InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Special Alert: Trump Administration Initiates "Regulatory Freeze"
On January 20, Reince Priebus, Chief of Staff to President Trump, issued a memorandum to the heads of executive departments and agencies initiating a regulatory review to be headed by the Director of the Office of Management and Budget (“OMB”). Congressman Mick Mulvaney (R-SC) has been nominated to fill that position.
On behalf of the President, the memorandum asks the following of the agency and department heads:
- No new regulations: “[S]end no regulation to the Office of the Federal Register (the ‘OFR’) until a department or agency head appointed or designated by the President after noon on January 20, 2017, reviews and approves the regulation.”
- Withdraw final but unpublished regulations: “With respect to regulations that have been sent to the OFR but not published in the Federal Register, immediately withdraw them from the OFR for review and approval.”
- Delay the effective date of published but not yet effective regulations: “With respect to regulations that have been published in the OFR but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum” and consider notice and comment to further delay the effective date or to address “questions of fact, law, or policy.” Following the delay, regulations that “raise no substantial questions of law or policy” would be allowed to take effect. For those regulations that do raise such questions, the agency or department “should notify the OMB Director and take further appropriate action in consultation with the OMB Director.”
Rulemakings subject to statutory or judicial deadlines are exempt, and the OMB Director has the authority to grant further exemptions for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.”
Click here to read full special alert
* * *
If you have questions about the “freeze” or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
State Attorneys General Seek to Intervene in PHH v. CFPB Case
On January 23, the Attorneys General of 16 states and the District of Columbia (the State Attorneys General) filed a motion requesting the permission of the D.C. Circuit to intervene in the CFPB’s petition for en banc reconsideration in PHH Corp. v. CFPB. In the motion, the State Attorneys General argue that they have a vital interest in the matter because the October 2016 panel decision subjecting the CFPB Director to “at will” removal by the President “threatens to undermine the ability of the State Attorneys General [to work with the CFPB] to bring effective civil enforcement and coordinated regulatory actions free from political influence and interference.”
Noting the possibility that President Trump may seek to remove CFPB Director Cordray before the petition for rehearing is resolved or refuse to pursue an appeal to the Supreme Court if the panel decision stands, the State Attorneys General raise the concern that “[t]he incoming administration … may not continue an effective defense of the statutory for-cause protection of the CFPB director.” Therefore, because “[a] significant probability exists that the pending petition for rehearing will be withdrawn, or the case otherwise rendered moot,” the State Attorneys General argue that the D.C. Circuit should allow them to intervene to protect their interests.
In addition to the District of Columbia, the motion was filed on behalf of the Attorneys General for the following states: Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, and Washington. The filing of the motion was announced by Connecticut Attorney General George Jepsen, whose office prepared the initial draft.
Special Alert: Trump Administration Initiates “Regulatory Freeze”
Buckley Sandler Special Alert
On January 20, Reince Priebus, Chief of Staff to President Trump, issued a memorandum to the heads of executive departments and agencies initiating a regulatory review to be headed by the Director of the Office of Management and Budget (“OMB”). Congressman Mick Mulvaney (R-SC) has been nominated to fill that position.
On behalf of the President, the memorandum asks the following of the agency and department heads:
- No new regulations: “[S]end no regulation to the Office of the Federal Register (the ‘OFR’) until a department or agency head appointed or designated by the President after noon on January 20, 2017, reviews and approves the regulation.”
- Withdraw final but unpublished regulations: “With respect to regulations that have been sent to the OFR but not published in the Federal Register, immediately withdraw them from the OFR for review and approval.”
- Delay the effective date of published but not yet effective regulations: “With respect to regulations that have been published in the OFR but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum” and consider notice and comment to further delay the effective date or to address “questions of fact, law, or policy.” Following the delay, regulations that “raise no substantial questions of law or policy” would be allowed to take effect. For those regulations that do raise such questions, the agency or department “should notify the OMB Director and take further appropriate action in consultation with the OMB Director.”
Rulemakings subject to statutory or judicial deadlines are exempt, and the OMB Director has the authority to grant further exemptions for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.”
Click here to read full special alert
If you have questions about the “freeze” or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
House GOP Report Claims CFPB Violated APA
On January 18, GOP members of the House Financial Services Committee released “The CFPB’s Vitiated Legal Case Against Auto-Lenders”, an investigative report prepared by GOP members who are of the belief that the CFPB likely has and continues to violate the Administrative Procedure Act. Relying mostly on internal CFPB documents obtained by the committee, the report focuses on the Bureau’s 2015 rule authorizing it to supervise larger participants in the auto lending market. In an accompanying press release, Committee Chairman Rep. Jeb Hensarling noted that the CFPB likely violated federal law when CFPB Director Richard Cordray failed to “heed CFPB attorneys who advised him to publish a list of institutions the Bureau believed would be subject to the proposed [auto-lending] rule” and/or “re-open the public comment period after it had closed.”
