[Federal Register Volume 87, Number 158 (Wednesday, August 17, 2022)]
[Rules and Regulations]
[Pages 50556-50560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17699]


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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Chapter X


Limited Applicability of Consumer Financial Protection Act's 
``Time or Space'' Exception With Respect to Digital Marketing Providers

AGENCY: Consumer Financial Protection Bureau.

ACTION: Interpretive rule.

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SUMMARY: Section 1002 of the Consumer Financial Protection Act of 2010 
(CFPA) defines the term ``service provider'' and sets forth two 
exceptions to that definition. Under one of those exceptions, a person 
is not a service provider solely by virtue of such person offering or 
providing to a covered

[[Page 50557]]

person time or space for an advertisement for a consumer financial 
product or service through print, newspaper, or electronic media. The 
Consumer Financial Protection Bureau (Bureau or CFPB) is issuing this 
interpretive rule to address digital marketing providers that commingle 
the targeting and delivery of advertisements to consumers, such as by 
using algorithmic models or other analytics, with the provision of 
advertising ``time or space.'' Digital marketing providers that are 
materially involved in the development of content strategy would not 
fall within the ``time or space'' exception as interpreted by the 
Bureau. Accordingly, digital marketing providers that are involved in 
the identification or selection of prospective customers or the 
selection or placement of content to affect consumer engagement, 
including purchase or adoption behavior, are typically service 
providers under the CFPA.

DATES: This interpretive rule is effective on August 17, 2022.

FOR FURTHER INFORMATION CONTACT: Christopher Davis, Attorney-Advisor; 
Office of Fair Lending and Equal Opportunity, at 
[email protected], or Brad Lipton, Senior Counsel, Legal 
Division, at 202-435-7000. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Financial services companies rely on digital marketing providers to 
target and deliver advertisements across various platforms to consumers 
on their behalf. By doing so, financial services companies may be able 
to engage with audiences in ways that they were previously unable to 
with traditional advertising methods. Many modern digital marketing 
providers (or ``digital marketers'') play a dramatically different role 
in consumer advertising than did traditional media sources like print 
newspapers or radio stations. Many digital marketers target and deliver 
ads to specific consumers \1\ using sophisticated analytical 
techniques, including machine learning and behavioral analytics, to 
process large amounts of consumer data.\2\ In other words, many digital 
marketers aggregate and analyze immense amounts of granular consumer 
data, and then use that data to determine what advertisements to 
provide to specific consumers at what times. Accordingly, digital 
marketing providers commingle the service of targeting and delivering 
advertisements with the activities of traditional media sources in 
providing airtime or physical space.
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    \1\ The targeting and delivery of advertisements includes both 
the targeting and delivery of certain ads to consumers generally at 
specific times to increase or maximize engagement and the targeting 
and delivery of ads to specific consumers at specific times. For 
instance, a digital marketer may select certain ads to show late at 
night to consumers generally. Or a digital marketer may select 
certain ads to show late at night to certain consumers.
    \2\ See C.A. Summers, R.W. Smith, and R.W. Reczek, ``An audience 
of one: Behaviorally targeted ads as implied social labels,'' 
Journal of Consumer Research, vol. 43, no. 1, pp. 156-178 (June 
2016).
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    Digital marketing providers obtain data from a variety of sources, 
including but not limited to data collected directly from consumers, 
for example when registering for an account or when conducting a search 
query into a search bar. Further, digital marketers may harvest a wide 
variety of consumer data by monitoring and tracking a consumer's web 
activity, including for example, their browsing history, their activity 
while online, and their geolocation.\3\ (This is sometimes called 
``surveillance advertising.'' \4\) Digital marketers may also obtain 
data from third-party data brokers or ``second-party'' partnerships 
with other companies.\5\ Using these tools and others, digital 
marketers collect granular consumer data that they analyze to develop 
insights about consumers' behavior more broadly.\6\
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    \3\ See Paige M. Boshell, The Power of Place: Geolocation 
Tracking and Privacy, Bus. Law Today (Mar. 2019).
    \4\ See Shoshana Zuboff, The Age of Surveillance Capitalism: The 
Fight for a Human Future at the New Frontier of Power (2019).
    \5\ See supra note 3.
    \6\ See supra note 2.
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    The insights that digital marketing providers develop enable them 
to offer financial services companies targeted advertising services. 
For example, collected data from individual consumers can be analyzed 
by these marketers and used to segment consumers across various 
groupings, such as by age, location, or specific interests (e.g., 
``concert goers''). After these categories have been developed, firms 
that use digital marketing providers to acquire customers can select 
(or exclude) certain types of customers.\7\
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    \7\ See id.
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    In contrast, digital marketers may also target advertisements at 
specific times based on context, i.e., the content that a user is 
currently viewing. Such contextual advertisements more closely resemble 
traditional ads users might find in other spaces--such as an ad for a 
sporting goods store aired during a televised basketball match or a 
print clothing ad placed in a fashion magazine--as they are based on 
the contents of what is being displayed, not consumer-specific data.
    Digital marketers engaged in ad targeting and delivery may operate 
the websites or platforms on which ads appear, or they may not. In 
either case, digital marketers serve as an intermediary between the 
financial services company and consumers.
    The ways in which digital marketing providers specifically target 
ads are varied and evolve over time. Ultimately, the digital marketer 
may decide which group(s) the consumer belongs in and which financial 
services companies desire to advertise to that group, and may select 
the specific ad to display to that consumer and/or when to display the 
ad based on other factors (e.g., the amount a firm is willing to pay to 
display the ad). Accordingly, many digital marketing providers are 
materially involved in the development of ``content strategy'' \8\ by 
identifying or selecting prospective customers and/or selecting or 
placing content to affect consumer engagement, including purchasing or 
adoption behavior. These activities go well beyond the activities of 
traditional media sources, such as print newspapers or radio, that 
solely passively provided airtime or physical space for advertisements.
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    \8\ Content strategy is ``the strategy for the distribution of 
th[e] content'' as well as ``the set of methods and guidelines for 
the development and curation of content.'' Christen Geiler, 
Information Architecture vs Content Strategy--and Why YOU Need Both, 
Digital.gov (July 18, 2016), https://digital.gov/2016/07/18/information-architecture-vs-content-strategy-and-why-you-need-both/.
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II. Analysis

