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Financial Services Law Insights and Observations

CFPB ratifies prior regulatory actions in wake of Seila Law

Agency Rule-Making & Guidance CFPB Seila Law Payday Rule U.S. Supreme Court

Agency Rule-Making & Guidance

On July 7, the CFPB, “out of an abundance of caution,” ratified several previous actions, including the large majority of the Bureau’s existing regulations, following the U.S. Supreme Court’s opinion in Seila v. Consumer Financial Protection Bureau. As previously covered by a Buckley Special Alert, the Court held that, while the clause in the Consumer Financial Protection Act that requires cause to remove the director of the CFPB violates the constitutional separation of powers, the removal provision could—and should—be severed from the statute establishing the CFPB, rather than invalidating the entire statute. According to the Bureau’s announcement, the action ratifies most regulatory actions taken by the Bureau from January 4, 2012 through June 30, 2020, and “provides the financial marketplace with certainty that the rules are valid in light of the Supreme Court decision in Seila Law.” The Bureau noted, however, that the ratification does not include two actions: (i) the July 2017 “Arbitration Agreements” rule, which was disapproved following the approval by President Trump of a joint resolution under the Congressional Review Act that provides “the ‘rule shall have no force or effect’”; and (ii) the November 2017 “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule (Payday Rule), for which the Bureau previously revoked the rule’s mandatory underwriting provisions. Both of these actions are not within the scope of the ratification, the Bureau stated, noting, however, that it has separately ratified the Payday Lending Rule’s payment provisions.

The Bureau is also considering whether to ratify other legally significant actions, such as certain pending enforcement actions, and stated it will make separate ratifications, if appropriate. However, the Bureau stressed it “does not believe that it is necessary for this ratification to include various previous Bureau actions that have no legal consequences for the public, or enforcement actions that have finally been resolved.” Additionally, because the ratification is not a “rule” or “rule making” as defined by the Administrative Procedure Act (APA), since it is “not an ‘agency statement of general or particular applicability and future effect’” and is “not ‘formulating, amending, or repealing a rule,’” the Bureau contended it is not subject to the APA’s notice-and-comment procedures.

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