The CFPB will use the Manual initially to supervise the more than 100 large banks, thrifts, and credit unions that are subject to the CFPB’s examination authority pursuant to the Dodd-Frank Act (those with total assets over $10 billion, as well as their affiliates). The Bureau’s examiners will also ultimately use the Manual to supervise non-depository consumer financial service companies (e.g., mortgage lenders), with the stated goal of promoting “fair, transparent, and competitive consumer financial markets where consumers can have access to credit and other products and services, and where providers can compete for their business on a level playing field where everyone has to play by the rules.”

The CFPB Examination Framework and Philosophy

While only certain entities will be subject to CFPB examination, the Manual outlines an examination approach that is illustrative of the Bureau’s bend on matters over which it has rulemaking authority. This is particular true of its view of its authority over matters it considers unfair, deceptive or abusive acts or practices (UDAAP).

Like other bank regulators, the CFPB will prepare for examinations by gathering and reviewing a wide array of regulatory and public data about an institution:  state and/or prudential regulator reports of examination and correspondence, enforcement actions, state licensing and registration information, complaint data, call reports, HMDA LARs, HAMP data, fair lending analyses, SEC or other securities-related filings, the institution’s website and advertising, and, among other things, “newspaper articles, web postings, or blogs that raise examination related issues.” The CFPB will then contact the institution about the examination and prepare its customized Information Request.

The CPFB’s “Risk Assessment” is a living document—a profile of a particular institution that will be maintained and used to guide its examination and supervision generally. As stated in the Manual (emphasis added):

CFPB’s Risk Assessment is designed to evaluate on a consistent basis the extent of risk to consumers arising from the activities of a supervised entity or particular lines of business within it and to identify the sources of that risk. “Risk to consumers” for the purpose of the CFPB Risk Assessment is the potential for consumers to suffer economic loss or other legally-cognizable injury (e.g., invasion of privacy) from a violation of Federal consumer financial law. The risk assessment includes factors related particularly to the potential for unfair, deceptive or abusive practices, or discrimination. Two sets of factors interact to result in a finding that the overall risk in a business or entity is low, moderate, or high. The first set of factors relate to the inherent risk in the particular line of business or the entity overall. The second set of factors is the quality of controls that manage and mitigate that risk. The Risk Assessment also includes a judgment, based on current or recent information, about the expected change in the overall risk: decreasing, increasing, or unchanged.

The Risk Assessment provides the basis for an institution’s “Supervision Plan”—the Bureau’s custom approach to supervising a particular depository institution and its affiliates and for allocating supervision resources. A sample Risk Assessment is provided beginning on page four of the Manual’s Part III.

As with any other bank regulatory examination, the examination process would conclude with an exit meeting with management, the assignment of a rating, and the production of a Report of Examination (“ROE”). Prior to delivery of the ROE, the CFPB will submit its draft report to the entity’s prudential bank regulator, if any. If the report concerns other types of regulated entities, opportunities for comment by state regulators will depend on whether CFPB is conducting joint or coordinated examinations with the relevant state regulators.

The CFPB will also require a meeting with a supervised entity’s board of directors or principals when or more of the following circumstances are present:

• The proposed compliance rating is “3,” “4,” or “5”;
• An informal supervisory agreement or formal enforcement action is recommended; or
• The supervised entity’s management, board, or principals requests such a meeting.

Unfair, Deceptive or Abusive Acts or Practices

One section of the Manual provides new insight into the CFPB’s intended use of its authority under Dodd-Frank to prohibit what it considers to be an “unfair, deceptive or abusive act or practice.” Under the Dodd-Frank Act, it is unlawful for any provider of consumer financial products or services to engage in any unfair, deceptive or abusive act or practice. The Act also provides CFPB with rulemaking authority and, with respect to entities within its jurisdiction, enforcement authority to prevent unfair, deceptive, or abusive acts or practices in connection with the provision of consumer financial product or services or offers to do so.