Service Providers

    A person is a ``covered person'' under the CFPA, and thus subject 
to that law, including its prohibition on unfair, deceptive, or abusive 
acts or practices (UDAAPs), if it offers or provides a financial 
product or service for use by consumers primarily for personal, family, 
or household purposes.\9\ ``Service provider[s]'' to covered persons 
are also subject to the CFPA, including its UDAAP prohibition.\10\
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    \9\ See 12 U.S.C. 5481(5), (6), (15)(A); 5531; 5536.
    \10\ See 12 U.S.C. 5481(26); 5531; 5536. As the CFPB has 
explained, discrimination may constitute an unfair act or practice 
that violates the CFPA's UDAAP prohibition. See CFPB UDAAP Exam 
Manual (updated Apr. 11, 2022).
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    The CFPA defines a service provider as ``any person that provides a 
material service to a covered person in connection with the offering or 
provision by such covered person of a consumer financial product or

[[Page 50558]]

service.'' \11\ The term ``service provider'' includes, but is not 
limited to, a person that ``participates in designing, operating, or 
maintaining the consumer financial product or service'' or ``processes 
transactions relating to the consumer financial product or service.'' 
\12\ The term ``service provider,'' however, ``does not include a 
person solely by virtue of such person offering or providing to a 
covered person'' either ``a support service of a type provided to 
businesses generally or a similar ministerial service,'' or ``time or 
space for an advertisement for a consumer financial product or service 
through print, newspaper, or electronic media.'' \13\
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    \11\ 12 U.S.C. 5481(26)(A).
    \12\ 12 U.S.C. 5481(26)(B)(i), (ii). Of course, nothing in this 
interpretive rule precludes a digital marketing provider from being 
considered a covered person based on its acts and practices. Indeed, 
by engaging in consumer data collection, tracking, analysis, and 
maintenance activities, digital marketing providers may be covered 
persons. See 12 U.S.C. 5481(15)(A)(ix).
    \13\ 12 U.S.C. 5481(26)(B)(i), (ii).
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Material Service

