Truth in Lending (Regulation Z); Impact of the 2021 Juneteenth Holiday on Certain Closed-End Mortgage Requirements

CourtConsumer Financial Protection Bureau
Citation86 FR 44267
Publication Date12 Aug 2021
Record Number2021-17050
Federal Register, Volume 86 Issue 153 (Thursday, August 12, 2021)
[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
                [Rules and Regulations]
                [Pages 44267-44270]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-17050]
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                BUREAU OF CONSUMER FINANCIAL PROTECTION
                12 CFR Part 1026
                Truth in Lending (Regulation Z); Impact of the 2021 Juneteenth
                Holiday on Certain Closed-End Mortgage Requirements
                AGENCY: Bureau of Consumer Financial Protection.
                ACTION: Interpretive rule.
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                SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
                issuing this interpretive rule to provide guidance on certain
                Regulation Z timing requirements related to rescission of closed-end
                mortgages and the TILA-RESPA Integrated Disclosures (TRID). These
                timing requirements are based on a definition of ``business day'' that
                excludes days that are designated as legal public holidays under
                Federal law. The interpretive rule explains these timing requirements
                in light of recent legislation that designated ``Juneteenth National
                Independence Day, June 19'' (Juneteenth) as a Federal legal public
                holiday. It clarifies that, if the relevant closed-end rescission or
                TRID time period began on or before June 17, 2021, then June 19, 2021,
                was considered a business day, but nothing prohibits creditors from
                providing longer time periods. Therefore, it would also be compliant
                for creditors to have considered June 19, 2021, a Federal holiday for
                purposes of these provisions.
                DATES: This interpretive rule is effective on August 12, 2021.
                FOR FURTHER INFORMATION CONTACT: Pedro De Oliveira, Lanique Eubanks,
                Jaclyn Maier, or Priscilla Walton-Fein, Senior Counsels, Office of
                Regulations, at 202-435-7700. If you require this document in an
                alternative electronic format, please contact
                [email protected].
                SUPPLEMENTARY INFORMATION:
                I. Background
                 On June 17, 2021, the President signed legislation that amended 5
                U.S.C. 6103(a) to add ``Juneteenth National Independence Day, June 19''
                (Juneteenth) to the list of Federal legal public holidays (Federal
                holidays).\1\ Various regulatory provisions cross-reference or
                otherwise refer to the Federal holidays listed in 5 U.S.C. 6103(a),
                including the Regulation Z definition of ``business day.'' In
                Regulation Z, ``business day'' is defined in Sec. 1026.2(a)(6)
                generally to mean ``a day on which the creditor's offices are open to
                the public for carrying on substantially all of its business
                functions.'' However, for purposes of certain specified Regulation Z
                provisions, Sec. 1026.2(a)(6) defines business day to mean: ``[A]ll
                calendar days except Sundays and the legal public holidays specified in
                5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther
                King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor
                Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.''
                \2\ This is referred to herein as the ``specific business day''
                definition.
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                 \1\ Juneteenth National Independence Day Act, Public Law 117-17,
                135 Stat. 287 (2021).
                 \2\ Comment 2(a)(6)-2 further provides that four Federal
                holidays are identified in 5 U.S.C. 6103(a) by a specific date: New
                Year's Day, January 1; Independence Day, July 4; Veterans Day,
                November 11; and Christmas Day, December 25. The comment states that
                when one of these holidays falls on a Saturday, Federal offices and
                other entities might observe the holiday on the preceding Friday
                but, nonetheless, the observed holiday is a business day for
                purposes of the specific business day definition. Like the four
                Federal holidays listed in comment 2(a)(6)-2, Juneteenth is
                identified in 5 U.S.C. 6103(a) by a specific date. For 2021, Federal
                offices observed the Juneteenth holiday on Friday, June 18, 2021.
                For purposes of the specific business day definition, June 18, 2021,
                was a business day.
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                 The legislation that made Juneteenth a Federal holiday took effect
                immediately.\3\ Therefore, June 19 became a Federal holiday on June 17,
                2021. By virtue of the cross-reference to 5 U.S.C. 6103(a) in Sec.
                1026.2(a)(6), the days that are considered Federal holidays under the
                specific business day definition in Regulation Z also changed on June
                17, 2021. The Bureau understands that this presented interpretive
                questions and compliance challenges for the mortgage industry because
                the Juneteenth holiday occurred only two days after the date of the law
                change. Based on industry inquiries and outreach to the Bureau
                following the June 17, 2021, amendment to 5 U.S.C. 6103(a), the Bureau
                understands these issues were particularly acute for transactions that
                either (1) closed on or before June 17, 2021, but for which consumers'
                rescission periods had not yet expired or (2) were close to the
                [[Page 44268]]
                planned closing date on June 17, 2021, and subject to certain
                disclosure timing requirements of the TRID provisions of Regulation Z.
