The American Bankers Association said a proposed interpretative rule will discourage banks from EWA products, limiting access to a convenient and potentially free source of small dollar, short-term liquidity.

The final rule goes into effect Sept. 16, with the registration deadline for large nonbanks starting Oct. 16.

The CFPB does not intend to seek penalties for violations of the interpretive rule while BNPL lenders are transitioning into compliance in a good faith and expeditious manner.

Some banks continue to press the CFPB for a reporting exemption for small banks as the rule will create additional burdens on these banks who may get frustrated and end up selling or closing their businesses.

While updates to Regulation X are needed, many of the bureau’s proposed changes will create limitations or additional challenges for mortgage servicers, according to industry experts.

The regulators clarified that the final document is intended to be limited to “real estate-related financial transactions that are secured by a single 1-to-4 family residential property.”

The proposed rule fails to provide a bright-line test for lenders and employers, an attorney with the Dorsey & Whitney law firm said.

The proposal includes some aspects supported by both servicers and consumer advocates and some provisions that could see pushback from servicers.

CFPB rules are likely to face challenges and the bureau may shift to using enforcement actions as a form of policymaking.

Only four proposed rules are on track to come from the CFPB by May 2025, according to the latest regulatory agenda.