While standards for what is “unfair” or “deceptive” are somewhat established, the CFPB’s ability under Dodd-Frank to regulate practices it considers “abusive” is new territory. Under the Act, an act or practice is not “abusive” unless it:

1. Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or
2. Takes unreasonable advantage of –
   a. A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;
   b. The inability of the consumer to protect its interests in selecting or using a consumer financial product or service; or
   c. The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

Unlike its overview of the “unfair” and “deceptive” legal standards, the Manual does not—and arguably could not yet—provide examples of enforcement activity based on practices that are “abusive.” The Manual does, however suggest an approach to the new standard:

Based on the results of the risk assessment of the entity, examiners should review for potential unfair, deceptive, or abusive acts or practices, taking into account an entity’s marketing programs, product and service mix, customer base, and other factors, as appropriate. Even if the risk assessment has not identified potential unfair, deceptive, or abusive acts or practices, examiners should be alert throughout an examination for situations that warrant review.

Needless to say, the list of materials subject to CFPB review and transaction testing in a UDAAP analysis is comprehensive. More significantly, the template Risk Assessment provided in the Manual illustrates the CFPB’s potential reach. Many items on the Assessment’s “risk checklist” are qualitative and/or highly subjective:

“Products are bundled in a way that may obscure relative costs.”

“The terms of the product are subject to change at the discretion of the entity, and the entity has frequently made changes in the terms.”

“Complex products are marketed to consumers not likely to benefit from them or who may be likely to be harmed by them.”

CFPB architect Elizabeth Warren has said that the Bureau’s focus will be on improving disclosures, not prohibiting products. In the first iteration of the Bureau’s Examination Manual, there is room for both approaches. Describing an element of the test for “unfairness,” that the injury caused by an allegedly harmful product was “not reasonably avoidable,” the Manual states (emphasis added):

A key question is not whether a consumer could have made a better choice. Rather, the question is whether an act or practice hinders a consumer’s decision-making. For example, not having access to important information could prevent consumers from comparing available alternatives, choosing those that are most desirable to them, and avoiding those that are inadequate or unsatisfactory. In addition, if almost all market participants engage in a practice, a consumer’s incentive to search elsewhere for better terms is reduced, and the practice may not be reasonably avoidable.

The specific focus of this fourth round of testing is comparison shopping.  Consumers and the lending industry have been asked to compare two different types of loan products using the same version of the form.  The CFPB states that it wants to be sure that the disclosure actually helps consumers to understand the features of competing loan products, from the overall loan amount to estimates of tax and insurance costs.

The CFPB’s efforts in this area have generally met with approval from all interested parties.  The proposed form is more clear, concise and informative than either the existing TILA or RESPA disclosures.  For example, all of the useless “seller’s column” and “buyer’s column” information on the RESPA good faith estimate has been eliminated in favor of total dollar amounts for the services the consumer can shop for and for the services the consumer cannot shop for.  Implementing the new requirements will require systems changes, but we might finally arrive at a disclosure that eliminates useless information, reconciles the differences between TILA and RESPA, and that is easier to explain to borrowers.

Past efforts to reconcile TILA and RESPA disclosures were hampered by the fact that the Federal Reserve had primary regulatory authority for TILA and the Department of Housing and Urban Development had primary authority for RESPA.  The Dodd-Frank Act removed this roadblock by transferring these powers to the Bureau.

Regulatory changes will be needed in order for the model form to satisfy both TILA and RESPA requirements.  The Dodd-Frank Act directs the Bureau to propose rules and a model form for public comment by July 12, 2012 (one year after the designated transfer date).  The Bureau is well on its way toward producing the disclosure form for formal comment.

The Durbin Amendment:

What Does the Final Ruling Mean for Prepaid?

You can register for free online. Attendees are encouraged to submit in advance and without attribution, any questions they would like addressed during the webinar.  Please enter your questions when you register.

The Webinar will be presented by Judie Rinearson (Bryan Cave – New York), Linda Odom (Bryan Cave – Washington, D.C.) and Courtney Stolz (Bryan Cave – Washington, D.C.).

CLE credit for this webinar will be available for attendees in California, Georgia, Illinois, New York and Virginia.

Judith Rinearson leads Bryan Cave’s Stored Value and Prepaid Card Services Group and is a recognized authority in the areas of payment systems, electronic payments, stored value, travelers checks and check processing. She has more than 19 years of experience in the financial services industry, particularly in the areas of non-bank money services and payment products. She currently chairs the Government Relations Working Group for the NBPCA and the Payment Card Fraud Task Force for the ABA’s Cyberspace Law Committee. She also serves as counsel to the recently established Retail Gift Card Association.