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                 \3\ The law took effect when it was signed by the President on
                June 17, 2021. See, e.g., United States v. Casson, 434 F.2d 415
                (D.C. Cir. 1970) (indicating that a law that is effective on
                enactment goes into effect at the exact time that the President
                signs it).
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                 This interpretive rule provides guidance on the 2021 Juneteenth
                holiday and the specific business day definition in these two
                situations.\4\
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                 \4\ The Bureau is adopting this interpretation effective on the
                date of publication in the Federal Register. The interpretive rule
                explains the Bureau's view of the legal requirements that were
                applicable around the time of the Juneteenth holiday in June 2021.
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                II. Discussion
                Guidance on Determining the Applicable Specific Business Day Definition
                 The specific business day definition applies to various timing
                requirements in Regulation Z, including rescission of closed-end
                mortgages and some TRID provisions.\5\ Regulation Z does not specify
                which version of the specific business day definition applies to these
                provisions when the definition changes during the relevant time
                period--the version of the definition in effect when the relevant time
                period begins, or the new version of the definition that takes effect
                before the relevant time period ends. The Bureau is issuing this
                interpretive rule to clarify that the version of the specific business
                day definition that applies to these provisions is the version of the
                definition in effect when the relevant time period begins.\6\
                Accordingly, in the context of the 2021 Juneteenth Federal holiday and
                the affected closed-end rescission and TRID provisions, if the relevant
                time period began on or before June 17, 2021, then June 19, 2021, is a
                business day for purposes of the specific business day definition. If
                the relevant time period began after June 17, 2021, then June 19, 2021,
                is a Federal holiday for purposes of the specific business day
                definition.
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                 \5\ With respect to rescission, the affected regulatory
                provisions are Sec. 1026.23(a)(3)(i) and (b)(1)(v). With respect to
                TRID, the affected regulatory provisions are Sec.
                1026.19(e)(1)(iii)(B), (e)(1)(iv), (e)(2)(i)(A), (e)(4)(ii), and
                (f)(1)(ii) and (iii). Other provisions of Regulation Z rely on the
                specific business day definition and therefore also were affected by
                the legislation. Those provisions are outside the scope of this
                interpretive rule.
                 \6\ The Bureau understands that the law amending 5 U.S.C.
                6103(a) to add Juneteenth to the list of Federal holidays was signed
                by the President shortly after 4 p.m. EST on June 17, 2021. See
                Press Release, The White House, Remarks by President Biden at
                Signing of the Juneteenth National Independence Day Act (June 17,
                2021), https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/06/17/remarks-by-president-biden-at-signing-of-the-juneteenth-national-independence-day-act/. While the law took effect
                immediately, the Bureau is clarifying that the version of the
                specific business day definition in effect prior to June 17, 2021,
                applies where the relevant time period began at any time on June 17,
                2021. The requirements discussed in this interpretive rule generally
                apply with respect to the day that a particular event occurred, not
                the time of day. Accordingly, the Bureau believes it is more
                consistent with these provisions not to distinguish among actions
                taken at different times on June 17, 2021. Treating all actions
                taken on June 17, 2021, the same in the context of these provisions
                also serves the purposes of the regulation, by providing certainty
                to creditors and uniformity in the application of the specific
                business day definition across the mortgage market.
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                 The Bureau concludes that this reading is consistent with the
                purposes of the specific business day definition, which are to provide
                certainty and uniformity to the timing requirements.\7\ When the
                Federal Reserve Board (Board) established the specific business day
                definition, it explained that creditors and consumers need certainty as
                to the length of the rescission period; otherwise, they risk a delay in
                the loan funding date to account for an extension of the rescission
                period.\8\ Similarly, in issuing the TRID requirements, the Bureau
                explained that creditors and consumers need certainty as to the length
                of the waiting and other time periods required under the TRID
                provisions in order to establish a closing date and reduce the
                potential for unexpected closing delays.\9\ Interpreting these
                provisions to require use of an amended specific business day
                definition that takes effect only after the relevant time period begins
                would undermine that certainty, as it may require a change in the
                timing of loan funding, closing, and other dates that are dependent on
                the definition.