    When digital marketing providers are materially involved in the 
development of content strategy, they typically provide a material 
service. Unlike most traditional media sources, digital marketing 
providers engaged in ad targeting and delivery are not solely providing 
airtime or physical space for ads. Rather, digital marketers commingle 
the targeting and delivery of advertisements with the provision of 
``time or space.''
    A ``material'' service is a service that is significant or 
important.\14\ When digital marketers identify or select prospective 
customers and/or select or place content to affect consumer engagement, 
including purchasing or adoption behavior, they are providing a 
significant--and thus ``material''--service provided to covered 
persons. In particular, identifying prospective customers and then 
attempting to acquire those customers is a significant component of the 
``offering'' of a consumer financial product or service, which is part 
of the legally relevant test for determining that a firm is a ``covered 
person.'' \15\
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    \14\ See Merriam Webster's Dictionary (online ed.) (defining 
``material'' as ``having real importance or great consequences''); 
Black's Law Dictionary (11th ed. online) (defining ``material'' as 
``significant; essential'').
    \15\ See 12 U.S.C. 5481(6).
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    Indeed, modern digital ad targeting and content delivery typically 
consists of many functions--such as lead generation,\16\ customer 
acquisition, or marketing analysis or strategy--that would often be 
performed by covered persons. For example, a covered person may measure 
the effectiveness of certain marketing efforts by calculating a 
``customer acquisition rate.'' \17\ Similarly, a covered person's 
marketing group may analyze where to purchase advertising across 
multiple channels to maximize impact.\18\ The involvement in the 
development of content strategy by digital marketing providers 
increasingly resembles these functions and others often performed by 
covered persons themselves (although the services are often carried out 
in a more sophisticated way, based on the digital marketers' data and 
technology). Accordingly, digital marketers that are materially 
involved in the development of content strategy by identifying or 
selecting prospective customers and/or selecting or placing content to 
affect consumer engagement, including purchasing or adoption behavior, 
typically provide a material service.
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    \16\ See, e.g., Complaint for Violations of the Consumer 
Financial Protection Act of 2010, Consumer Fin. Prot. Bureau v. D 
and D Marketing, Inc., No. 2:15-cv-9692 (filed Dec. 17, 2015), 
https://files.consumerfinance.gov/f/201512_cfpb_complaint-v-d-and-d-marketing-inc-et-al.pdf (alleging that a lead aggregator is a 
``service provider'' because it sold consumer loan applications as 
``leads'' to payday and installment lenders who are ``covered 
persons'').
    \17\ See, e.g., Jacquelyn S. Thomas, Werner Reinartz, and V. 
Kumar, ``Getting the Most out of All Your Customers,'' Harvard 
Business Review (July-August 2004) (noting that ``most companies 
still use the customer acquisition rate'').
    \18\ See, e.g., Wes Nichols, ``Advertising Analytics 2.0,'' 
Harvard Business Review (March 2013) (noting that ``most businesses 
still . . . measured how [their] TV, print, radio, and online ads 
each functioned independently to drive sales'').
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``Time or Space'' Exception

    As noted above, the CFPA provides that the term service provider 
``does not include a person solely by virtue of such person offering or 
providing to a covered person'' either ``a support service of a type 
provided to businesses generally or a similar ministerial service,'' or 
``time or space for an advertisement for a consumer financial product 
or service through print, newspaper, or electronic media.'' \19\ The 
reference to ``solely'' providing ``time or space for an 
advertisement'' means that digital marketers that provide additional 
services beyond ``time or space''--i.e., beyond airtime or physical 
space for the ad--do not qualify for the exception. Accordingly, when 
digital marketers are materially involved in the development of content 
strategy in addition to providing airtime or physical space, they fall 
outside the exception for ``solely'' providing ``time or space.''
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    \19\ 12 U.S.C. 5481(26)(B)(i), (ii).
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    The ``service provider'' definition should be interpreted as a 
cohesive whole.\20\ Thus, the ``time or space'' exception should be 
interpreted alongside its inclusion with the exception for ``a support 
service of a type provided to businesses generally or a similar 
ministerial service.'' \21\ Firms that provide a ``ministerial'' 
service to financial institutions are not materially involved in the 
marketing or distribution of the consumer financial product or service; 
they are not typically involved in the identification or selection of 
prospective customers, nor do they select or place content to affect 
consumer engagement. For example, a firm that furnishes broadband 
access to a financial institution is not involved in the strategic 
marketing and distribution of the consumer financial product or service 
and is generally not providing a material service.
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    \20\ See, e.g., Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 569 
(1995) (noting that ``the Act is to be interpreted as a symmetrical 
and coherent regulatory scheme'').
    \21\ 12 U.S.C. 5481(26)(B)(i), (ii).
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    Additionally, the ``time or space'' exception refers to 
``electronic media'' within the phrase ``print, newspaper, or 
electronic media.'' \22\ This phrasing--especially alongside the other 
exemption for ``a support service of a type provided to businesses 
generally or a similar ministerial service''--indicates that the ``time 
or space'' exception should be interpreted to refer to the offering of 
advertising in a manner similar to that was generally performed by 
traditional media sources, such as ``print'' or ``newspaper.'' \23\ A 
traditional media source typically provided ``time or space''--i.e., 
the airtime or physical space for the ad--with relatively little (i.e., 
largely ``ministerial'') involvement in the development of content 
strategy.\24\
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    \22\ 12 U.S.C. 5481(26)(B)(i).
    \23\ Cf. Gustafson, 513 U.S. at 576 (``[T]he term `written 
communication' must be read in context to refer to writings that, 
from a functional standpoint, are similar to the terms `notice, 
circular, and advertisement.' '').
    \24\ 12 U.S.C. 5481(26)(B)(i), (ii).
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    To be sure, some traditional media sources may have been involved 
in the selection of the audience for or content of ads to some degree 
(such as by allowing businesses to select advertising space in a 
geographic-specific section of a newspaper to businesses operating in 
that geographic area or putting advertisements for financial services 
in the financial section of the newspaper). But traditional media 
sources were typically not materially involved in the development of 
content strategy; in the main, their function was solely to provide 
``time or space'' by operating as