Linda Odom concentrates her practice in technology, contracts and intellectual property matters with significant experience in the area of new financial service products. She has assisted prepaid clients in developing and structuring complex card and mobile prepaid payment products and has negotiated agreements with program managers, processors, bank issuers and acquirers. Linda has been working in the technology-based financial services area since 1996 when she negotiated the agreements to form the technology platform for NetBank, the world’s second Internet-only bank.

Courtney Stolz concentrates her practice on banking, electronic commerce, and privacy. Her clients include internet banks, as well as other premier financial services providers that rely on Internet or other non-traditional delivery channels. She advises on the legal requirements imposed under the money transmitter licensing laws, check casher laws, the Bank Secrecy Act, the Anti-Money Laundering Act and laws related to gift cards, prepaid cards, bill payment services and other funds transfers.

This rule renumbers and issues these former OTS regulations as new OCC regulations, with nomenclature and other technical amendments to reflect OCC supervision of federal savings associations. These newly issued OCC regulations will supersede OTS regulations for purposes of OCC supervision of federal savings associations, as provided by the Act.

This interim final rule is part of a larger OCC review of OCC and OTS regulations to determine what changes are needed for the transition to OCC supervision of federal savings associations. As a continuation of this review, the OCC will consider more comprehensive substantive amendments to these regulations, as appropriate, later this year.

• Preemption standard for national banks and federal thrifts is altered
• Codification of the requirement that a bank holding company act as a “source of strength” for any subsidiary that is a depository institution
• Federal Reserve is authorized to issue orders and regulations relating to the capital requirements of holding companies
• Heightened capital requirements for interstate acquisitions
• New restrictions on insider asset sales and lending
• Truth in Lending Act exemption threshold for certain credit transactions and consumer leases is increased from $25,000 to $50,000 (i.e., TILA coverage is increased)
• Repeal of Regulation Q and the underlying statute (permitting payment of interest on demand deposit accounts)
• Increase in next-day availability requirement for deposit items not themselves subject to next-day availability under the Expedited Funds Availability Act from first $100 to first $200
• Required credit score disclosure under the Fair Credit Reporting Act where adverse action is based in whole or part on a consumer report

We will continue to follow rulemaking and enforcement of the Act and provide updates linked to our dedicated Dodd-Frank page.  Regulators (and Barney Frank) are celebrating the law’s milestone today by testifying before the U.S. Senate on how the Act has improved supervision.  Stay tuned.

Under the final rules, issuers are permitted to charge a base fee of 21 cents plus 5 basis points (.05%) multiplied by the full value of the transaction, to cover fraud losses.  In addition, a 1 cent per transaction fraud prevention adjustment was also proposed, for those issuers who meet eligibility requirements (such as having fraud prevention and data security policies and procedures in place, which must be updated and certified on an annual basis.)  The fraud prevention adjustment rules are new, and are open for comment through September 30, 2011.

Under the new rules, a covered $50 debit or prepaid transaction would have a total possible interchange fee of  = 23.5¢ [21¢ + 2.5¢ ($50 x .05  /100) + 1¢], and a $500 transaction would have a total possible interchange fee of  = 47¢  [21 ¢ + 25¢ ($500 x.05 /100) + 1¢].   While this is a significant improvement over the original suggested cap of 12¢, it still represents a substantial decrease in interchange revenues for both prepaid and debit card issuers.

Among the more controversial aspects of the Final Rules were:

• The decision not to require payment networks to implement a two-tier system that would ensure that exempt entities, such as banks with less than $10 billion in assets, will receive the benefits of their exemptions.   Instead, the Board will be surveying and publishing average interchange rates for exempt and non-exempt banks, in order to monitor the effectiveness of the small bank exemption.
• The decision to exclude “three-party systems” in which the same entity is the Issuer and the Acquirer for the debit or prepaid card. Also excluded are ATM and ACH payment transactions.
• The full exemption for all products using a bona fide trust arrangement that meets Internal Revenue Code requirements -  which benefits many HSA/HRA card issuers.
• The additional requirement for exempt reloadable general-use prepaid cards to be the sole means for the cardholder to access the funds.  Thus, while an exempt reloadable prepaid card may be loaded via ACH, the cardholder cannot use ACH or convenience checks to make payments from the prepaid card account – without the issuer losing the exemption.
• The requirement that the payment networks develop policies and procedures to determine which entities are eligible for exemptions.
• The decision to include within the scope of the regulations both business and personal accounts, as well as prepaid cards that rely on “selective authorization” such as University cards and Mall cards.

