[Federal Register Volume 87, Number 127 (Tuesday, July 5, 2022)]
[Rules and Regulations]
[Pages 39733-39735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14230]



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 Rules and Regulations
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  Federal Register / Vol. 87, No. 127 / Tuesday, July 5, 2022 / Rules 
and Regulations  

[[Page 39733]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1006


Debt Collection Practices (Regulation F); Pay-to-Pay Fees

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Advisory opinion.

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SUMMARY: Section 808(1) of the Fair Debt Collection Practices Act 
(FDCPA or Act) prohibits debt collectors from collecting any amount 
(including any interest, fee, charge, or expense incidental to the 
principal obligation) unless that amount is expressly authorized by the 
agreement creating the debt or permitted by law. The Consumer Financial 
Protection Bureau (CFPB) issues this advisory opinion to affirm that 
this provision prohibits debt collectors from collecting pay-to-pay or 
``convenience'' fees, such as fees imposed for making a payment online 
or by phone, when those fees are not expressly authorized by the 
agreement creating the debt or expressly authorized by law. This 
advisory opinion also clarifies that a debt collector may also violate 
section 808(1) when the debt collector collects pay-to-pay fees through 
a third-party payment processor.

DATES: This advisory opinion is effective on July 5, 2022.

FOR FURTHER INFORMATION CONTACT: Sonya Pass, Senior Legal Counsel and 
Chief of Staff, Legal Division, (202) 435-7700. If you require this 
document in an alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Advisory Opinion

A. Background

    Congress enacted the FDCPA in 1977 to ``eliminate abusive debt 
collection practices by debt collectors, to insure that those debt 
collectors who refrain from using abusive debt collection practices are 
not competitively disadvantaged, and to promote consistent State action 
to protect consumers against debt collection abuses.'' \1\ The statute 
was a response to ``abundant evidence of the use of abusive, deceptive, 
and unfair debt collection practices by many debt collectors,'' which 
Congress attributed to the ``inadequacy'' of ``existing laws and 
procedures,'' including State laws.\2\ To remedy this, the FDCPA 
imposes various requirements and restrictions on debt collectors' debt 
collection activity. Relevant here is section 808, which provides that 
a ``debt collector may not use unfair or unconscionable means to 
collect or attempt to collect any debt.'' \3\ Section 808 then states 
that ``[w]ithout limiting the general application of the foregoing, the 
following conduct is a violation of this section'' and enumerates eight 
specifically prohibited practices, including the ``collection of any 
amount (including any interest, fee, charge, or expense incidental to 
the principal obligation) unless such amount is expressly authorized by 
the agreement creating the debt or permitted by law.'' \4\
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    \1\ Public Law 95-109, sec. 802(e), 91 Stat. 874, 874 (codified 
at 15 U.S.C. 1692(e)).
    \2\ 15 U.S.C. 1692(a), (b). See also S. Rep. No. 95-382, at 2 
(1977) (stating that ``debt collection abuse by third party debt 
collectors [was] a widespread and serious national problem,'' which 
Congress largely attributed to a ``lack of meaningful legislation on 
the State level'').
    \3\ 15 U.S.C. 1692f.
    \4\ 15 U.S.C. 1692f(1).
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    At the time of the FDCPA's enactment, the Federal Trade Commission 
(FTC) was the agency that administered, and had primary responsibility 
for enforcing, the FDCPA.\5\ Then, in 2010, Congress passed the Dodd-
Frank Wall Street Reform and Consumer Protection Act, which created the 
CFPB and granted it authority to administer, implement, and enforce the 
FDCPA.\6\ Congress also provided the CFPB authority to prescribe rules 
under the FDCPA.\7\ Pursuant to that authority, in 2020, the CFPB 
issued Regulation F, which implements the FDCPA, to prescribe rules 
governing the activities of debt collectors.\8\ The CFPB implemented 
FDCPA section 808(1) at 12 CFR 1006.22(b) by ``generally mirror[ing] 
the statute, with minor wording and organizational changes for 
clarity.'' \9\ In particular, the CFPB stated that the ``term `any 
amount' includes any interest, fee, charge, or expense incidental to 
the principal obligation.'' \10\
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    \5\ See 15 U.S.C. 1692l(a) (2010).
    \6\ Public Law 111-203, sec. 1089, 124 Stat. 1376, 2093 
(codified at 15 U.S.C. 1692l(b)(6)).
    \7\ 15 U.S.C. 1691l(d).
    \8\ See Debt Collection Practices (Regulation F), 85 FR 76734 
(Nov. 30, 2020); Debt Collection Practices (Regulation F), 86 FR 
5766 (Jan. 19, 2021).
    \9\ 85 FR 76734, 76833.
    \10\ Id. at 76833, 76892.
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    In 2013, the CFPB launched its supervisory program over certain 
larger participants in the consumer debt collection market. Through 
these examinations, the CFPB ascertains compliance with the FDCPA, and 
now Regulation F, as well as other Federal consumer financial laws. The 
CFPB also periodically publishes Supervisory Highlights with anonymized 
findings and analysis from these supervisory examinations, as well as 
compliance bulletins to provide entities with guidance on complying 
with certain legal requirements.
    For example, in 2017, the CFPB issued a compliance bulletin 
(Bulletin) that ``provides guidance to debt collectors about compliance 
with the [FDCPA] when assessing phone pay fees,'' a type of pay-to-pay 
fee.\11\ The Bulletin summarizes CFPB staff's conclusion that, under 
section 808(1), debt collectors may collect such pay-to-pay fees only 
if the underlying contract or state law expressly authorizes those 
fees.\12\ In particular, the Bulletin states that in at least one 
supervisory exam, CFPB examiners found that a debt collector ``violated 
[section 808(1)] when they charged fees for taking mortgage payments 
over the phone'' where the underlying contracts creating the debt did 
not expressly authorize collecting such fees and where the relevant 
State law did not ``expressly permit collecting such fees.'' \13\
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    \11\ CFPB Compliance Bulletin 2017-01, 82 FR 35936, 35936 (Aug. 
2, 2017).
    \12\ Id. at 35938.
    \13\ Id. (explaining that the CFPB examiners had instructed the 
company to collect pay-by-phone fees only ``where expressly 
authorized by contract or state law''); see also CFPB: Fall 2014 
Supervisory Highlights, at 7, available at https://files.consumerfinance.gov/f/201410_cfpb_supervisory-highlights_fall-2014.pdf (similar); CFPB: Fall 2015 Supervisory Highlights, at 20-
21, available at https://files.consumerfinance.gov/f/201510_cfpb_supervisory-highlights.pdf (similar).