[[Page 50559]]

passive conduits of information provided by their customers.
    Indeed, when digital marketers are materially involved in the 
development of content strategy, the marketers perform functions that 
would often traditionally be undertaken by the covered person itself, 
rather than by a traditional media outlet. For example, as noted above, 
a covered person's marketing group may analyze where or when to 
purchase advertising across multiple channels to maximize impact.\25\ 
Of course, covered persons may sometimes engage third-party vendors for 
these activities. For example, they may engage an advertising or 
consulting firm to perform marketing analysis. But this would not 
typically be a service that was performed by a traditional media 
source, such as a newspaper or radio station. The enterprises or firms 
providing these services may be ``service providers'' under the CFPA, 
but a media source that merely provided airtime or physical space would 
fall into the ``time or space'' exception and would not be a service 
provider.
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    \25\ See, e.g., Wes Nichols, ``Advertising Analytics 2.0,'' 
Harvard Business Review (March 2013) (noting that ``most businesses 
still . . . measured how [their] TV, print, radio, and online ads 
each functioned independently to drive sales'').
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Specific Circumstances

    The conduct of digital marketers that provide services to covered 
persons varies widely and, depending on the conduct, may or may not 
fall within the ``time or space'' exception. Under the interpretation 
of the definition of ``service provider'' described above, the role 
played by the digital marketing provider--i.e., whether the digital 
marketing provider is materially involved in the development of content 
strategy by identifying or selecting prospective customers and/or 
selecting or placing content to affect consumer engagement--will 
determine whether the advertiser falls within the ``time or space'' 
exception. Increasingly, the role typically played by digital marketers 
fall outside the exception and the digital marketers are typically 
service providers under the CFPA.
    In certain circumstances, the digital marketing provider is only 
minimally involved in identifying or selecting prospective customers or 
selecting or placing content to affect consumer engagement. For 
instance, digital marketers may offer covered persons the ability to 
choose to run an advertisement on a particular web page or application 
of the covered person's choosing, with advertisements seen by any user 
of that page or application. In these circumstances, the digital 
marketer would typically fall within the ``time or space'' exception. 
The digital marketer in this situation is ``solely'' providing ``time 
or space'' for the ad, in the sense of airtime or physical space for 
the ad, without commingling targeting or delivery of the 
advertisements. Moreover, the digital marketer's conduct in these 
circumstances is similar to a traditional media source (such as a 
newspaper or radio station) that offered advertisements directed at a 
particular market of the covered person's choosing, rather than a 
function traditionally performed by a covered person itself.
    Digital marketing providers may also target and deliver the 
advertisements to users with certain characteristics (such as 
demographics, geography, online behavior (such as particular keyword 
searches), or offline behavior). In some circumstances, the covered 
person may provide an audience of existing users and specify that 
advertisements be provided to similar consumers. While the covered 
person may specify certain parameters of the intended audience for a 
specific consumer financial product or service, it is the digital 
marketers' ad targeting and delivery algorithms that identify the 
audience with the desired characteristics and determine whether and/or 
when specific consumers see an advertisement.\26\
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    \26\ See, e.g., Charge of Discrimination at 5 ] 17, Facebook, 
Inc., No. 01-18-0323-8 (Dep't of Hous. & Urban Dev. Mar. 28, 2019), 
https://www.hud.gov/sites/dfiles/Main/documents/HUD_v_Facebook.pdf.
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    Digital marketing providers do not fall within the ``time or 
space'' exception if they target and deliver advertisements to users 
with certain characteristics, even if those characteristics are 
specified by the covered person. In these circumstances, although the 
covered person also plays a role, the digital marketer selects, 
including through its algorithms and data, the specific audience that 
sees the advertisement for the covered person's consumer financial 
product or service. The selection of specific consumers to see specific 
ads goes beyond solely selling airtime or physical space as performed 
by traditional media sources such as newspapers or radio. When digital 
marketers target and deliver advertisements to users with certain 
characteristics, the digital marketer is materially involved in the 
development of content strategy and is not covered by the ``time or 
space'' exception.