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                 \7\ See, e.g., 74 FR 23289, 23294 (May 19, 2009) (applying the
                specific business day definition to the seven-business-day waiting
                period prior to consummation after receipt of required disclosures,
                explaining that (1) doing so makes it easier for creditors to
                determine how to meet timing requirements, especially where the
                creditor has multiple offices not open on the same days; (2) the
                standard for determining when a waiting period ends will be the same
                for all creditors; and (3) whether a creditor's offices are open or
                closed will not affect the time that a consumer has to receive and
                review disclosures).
                 \8\ The Board explained that it adopted the two-tier definition
                because transactions subject to the right of rescission need a more
                definite and uniform business day definition. See 46 FR 20848, 20850
                (Apr. 7, 1981). Regulatory authority for this provision was later
                transferred to the Bureau. See Dodd-Frank Wall Street Reform and
                Consumer Protection Act, Public Law 111-203, section 1061, 124 Stat.
                1376, 2036 (2010) (transferring to the Bureau the ``consumer
                financial protection functions'' previously vested in certain other
                Federal agencies, including the Board).
                 \9\ The Bureau applied the specific business day definition to
                various TRID timing provisions to facilitate compliance for industry
                and to reduce the potential for closing delays. See 78 FR 79730,
                79770, 79837, 79851 (Dec. 31, 2013).
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                 The Bureau notes that the affected closed-end rescission and TRID
                provisions do not prohibit creditors from providing longer time
                periods. Therefore, as discussed further below, it would also be
                compliant for creditors to have considered June 19, 2021, a Federal
                holiday for purposes of these provisions.
                Application to Specific Rescission Provisions
                 As noted above, the Bureau is clarifying that the version of the
                specific business day definition that applies to the provisions
                discussed in this interpretive rule is the version of the definition in
                effect when the relevant time period begins. This section discusses how
                that guidance applies to closed-end rescission provisions that
                reference the specific business day definition.
                 Section 1026.23(a)(3)(i) provides that, for closed-end transactions
                covered by the right of rescission, the consumer may exercise the right
                to rescind until midnight of the third business day following the last
                of (1) delivery of all material disclosures; \10\ (2) consummation of
                the loan; \11\ and (3) delivery of the notice of the right to rescind
                to each consumer entitled to rescind.\12\ Pursuant to Sec.
                1026.23(b)(1)(v), the notice must include the date the rescission
                period expires.
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                 \10\ The material disclosures are the required disclosures of
                the annual percentage rate, the finance charge, the amount financed,
                the total of payments, the payment schedule, and the disclosures and
                limitations referred to in Sec. Sec. 1026.32(c) and (d) and
                1026.43(g). See 12 CFR 1026.23(a)(3)(ii).
                 \11\ ``Consummation'' is defined in Sec. 1026.2(a)(13) as the
                time that a consumer becomes contractually obligated on the credit
                transaction. Per comment 2(a)(13)-1, when a contractual obligation
                is created is determined by State law.
                 \12\ A creditor is required to provide two copies of the notice
                of the right to rescind to each consumer entitled to rescind (one
                copy to each if the notice is delivered in electronic form in
                accordance with the consumer consent and other applicable provisions
                of the E-Sign Act). The notice must be on a separate piece of paper
                but may appear with other information such as the itemization of the
                amount financed. The creditor may deliver the notice after the
                transaction is consummated, but the rescission period will not begin
                to run until the notice is given. See 12 CFR 1026.23(b)(1) and
                comments 23(b)(1)-2 and -4.
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                 For purposes of Sec. 1026.23(a)(3)(i), the rescission period is
                determined based on the version of the specific business day definition
                in effect when the rescission period begins. Similarly, for purposes of
                Sec. 1026.23(b)(1)(v), the rescission period expiration date disclosed
                on the notice of the right to rescind is determined based on the
                version of the specific business day definition in effect when the
                rescission period begins. Therefore, if the rescission period began on
                or before June 17, 2021, for purposes of determining the rescission
                period and
                [[Page 44269]]
                the disclosed rescission period expiration date, Saturday, June 19,
                2021, is a business day notwithstanding the addition of Juneteenth as a
                Federal holiday. For example, assume the rescission period began on
                Wednesday, June 16, 2021. Consistent with the version of the specific
                business day definition in effect when the rescission period began, the
                creditor disclosed June 19, 2021, as the rescission period expiration
                date on the notice of the right to rescind. Because the rescission
                period began on or before June 17, 2021, Saturday, June 19, 2021, is a
                business day for purposes of determining the rescission period and the
                disclosed rescission period expiration date. In this example, the
                rescission period expired on Saturday, June 19, 2021; the original
                rescission period expiration date did not change as a result of the
                addition of Juneteenth as a Federal holiday. The Bureau notes, however,
                that for purposes of compliance with Sec. 1026.23(a)(3)(i) and
                (b)(1)(v), a creditor may provide a longer rescission period.