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[[Page 39734]]

B. Coverage

    This advisory opinion applies to debt collectors as defined in 
section 803(6) of the FDCPA and implemented in Regulation F, 12 CFR 
1006.2(i). As used in this advisory opinion, pay-to-pay fees--sometimes 
called convenience fees--refers to fees incurred by consumers to make 
debt collection payments through a particular channel, such as over the 
telephone or online.

C. Legal Analysis

1. Any Amount
    Section 808(1) of the FDCPA prohibits debt collectors, in relevant 
part, from ``collect[ing] . . . any amount (including any interest, 
fee, charge, or expense incidental to the principal obligation).'' \14\ 
As the Supreme Court has explained, the ``word `any' has an expansive 
meaning, that is, `one or some indiscriminately of whatever kind.' '' 
\15\ In addition, under its ordinary meaning, the term ``including'' 
typically indicates a partial list.\16\ The CFPB interprets the words 
``any'' and ``including'' as used in section 808(1) consistent with 
their ordinary meanings. Accordingly, the CFPB clarifies that FDCPA 
section 808(1) and Regulation F, 12 CFR 1006.22(b), apply to any amount 
collected by a debt collector in connection with the collection of a 
debt,\17\ including, but not limited to, any interest, fee, charge, or 
expense that is incidental to the principal obligation.
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    \14\ 15 U.S.C. 1692f(1) (emphasis added). See also 12 CFR 
1006.22(b).
    \15\ Ali v. Fed. Bur. of Prisons, 552 U.S. 214, 219 (2008) 
(quoting United States v. Gonzales, 520 U.S. 1, 5 (1997), in turn 
quoting Webster's Third New International Dictionary 97 (1976)).
    \16\ Include, Black's Law Dictionary (11th ed. 2019). 
Additionally, as the Supreme Court has stated, ``including'' is 
``not [a term] of all-embracing definition, but connotes simply an 
illustrative application of the general principle.'' Fed. Land Bank 
of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 100 (1941); see 
also Arizona State Bd. For Charter Schools v. Dep't of Educ., 464 
F.3d 1003, 1007 (9th Cir. 2006) (``[T]he word `including' is 
ordinarily defined as a term of illustration, signifying that what 
follows is an example of the preceding principle.''); United States 
v. Hawley, 919 F.3d 252, 256 (4th Cir. 2019) (explaining that 
``including'' ``is an introductory term for an incomplete list of 
examples'').
    \17\ The CFPB notes that, if a debt collector is engaged in a 
truly separate transaction and is not collecting or attempting to 
collect a debt covered by the FDCPA, section 808(1) does not apply.
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    Consistent with this interpretation, the CFPB further clarifies 
that pay-to-pay fees charged to consumers for accepting a consumer's 
payment on a debt through a particular payment channel are an 
``amount'' within the meaning of FDCPA section 808(1) and Regulation F, 
12 CFR 1006.22(b). The CFPB acknowledges that some courts have held 
otherwise, finding that pay-to-pay fees do not violate FDCPA section 
808(1) because such fees are not ``incidental to the principal 
obligation.'' \18\ But, as explained, the CFPB interprets section 
808(1) to apply to ``any amount,'' even if such amount is not 
``incidental to'' the principal obligation.\19\
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    \18\ See, e.g., Flores v. Collection Consultants of Cal., No. SA 
CV 14-0771-DOC, 2015 WL 4254032, at 10 (C.D. Cal. Mar. 20, 2015); 
Shula v. Lawent, 359 F.3d 489, 492-93 (7th Cir. 2004). In Shula, it 
does not appear that that court was presented with the question 
whether ``any amount'' included more than ``fees . . . incidental to 
the principal obligation''; nor did that court analyze the issue. 
For the reasons stated above, the CFPB disagrees with that decision 
to the extent it suggested that section 808(1) applies only to 
amounts that are incidental to the principal obligation.
    \19\ Section 808(1) of the FDCPA and Regulation F, 12 CFR 
1006.22(b), also covers pay-to-pay fees for the separate reason that 
such fees are ``incidental to'' the principal obligation. While the 
FDCPA does not define ``incidental,'' it is ordinarily understood as 
``related to,'' see Collins English Dictionary (12th ed. 2014), or 
``[s]ubordinate to something of greater importance,'' see Black's 
Law Dictionary (11th ed. 2019). Pay-to-pay fees meet these 
definitions: They are ``related to'' the principal obligation 
because they are fees charged for paying the principal obligation. 