    Moreover, when digital marketers target and deliver advertisements 
to users with certain characteristics, the selection of the audience 
through algorithms and data is akin to a customer acquisition function 
that would traditionally be performed in-house by a covered person (or 
a vendor other than a traditional media source, such as a consulting 
firm). Accordingly, digital marketers that target and deliver 
advertisements to users with certain characteristics specified by the 
covered person are typically service providers under the CFPA.
    Similarly, digital marketing providers do not fall into the ``time 
or space'' exception if a covered person identifies particular users by 
name and the digital marketer targets and delivers the advertisements 
to those users at specific times to increase or maximize engagement. 
The provision of the service of analyzing when advertisements should 
appear goes beyond ``solely'' selling airtime or physical space as 
performed by traditional media sources such as newspapers or radio. To 
be sure, a traditional media source might have provided some basic 
information to firms about when to air particular advertisements, but 
the business purchasing the ad was generally the entity that made the 
decision about when and where to place the ad. Here, the use of 
algorithms and business-specific data to determine when to display a 
specific business' ads to specific consumers to affect consumer 
engagement extends well beyond the activities performed by a 
traditional media source.
    There are also circumstances in which the digital marketing 
provider plays an even more significant role in determining which 
specific consumers see digital advertisements, such as by determining 
or suggesting to the covered person which users are the most 
appropriate audience for the covered person's advertisements (rather 
than receiving such direction from the covered person). Digital 
marketers may determine who is the appropriate audience to receive ads 
based on, for instance, the content of the particular ad, the type of 
businesses being advertised, the marketer's own knowledge of a 
particular user's characteristics and behavior (including offline 
behavior), the behavior of other users, and past user engagement with 
similar types of ads.\27\
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    \27\ See, e.g., Charge of Discrimination at 4 ] 16, Facebook, 
Inc., No. 01-18-0323-8 (Dep't of Hous. & Urban Dev. Mar. 28, 2019), 
https://www.hud.gov/sites/dfiles/Main/documents/HUD_v_Facebook.pdf.
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    In circumstances such as these in which a digital marketing 
provider plays an even more significant role in

[[Page 50560]]

determining which specific users see digital advertisements, such as by 
determining or suggesting which users are the appropriate audience for 
advertisements, the digital marketer does not fall within the ``time or 
space'' exception and is typically a service provider under the CFPA. 
Determining which users are the appropriate audience for a particular 
covered person's advertisement is well beyond providing airtime or 
physical space. To the contrary, determining the appropriate audience 
is much more similar to the function traditionally performed by a 
covered person's own customer acquisition or marketing group than by a 
traditional media source. Indeed, identifying or selecting prospective 
customers for a covered person's business is similar to the function of 
a ``lead generator'' that would be considered a service provider under 
the CFPA. Accordingly, digital marketers that, for example, determine 
or suggest which users are the appropriate audience for advertisements 
are materially involved in the development of content strategy, do not 
fall under the ``time or space'' exception, and are typically service 
providers under the CFPA.

III. Regulatory Matters

    This is an interpretive rule issued under the Bureau's authority to 
interpret the CFPA, including under section 1022(b)(1) of the CFPA, 
which authorizes guidance as may be necessary or appropriate to enable 
the Bureau to administer and carry out the purposes and objectives of 
Federal consumer financial laws, such as the CFPA.\28\
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    \28\ 12 U.S.C. 5512(b)(1).
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    As an interpretive rule, this rule is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure 
Act.\29\ Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\30\ The Bureau also has determined 
that this interpretive rule 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.\31\
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    \29\ 5 U.S.C. 553(b).
    \30\ 5 U.S.C. 603(a), 604(a).
    \31\ 44 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\32\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the rule's 
published effective date. The Office of Information and Regulatory 
Affairs has designated this interpretive rule as not a ``major rule'' 
as defined by 5 U.S.C. 804(2).
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    \32\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-17699 Filed 8-16-22; 8:45 am]
BILLING CODE 4810-AM-P