                Application to Specific TRID Provisions
                 As noted above, the Bureau is clarifying that the version of the
                specific business day definition that applies to the provisions
                discussed in this interpretive rule is the version in effect when the
                relevant time period begins. This section discusses how that guidance
                applies to TRID provisions that reference the specific business day
                definition.
                 Delivery of Loan Estimate prior to consummation. Section
                1026.19(e)(1)(iii)(B) provides that creditors generally must deliver or
                place in the mail the Loan Estimate to consumers no later than seven
                business days before consummation of the transaction.\13\ Consistent
                with the guidance described above, the Bureau concludes that the seven-
                business-day waiting period in Sec. 1026.19(e)(1)(iii)(B) is
                determined based on the version of the specific business day definition
                in effect on the date the creditor delivers the Loan Estimate or places
                it in the mail. For example, if a creditor delivered or placed the Loan
                Estimate in the mail on Monday, June 14, 2021, the creditor complied
                with Sec. 1026.19(e)(1)(iii)(B) if consummation occurred on or after
                Tuesday, June 22, 2021, because the Loan Estimate was delivered or
                mailed seven business days (including June 19, 2021) before
                consummation. The Bureau notes, however, that it would also be
                compliant for creditors to have considered June 19, 2021, a Federal
                holiday for purposes of Sec. 1026.19(e)(1)(iii)(B) because creditors
                may provide the Loan Estimate earlier than seven business days before
                consummation.
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                 \13\ The seven-business-day waiting period begins when the
                creditor delivers the Loan Estimate or places it in the mail, not
                when the consumer receives or is considered to have received the
                Loan Estimate. Comment 19(e)(1)(iii)-2.
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                 Mailbox rules. Section 1026.19(e)(1)(iv), (e)(4)(ii), and
                (f)(1)(iii) provide that if the Loan Estimate or Closing Disclosure, as
                applicable, is not provided to the consumer in person, the consumer is
                considered to have received the Loan Estimate or Closing Disclosure
                three business days after it is delivered or placed in the mail when
                determining compliance with the disclosure timing requirements in those
                sections.\14\ These are referred to herein as ``mailbox rules.'' The
                Bureau concludes that, for purposes of Sec. 1026.19(e)(1)(iv),
                (e)(4)(ii), and (f)(1)(iii), the three-business-day period is
                determined based on the version of the specific business day definition
                in effect on the date the creditor delivers the disclosures or places
                them in the mail.\15\ For example, if a creditor did not provide the
                Loan Estimate or Closing Disclosure to the consumer in person but
                delivered or placed it in the mail on Thursday, June 17, 2021, the
                consumer is considered to have received the Loan Estimate or Closing
                Disclosure on Monday, June 21, 2021. It would also be compliant for
                creditors to have considered June 19, 2021, a Federal holiday for
                purposes of the mailbox rules in Sec. 1026.19(e)(1)(iv), (e)(4)(ii),
                and (f)(1)(iii).
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                 \14\ In such circumstances, the creditor may, alternatively,
                rely on evidence that the consumer received the disclosures earlier.
                Comments 19(e)(1)(iv)-1 and -2 provide that if the Loan Estimate is
                not provided to the consumer in person (such as by mail or email),
                the creditor may, alternatively, rely on evidence that the consumer
                received the Loan Estimate earlier than three business days after it
                is delivered or placed in the mail. See also comments 19(e)(4)(ii)-1
                and 19(f)(1)(iii) 1 and -2.
                 \15\ Relatedly, Sec. 1026.19(e)(2)(i)(A) provides that neither
                a creditor nor any other person may impose a fee on a consumer in
                connection with the consumer's application for a mortgage
                transaction before the consumer has, among other things, received
                the Loan Estimate. While Sec. 1026.19(e)(2)(i)(A) does not refer to
                business days when referencing the consumer receiving the Loan
                Estimate, Sec. 1026.2(a)(6) lists the specific business day
                definition as applying to Sec. 1026.19(e)(2)(i)(A). The same
                interpretation that applies to the mailbox rules for purposes of
                determining the receipt of disclosures also applies to Sec.