Indeed, if the principal obligation did not exist, then neither 
would the pay-to-pay fee. These fees are also generally minor in 
comparison to the outstanding debt and are therefore ``subordinate 
to'' the principal obligation.
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2. Permitted by Law
    Section 808(1) of the FDCPA prohibits, in relevant part, the 
collection of any amount ``unless such amount is expressly authorized 
by the agreement creating the debt or permitted by law.'' \20\ The word 
``permit'' is susceptible to multiple meanings, but it tends to refer 
to ``affirmative authorization,'' and the CFPB reads section 808(1) to 
use the word in that sense. Dictionaries provide that ``permit'' can 
mean either ``to consent to expressly or formally,'' suggesting 
affirmative authorization, or to ``allow'' or ``to acquiesce, by 
failure to prevent,'' suggesting that the lack of a prohibition is 
sufficient.\21\ However, ``allow and permit have an important 
connotative difference. Allow . . . suggests merely the absence of 
opposition, or refraining from a proscription. In contrast, permit 
suggests affirmative sanction or approval.'' \22\ Use of the word 
``permit,'' rather than ``allow,'' therefore suggests that affirmative 
authorization, rather than a mere lack of a prohibition, is required. 
Furthermore, as the Supreme Court has instructed, ``words of a statute 
must be read in their context,'' \23\ and here, ``permit'' is used not 
in isolation but as part of the phrase ``permitted by law.'' While in 
some contexts one may ``permit'' something by failing to prevent it, it 
is far less natural to understand ``permitted by law'' to mean 
``permitted by the absence of any law prohibiting it.''
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    \20\ 15 U.S.C. 1692f(1) (emphasis added). See also 12 CFR 
1006.22(b).
    \21\ Permit, Webster's Third New International Dictionary 1683 
(1976); see also Permit, Black's Law Dictionary (5th ed. 1979) 
(defining ``permit'' as ``[t]o suffer, allow, consent, let; to give 
leave or license; to acquiesce, by failure to prevent, or to 
expressly assent or agree to the doing of an act'').
    \22\ Garner's Dictionary of Legal Usage 46 (3d ed. 2011); see 
also Alexander v. Carrington Mortgage Services, 23 F.4th 370, 377 
(4th Cir. 2022) (holding ``permitted by law'' requires affirmative 
authorization).
    \23\ King v. Burwell, 576 U.S. 473, 492 (2015).
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    The CFPB therefore interprets FDCPA section 808(1) to prohibit a 
debt collector from collecting any amount unless such amount either is 
expressly authorized by the agreement creating the debt (and is not 
prohibited by law) or is expressly permitted by law. That is, the CFPB 
interprets FDCPA section 808(1) to permit collection of an amount only 
if: (1) the agreement creating the debt expressly permits the charge 
and some law does not prohibit it; or (2) some law expressly permits 
the charge, even if the agreement creating the debt is silent. The 
CFPB's interpretation of the phrase ``permitted by law'' applies to any 
``amount'' covered under section 808(1), including pay-to-pay fees.\24\
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    \24\ Note that, even if pay-to-pay fees are expressly authorized 
in the underlying agreement or permitted by State law, debt 
collectors must still take care to comply with other laws, including 
other provisions of the FDCPA and the Consumer Financial Protection 
Act's prohibition on unfair, deceptive, or abusive acts or 
practices, when assessing pay-to-pay fees.
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    Under the CFPB's interpretation, an amount is impermissible if both 
the agreement creating the debt and other law are silent. For example, 
under the CFPB's interpretation, amounts, including pay-to-pay fees, 
that are neither expressly authorized by the agreement creating the 
debt nor expressly authorized by law are impermissible under FDCPA 
section 808(1) and Regulation F, 12 CFR 1006.22(b), even if such 
amounts are the subject of a separate, valid agreement under State 
contract law.\25\ Although some courts have adopted this ``separate 
agreement'' interpretation to permit debt collectors to collect, for 
example, certain pay-to-pay fees, the CFPB declines to do so. Such a 
reading would render the part of section 808(1) that refers to amounts 
``expressly authorized by the agreement creating the debt'' superfluous 
\26\ because a lawful