The Board also approved rules governing routing and exclusivity, requiring issuers to offer two unaffiliated networks for routing debit transactions on each debit or prepaid product. The cards must have either one signature network and unaffiliated one PIN network, or a two unaffiliated PIN networks or two unaffiliated signature networks.

The new Interchange Rules go into effect on October 1st, 2011, as opposed to July 21 as originally dictated by the Durbin Amendment.  Most of the Routing Rules go into effection on April 1, 2012, although some provisions (relating to prepaid cards and HSA/HRA cards go into effect on April 1, 2013.

At a publicly held board meeting on June 29, 2011, the Federal Reserve Board approved its final interchange rule, entitled Regulation II, “Debit Card Interchange Fees and Routing,” setting the maximum permissible swipe fee an issuer may receive for an electronic debit transactions, adopting routing requirements and applying unanticipated new restrictions to General Purpose Reloadable (GPR) cards to take advantage of the interchange cap exemption. In addition—to the relief of the banking industry—the Fed announced that the rules on pricing requirements will go into effect on Oct. 1, 2011, as opposed to July 21 as dictated by the Durbin Amendment.

Under the final rule, issuers are permitted to charge a base fee of 21 cents (representing 80 percent of an issuer’s average transaction cost), plus five basis points on the full value of the transaction to cover fraud losses (representing the average per-transaction fraud loss of the median issuer). The fraud loss recoupment (referred to by the Fed as an “ad valorem” or “according to value” charge) came as a surprise to most and is viewed as a big win for the banking industry. The Fed also issued an interim final rule that would allow issuers to charge an additional fraud prevention adjustment of one cent if the bank meets, and certifies compliance of, certain security standards. The Fed requested comments on whether the one-cent cap should be adjusted.

In addition, the Fed approved rules governing routing and exclusivity, requiring issuers to offer two unaffiliated networks for routing debit transactions.

Perhaps the biggest surprise in the final rule is that GPR cards will not benefit from the interchange cap exclusion if they allow funds to be accessed through means other than the card.

Open Board Meeting

At the board meeting, Chairman Ben Bernanke stated that the interchange rule has been one of its most challenging rulemakings under the Dodd-Frank Act to date. The Fed had to consider myriad players impacted by debit interchange, as demonstrated by the more than 11,000 comment letters the Fed received.

After Bernanke’s introductory remarks, Mark Manuszak, Federal Reserve Board staff member and economist, discussed the standards established for assessing whether the amount of an interchange transaction fee is “reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” After mentioning the comments received by merchants versus issuers and networks, he stated that the staff concluded that a broader range of costs should be included as the basis for the interchange fee standard. Thus, the “allowable costs” should include not only the incremental cost of authorizing, clearing and settling the transaction but also certain other costs that affect an electronic debit transaction, such as network processing fees and costs associated with connectivity, equipment, software and transaction monitoring. Most significantly, Manuszak said that a portion of fraud losses should be incorporated in this assessment through the ad valorem component.

Manuszak also discussed network exclusivity and the routing of debit card transactions, stating that the final rule adopts the first alternative in the proposed rules, requiring two unaffiliated network options per card (versus per authentication method). He explained that under the final rule issuers and networks remain prohibited from inhibiting a merchant’s ability to direct the routing of debit card transactions over any network. Manuszak added that the network exclusivity rules become effective on Oct. 1, 2011, for networks and April 1, 2012, for issuers—except with respect to nonreloadable and reloadable general-use prepaid cards, which will have a postponed effective date of April 1, 2013 to allow time for technological developments. As a result, nonreloadable general-use prepaid cards sold prior to the effective date are not subject to the prohibition on network exclusivity. Furthermore, GPR cards sold prior to the effective date are not subject to the prohibition on network exclusivity unless and until they are reloaded—if the card is reloaded prior to April 1, 2013, the card must be in compliance by May 1, 2013; if the card is reloaded after April 1, 2013, then it must be compliant 30 days after the date of reloading.