The report was released amid uncertainty over the fate of Director Cordray as the new administration assumes office. As previously covered in InfoBytes, a group of Democratic senators sent a letter Jan. 10 to President-elect Trump urging him not to dismiss Cordray, and noting that an attempt by Trump to fire him would be hard-pressed to withstand a legal challenge. This latest investigative report was the third released by GOP members on the panel over the last 14 months concerning CFPB efforts to regulate auto lenders—which Rep. Hensarling describes as “dangerously out-of-control,” and “unconstitutional.”
FTC Chief Ramirez Announces Resignation
On January 13, the FTC announced that Chairwoman Edith Ramirez will be stepping down effective February 10. Chairwoman Ramirez was appointed by President Barack Obama and has served as a commissioner since April 2010. She became chairwoman in March 2013, after former FTC Chairman Jon Leibowitz resigned. Her departure means that President-elect Donald Trump will have the chance to fill three vacancies at the agency.
Trump Nominates Jeff Sessions to be Next Attorney General
On November 18, President-elect Donald Trump announced that he has chosen Sen. Jefferson Sessions (R-Ala.), to become the next U.S. Attorney General. Sessions served as the U.S. Attorney for the Southern District of Alabama for 12 years and was the state's attorney general for two years. Trump also announced his intent to nominate U.S. Rep. Mike Pompeo (R-Kan.) as Director of the CIA and Lt. Gen. Michael Flynn as Assistant to the President for National Security Affairs.
CFPB Requests Rehearing of Decision Threatening Agency's Structure
Earlier today, the CFPB filed its much-anticipated response in PHH Corp. v. CFPB, requesting reconsideration by the full D.C. Circuit. As discussed in our special alert, on October 11, 2016, a three-judge panel of the D.C. Circuit vacated the CFPB’s $109 million penalty against PHH under the Real Estate Settlement Procedures Act (RESPA). In addition, a majority of the panel held that, to resolve a constitutional defect in the CFPB’s structure, the Director was removable by the President at will, meaning that President Trump could remove Director Cordray upon taking office. However, the panel’s decision is stayed until seven days after the court rules on the CFPB’s request.
Rather than proceeding directly to the Supreme Court, the CFPB proceeded as expected by requesting rehearing en banc by the full D.C. Circuit, which is generally disfavored and granted only for matters of “exceptional importance.” Perhaps most significantly, the Bureau’s petition does not request rehearing of the panel’s conclusion that RESPA’s three-year statute of limitations applied to administrative as well as judicial actions brought under that statute.
The CFPB’s petition argues that the panel’s constitutional ruling on the CFPB’s structure should be reheard because it “sets up what may be the most important separation-of-powers case in a generation.” Specifically, the Bureau argues that the panel’s determination that a multi-member commission is an essential component of an independent agency runs contrary to Supreme Court precedent and “unduly limits Congress’s flexibility to respond to the various crises of human affairs … by creating independent administrative agencies headed by a single director.” The Bureau further states that the panel’s reasoning “may affect not only the Bureau but also other agencies headed by a single director removable only for cause,” such as the Social Security Administration, Federal Housing Finance Agency, and the Office of Special Counsel.
The Bureau also asks the D.C. Circuit to rehear the panel’s determination that RESPA permits lenders and mortgage insurers to enter into tying arrangements under which the lender refers mortgage insurance businesses to the insurer in exchange for the insurer purchasing reinsurance from the lender’s affiliate. In support of this request, the Bureau argues that “the panel’s decision misinterpreted [RESPA] in a manner that so fundamentally defeats the statutory purpose [of prohibiting kickbacks] as to warrant rehearing en banc.” Specifically, the Bureau states that “[t]he panel’s reading of the statute would permit any mortgage lender to condition referrals on the purchase of goods or services in any related or unrelated business line. Such schemes flout the core purposes of RESPA.”
Under the D.C. Circuit’s rules, PHH is not permitted to file a response to the CFPB’s petition unless ordered by the court to do so. However, the court will not modify the panel’s opinion without allowing PHH to respond to the petition. There is no deadline for action by the court.
Election Results: Preliminary Thoughts and Reactions
As a result of last Tuesday’s election, Republicans will control the White House and both houses of Congress in 2017. It is likely there ultimately will be some significant changes affecting financial services regulation and enforcement, but they will take time to implement. The President-elect has articulated sympathy for less regulation and opposition to the Dodd-Frank Act but also an unconventional economic populism. The Congressional Republicans have already prepared, and in some cases passed, more specific changes to limit and cabin the CFPB. We anticipate efforts focused on changing the CFPB Director and CFPB structure, reduced regulation that may encourage product innovation (particularly in the FinTech space), and potentially less emphasis on certain Department of Justice (“DOJ”) enforcement initiatives such as fair lending and the Residential Mortgage-Backed Securities (“RMBS”) task force. Nonetheless, we expect continued enforcement and supervisory activity, including by states and by prudential regulators that are less directly tied to shifting political winds.
Click here to read the full special alert
* * *
Questions regarding the matters discussed in this alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- Jeremiah S. Buckley, (202) 349-8010
- Joseph M. Kolar, (202) 349-8020
- John P. Kromer, (202) 349-8040
- Jon D. Langlois, (202) 349-8045
- Jeffrey P. Naimon, (202) 349-8030
- Clinton R. Rockwell, (310) 424-3901
- Christopher M. Witeck, (202) 349-8051