[[Page 39735]]

agreement creating the debt is, by definition, an agreement valid under 
State contract law.\27\ In addition, the separate agreement 
interpretation ignores section 808(1)'s focus on the ``amount'' being 
``expressly authorized by the agreement creating the debt'' or 
``permitted by law.'' \28\ Under section 808(1), it is not enough for 
the agreement to be ``permitted by law''; rather, the ``amount'' itself 
must be. Contract law standing alone does not provide for the 
collection of any specific amounts--and no principle of contract law 
says debt collectors may collect pay-to-pay fees.\29\ Thus, while it 
may have been permissible under contract law for a debt collector to 
enter into separate agreements with consumers, contract law does not 
permit the ``amount'' at issue, i.e., the pay-to-pay fees.
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    \25\ The CFPB acknowledges that some district courts have held 
otherwise. See, e.g., Thomas-Lawson v. Carrington Mortg. Servs., 
LLC, No. 2:20-cv-07301-ODW, 2021 WL 1253578 (C.D. Cal. Apr. 5, 
2021), appeal pending, No. 21-55459 (9th Cir.).
    \26\ See Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 
1037 (2019) (refusing to interpret the FDCPA in a way that would 
render a provision ``superfluous'').
    \27\ Accord Alexander, 23 F.4th at 379 (rejecting the separate 
agreement interpretation in part because it would render section 
808(1)'s other prong superfluous). The separate agreement 
interpretation also would conflict with the FDCPA's use of the 
phrase ``expressly authorized,'' since general principles of State 
contract law allow parties to agree to express or implied terms as 
part of any agreement. See Restatement (Second) of Contracts Sec.  4 
cmt. a (1981). If general principles of contract law counted as a 
``law'' that ``permitted'' the collection of amounts, debt 
collectors would be free to collect not only those amounts 
authorized by separate agreements, but also to collect amounts that 
are only implicitly authorized by the agreement creating the debt--
further rendering section 808(1)'s ``express'' requirement 
meaningless.
    \28\ See Johnson v. Riddle, 305 F.3d 1107, 1118 (10th Cir. 2002) 
(``The statute does not ask whether [the debt collector's] actions 
were permitted by law . . . , it asks whether the amount he sought 
to collect was permitted by law.'' (emphasis in original)).
    \29\ While a contract might, consistent with contract law, 
permit an amount, section 808(1) only permits collecting amounts 
authorized by contract when the amount is expressly authorized by 
the contract ``creating the debt.''
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    The CFPB's interpretation of ``permitted by law'' in FDCPA section 
808(1) is consistent with the previous interpretation in a CFPB 
compliance bulletin as discussed in part I.A., as well as with the 
prior interpretation of FTC staff and the holdings of the majority of 
courts to address the issue.\30\ In particular, in 1988, FTC staff 
issued Commentary that set forth ``staff interpretations'' of the 
FDCPA.\31\ As relevant here, FTC staff stated that, under section 
808(1), a ``debt collector may attempt to collect a fee or charge in 
addition to the debt if . . . the contract [creating the debt] is 
silent but the charge is otherwise expressly permitted by state law.'' 
\32\ Conversely, FTC staff stated that ``a debt collector may not 
collect an additional amount if . . . the contract does not provide for 
collection of the amount and state law is silent.'' \33\
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    \30\ See, e.g., Alexander, 23 F.4th at 376-77 (holding, in a 
case regarding pay-to-pay fees, that `` 'permitted by law' requires 
affirmative sanction or approval''); Seeger v. AFNI, Inc., 548 F.3d 
1107, 1111, 1112 (7th Cir. 2008) (finding that, to be entitled to 
collect a fee, debt collectors ``must show that the fee is either 
