.  This simultaneous existence also affects other regulations, including Regulation. Z.

This proposed rule clarifies the particular scope and coverage of that particular Reg. M that is maintained by the Board.  This Reg. M applies to auto dealers who are exempted from CFPB oversight provided in the Dodd-Frank Act.  For this reason, this proposed rule has a relatively limited impact.

For auto leasing companies who work with auto dealers, the proposed rule is a sharp reminder that an auto dealer lessor may be governed by a separate set of rules than the one applicable to a non-dealer auto leasing company.  Over time, those rules may diverge further from one another, and each may be subject to different interpretations by the various regulatory agencies and courts who consider them.  For this reason, if your compliance efforts include consideration of Reg. M issues, be sure to pause to consider which Reg. M is in control--  the Board’s or the CFPB’s.