Following Manuszak’s summary, Fed members posed various questions to the staff, including how the rule is expected to affect consumers to influence innovation, and how the staff assessed the impact of interchange regulation in other countries. Of particular note, the staff addressed how issuers with under $10 billion in assets would be impacted by the final rule. At one point, Daniel Tarullo recommended the Fed take steps to enforce the statutory exemption for small issuers. Bernanke followed by announcing plans to monitor the developments in the debit card market, including collecting and publishing data related to interchange rates charged by each network both covered and exempt issuers.

Finally, the members of the Board (consisting of Bernanke, Vice Chair Janet Yellen, Elizabeth Duke, Tarullo and Sarah Bloom Raskin) cast their votes, with all except Duke approving the final rule. In a brief comment in opposition to the final rule, Duke targeted prepaid cards, and called upon the Consumer Financial Protection Agency to ensure that more consumer protections be established over such cards.

Treatment of Prepaid Cards

The final rule still exempts reloadable prepaid cards not marketed/labeled as a gift card. These cards, however, are eligible for the exemption only if they are the only means of accessing the underlying funds or unless all remaining funds are provided to the cardholder in a single transaction. Thus, as stated in the Official Board Commentary, “reloadable cards that provide access to the funds underlying the card through check, ACH, wire transfer or other method (unless these other means of access were used solely for a one-time cash-out of the remaining balance on the card) would not meet the [exemption].” It appears that the restriction on ACH access relates solely to the cardholder’s ability to access the funds and will not impact on cards that have funds automatically loaded via ACH by an employer, governmental entity, etc.

The rule provides that general-use prepaid cards with underlying funds held in an omnibus account (and not separate accounts held by or for the benefit of individual cardholders) are still eligible for the exemption. In addition, the rule still prohibits reloadable prepaid cards from imposing overdraft fees or a fee for the first in-network ATM withdrawal per calendar month.

Furthermore, the Official Board Commentary adds a new comment on “hybrid cards,” i.e., cards that offer both combined credit and debit features. By way of example, the commentary states that if a card permits a cardholder to initiate a transaction that debits an account or funds underlying a prepaid card, then the card may be considered a debit card.

Industry Response

Representatives from merchant groups, such as the National Retail Federation and the Retail Industry Leaders Association, have already criticized the final rule, stating that the elevated caps are not “reasonable and proportional” and accusing the Fed of caving in to pressure from big banks and credit card companies.

The banking industry, on the other hand, expressed appreciation for the Fed’s willingness to mitigate the proposed rules’ detrimental impacts, while still voicing concern over government price controls. While the final rule permits a maximum interchange fee of 24 cents for the average $40 debit card transaction (doubling the initially proposed cap of 12 cents per transaction), American Bankers Association President Frank Keating acknowledged that the rule still represents a 45 percent loss in revenue for banks.

Among the prepaid industry, greatest concern has been raised about the impact of the new restriction on GPR cards that are exempt from the lower interchange rate. The final rule does not permit GPR cards to benefit from the exclusion if they allow funds to be accessed through means other than the card. The practical impact will be to eliminate convenience checks, remittance and bill payment services from many GPR products that are relied upon by the underbanked and underserved, making it more difficult and expensive for such cardholders to access basic financial services.

The NPRM revises OCC rules related to internal agency functions and operations (and integrates references to the OTS and federal thrifts, where applicable), including those related to OCC organization, availability of information under FOIA, release of non-public OCC information and post-employment restrictions for senior examiners. The NPRM also amends the OCC’s assessment fee rule to include federal savings associations and to synchronize payment due dates. In addition, the NPRM implements the Dodd Frank three-year moratorium on changes in control of credit card banks, industrial banks and trust banks, where the change would result in direct or indirect control by a commercial firm. 