authorized by the governing contract or that it is permitted by 
Wisconsin law'' and that, in that case, that neither an agreement 
nor a law expressly permitting a collection fee existed); Tuttle v. 
Equifax Check, 190 F.3d 9, 13 (2d Cir. 1999) (explaining that if 
``state law neither affirmatively permits nor expressly prohibits 
service charges, a service charge can be imposed only if the 
customer expressly agrees to it in the [underlying] contract'').
    \31\ See Staff Commentary on the Fair Debt Collection Practices 
Act, 53 FR 50097, 50101 (Dec. 13, 1988).
    \32\ Id. at 50108.
    \33\ Id.
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    The CFPB's interpretation is also consistent with the FDCPA's 
statutory purposes. As noted in part I.A, Congress passed the FDCPA 
because it found that existing laws and procedures, including at the 
state level, were inadequate to protect consumers. Given this concern, 
it would be particularly unnatural to understand ``permitted by law'' 
to mean ``permitted because no law prohibits it.'' Accordingly, the 
CFPB interprets FDCPA section 808(1) and Regulation F, 12 CFR 
1006.22(b), to prohibit debt collectors from collecting any amount, 
including any pay-to-pay fee, not expressly authorized in the agreement 
creating the debt unless there is some law that affirmatively 
authorizes the collection of that amount.
3. Payment Processors
    Debt collectors may violate FDCPA section 808(1) and Regulation F, 
12 CFR 1006.22(b), when using payment processors who charge consumers 
pay-to-pay fees. For instance, a debt collector collects an amount 
under section 808(1) at a minimum when a third-party payment processor 
collects a pay-to-pay fee from a consumer and remits to the debt 
collector any amount in connection with that fee, whether in 
installments or in a lump sum.\34\
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    \34\ See, e.g., Ballentine's Law Dictionary (3d ed. 2010) 
(defining ``collect'' as ``to receive payment''); cf. 15 U.S.C. 
1692a(6) (defining debt collector to include persons who ``directly 
or indirectly'' collect debts).
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II. Regulatory Matters

    This is an advisory opinion issued under the CFPB's authority to 
interpret the FDCPA, including under section 1022(b)(1) of the Consumer 
Financial Protection Act, which authorizes guidance as may be necessary 
or appropriate to enable the CFPB to administer and carry out the 
purposes and objectives of Federal consumer financial laws, such as the 
FDCPA.\35\
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    \35\ 12 U.S.C. 5512(b)(1); 5481(14); 5481(12)(H).
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    An advisory opinion is a type of interpretive rule. As an 
interpretive rule, this advisory opinion is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure 
Act.\36\ Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\37\ The CFPB has also determined that 
this advisory opinion does not impose any new or revise any existing 
recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would be collections of 
information requiring approval by the Office of Management and Budget 
under the Paperwork Reduction Act.\38\
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    \36\ 5 U.S.C. 553(b).
    \37\ 5 U.S.C. 603(a), 604(a).
    \38\ 44 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\39\ the CFPB will submit 
a report containing this advisory opinion and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to the opinion's published effective date. The Office of Information 
and Regulatory Affairs has designated this advisory opinion as not a 
``major rule'' as defined by 5 U.S.C. 804(2).
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    \39\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-14230 Filed 7-1-22; 8:45 am]
BILLING CODE 4810-AM-P