                1026.19(e)(2)(i)(A).
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                 Receipt of revised Loan Estimate and Closing Disclosure prior to
                consummation. Section 1026.19(e)(4)(ii) provides, in part, that the
                consumer must receive any revised Loan Estimate no later than four
                business days prior to consummation.\16\ Section 1026.19(f)(1)(ii)(A)
                provides that the creditor must ensure that the consumer receives the
                Closing Disclosure no later than three business days before
                consummation. Unlike Sec. 1026.19(e)(1)(iii)(B), the Sec.
                1026.19(e)(4)(ii) and (f)(1)(ii)(A) timing requirements begin when the
                disclosures are received by the consumer and not when they are
                delivered or placed in the mail. However, as noted above, Sec.
                1026.19(e)(4)(ii) and (f)(1)(iii) provide that if the revised Loan
                Estimate or Closing Disclosure is not provided to the consumer in
                person, the consumer is considered to have received the revised Loan
                Estimate or Closing Disclosure three business days after it is
                delivered or placed in the mail.
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                 \16\ This provision also prohibits a creditor from delivering a
                revised Loan Estimate on or after the date on which the creditor
                provides the Closing Disclosure. 12 CFR 1026.19(e)(4)(ii).
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                 Thus, the Bureau concludes that the four- and three-business-day
                timing requirements in Sec. 1026.19(e)(4)(ii) and (f)(1)(ii)(A),
                respectively, are determined based on the version of the specific
                business day definition in effect on the date the creditor either
                provides the required disclosures to the consumer in person or, if not
                provided in person, the date the creditor delivers or places the
                required disclosures in the mail. For example, if a creditor provided
                the Closing Disclosure to the consumer in person on Thursday, June 17,
                2021, the creditor complied with Sec. 1026.19(f)(1)(ii)(A) if
                consummation occurred on or after Monday, June 21, 2021, because the
                Closing Disclosure was delivered in person no later than three business
                days (including June 19, 2021) before consummation. The Bureau notes,
                however, that it would also be compliant for creditors to have
                considered June 19, 2021, a Federal holiday for purposes of Sec.
                1026.19(e)(4)(ii) and (f)(1)(ii)(A) because creditors may provide the
                revised Loan Estimate or Closing Disclosure earlier than required.
                III. Regulatory Matters
                 This is an interpretive rule issued under the Bureau's authority to
                interpret Regulation Z, including under section 1022(b)(1) of the Dodd-
                Frank Act, 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.\17\
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                 \17\ 12 U.S.C. 5512(b)(1).
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                 By operation of section 130(f) of the Truth in Lending Act (TILA),
                no provision of TILA sections 130, 108(b), 108(c), 108(e), or 112
                imposing any liability applies to any act done or
                [[Page 44270]]
                omitted in good faith in conformity with this interpretive rule,
                notwithstanding that after such act or omission has occurred, the
                interpretive rule is amended, rescinded, or determined by judicial or
                other authority to be invalid for any reason.\18\
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                 \18\ 15 U.S.C. 1640(f); see also 12 U.S.C. 2617(b), 12 CFR
                1024.4 (similar protection conferred by the Real Estate Settlement
                Procedures Act from certain liability).
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                 As an interpretive rule, this rule is exempt from the notice-and-
                comment rulemaking requirements of the Administrative Procedure
                Act.\19\ Because no notice of proposed rulemaking is required, the
                Regulatory Flexibility Act does not require an initial or final
                regulatory flexibility analysis.\20\ The Bureau 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 Office of Management and Budget (OMB) approval
                under the Paperwork Reduction Act.\21\
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                 \19\ 5 U.S.C. 553(b).
                 \20\ 5 U.S.C. 603(a), 604(a).
                 \21\ 44 U.S.C. 3501 et seq.
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                 Pursuant to the Congressional Review Act,\22\ the Bureau will
                submit a report containing this interpretive rule 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 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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                 \22\ 5 U.S.C. 801 et seq.
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                IV. Signing Authority
                 The Acting Director of the Bureau, David Uejio, having reviewed and
                approved this document, is delegating the authority to electronically
                sign this document to Laura Galban, a Bureau Federal Register Liaison,
                for purposes of publication in the Federal Register.
                 Dated: August 5, 2021.
                Laura Galban,
                Federal Register Liaison, Bureau of Consumer Financial Protection.
                [FR Doc. 2021-17050 Filed 8-11-21; 8:45 am]
                BILLING CODE 4810-AM-P
                

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