Perhaps most significant, however, are the changes made to the OCC regulations governing preemption and the OCC’s visitorial authority. As mandated by Dodd Frank, these changes will: 

• Eliminate preemption of state law for national bank operating subsidiaries, agents and affiliates.
• Remove language permitting field preemption (that is, preemption over an entire body of law, even if there is no conflict, because federal law “occupies the field”). 
• Implement statutory changes made by Dodd Frank as to when state consumer financial laws may be preempted, based in part on the Barnett standard for conflict preemption. 
• Revise the OCC’s visitorial powers rule to conform to the Supreme Court’s Cuomo decision, recognizing the ability of state attorneys general to bring enforcement actions in court to enforce non-preempted state laws against national banks. 
• Apply the national bank and national bank subsidiary preemption and visitorial powers standards to federal thrifts and their subsidiaries. (The affected OTS preemption regulations will be repealed.)

Dodd Frank permits federal preemption of state consumer financial laws in three situations: (1) when application of the state law would have a “discriminatory effect” on national banks as compared to the effect on the state’s state-chartered banks, (2) the state’s consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers, as established by the Supreme Court in the Barnett case or (3) the state law is preempted by another provision of federal law (other than the banking laws contained in title 12 of the U.S. Code).

The OCC has interpreted item (2) above as referring to conflict preemption as articulated in Barnett on the whole, rather than just the “prevents or significantly interferes” language used in the Dodd Frank, which is one of many formulations of conflict preemption articulated in Barnett. The NPRM posits that the specific language used in Dodd Frank may have been meant to clarify that standard in comparison to the OCC’s current rule preempting state laws that “obstruct, impair or condition” a national bank’s powers, which has created ambiguities and misunderstandings.

Because Dodd Frank preserves the Barnett conflict preemption standard, OCC rules and existing precedent consistent with the Barnett analysis, including judicial decisions and interpretations, are preserved. Even where existing precedent cites the specific language used in the current OCC regulations, that precedent remains valid because the OCC’s regulations were “premised on principles drawn from the Barnett case.” However, going forward, “that formulation would be removed as a regulatory preemption standard.”

Dodd Frank contains a number of new procedural and consultation requirements for preemption decisions and clarifies the criteria for judicial review of those determinations. The OCC must make preemption determinations under the Barnett standard by regulation or order on a case-by-case basis, which means a determination by the Comptroller as to the impact of a “particular” state consumer financial law on “any national bank that is subject to that law,” or the law of any other states with substantially equivalent terms. When making such a determination, the OCC must first consult with and take into account the views of the CFPB. There must be substantial evidence, made on the record of the proceeding, to support an order or regulation declaring a state law inapplicable under the Barnett standard. Finally, the OCC must publish a list of its preemption determinations every quarter, and must conduct a review, subject to notice and comment, every five years after issuing a decision preempting a state consumer financial law.

The NPRM expands upon the letter sent by the OCC to Sen. Tom Carper (D-Dela.) in response to the Senator’s request for clarification on how it would interpret particular aspects of the preemption provisions of the Dodd-Frank Act. The OCC has requested comments on all aspects of the NPRM, which are due by June 27, 2011.

One aspect of the proposed rules being developed by the FDIC concerns Section 210(s) of the Dodd-Frank Act dealing with recoupment of compensation from senior executives and directors of a failed nonbank financial company who were substantially responsible for the failed condition of the company. Section 201(s) provides that the FDIC may seek to recover “any compensation” paid to those parties in the previous two years. This would include salaries, bonuses, deferred compensation, golden parachute payments, stock option plans and profits realized from the sale of securities in the covered company. The proposed rule builds on this anti-incumbent theme by creating a presumption that a senior officer or director is substantially responsible for the company’s failure if they served as chairman of the board, CEO, president, CFO or any other position where they had responsibility for the strategic, policymaking, or company-wide operational decisions of the company. The presumption is rebuttable by providing evidence that the person did in fact perform their duties with the requisite skill and care. 

It is unclear whether the FDIC position concerning the presumption of culpability will survive as the final rules are developed and whether it will stand up to legal scrutiny if it remains in the rules. For example, the Dodd-Frank Act itself does not appear to move the evidentiary burden to the directors and officers. It is also difficult to understand the interplay of the FDIC proposed rule with state laws that provide gross negligence standards for liability for officers and directors as well as defenses based on the business judgment rule. Moving the burden of proof to the directors and officers upends our normal understanding of how the government normally pursues parties against whom it is seeking to impose a monetary penalty. The issue for defendants in such actions will be whether the imposition of the sanction by the FDIC can be opposed as a practical matter.