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On June 29, the U.S. House of Representatives approved resolution H.J. 90, along party lines, which would reverse the OCC’s final rule (covered by a Buckley Special Alert) to modernize the regulatory framework implementing the Community Reinvestment Act (CRA). As previously covered by InfoBytes, Chair of the House Financial Services Committee, Maxine Waters (D-CA) and Chair of the Subcommittee on Consumer Protection and Financial Institutions, Gregory Meeks (D-NY) introduced the resolution, with Waters criticizing the OCC’s decision to move forward with the rule “despite the Federal Reserve and the FDIC—the other regulatory agencies responsible for enforcing CRA—declining to join in the rulemaking.” While the resolution is unlikely to pass the Senate, the White House released a Statement of Administration Policy, which opposes the resolution and states that the President’s advisors will recommend he veto the action.
On June 11, Chair of the House Financial Services Committee, Maxine Waters (D-CA) and Chair of the Subcommittee on Consumer Protection and Financial Institutions, Gregory Meeks (D-NY), introduced a Congressional Review Act resolution to reverse the OCC’s final rule to modernize the regulatory framework implementing the Community Reinvestment Act (CRA). The OCC’s final rule (covered by a Buckley Special Alert), while technically effective October 1, provides for at least a 27-month transition period for compliance based on a bank’s size and business model. However, Waters criticized the OCC’s decision to move forward with the rule “despite the Federal Reserve and the FDIC—the other regulatory agencies responsible for enforcing CRA—declining to join in the rulemaking.” Waters argued that the final rule “will result in disinvestment in many low- and moderate-income communities,” with Meeks stating that the OCC’s decision to “put forward a rushed, incomplete rule. . .will harm the very communities the CRA is meant to support.”
On April 11, acting Director of the Office of Management and Budget (OMB), Russel Vought, sent a memorandum to the heads of all executive agencies announcing that on May 11, agencies will be required to submit all regulatory guidance materials to the Office of Information and Regulatory Affairs (OIRA) for review prior to publication. The memo asserts that the Congressional Review Act (CRA) “applies to more than just notice-and-comment rules; it also encompasses a wide range of other regulatory actions, including, inter alia, guidance documents, general statements of policy and interpretive rules” and therefore, agencies should not publish a regulatory action in the Federal Register without first submitting the document to OIRA to determine whether it is considered a “major rule” under the CRA. The CRA defines a “major rule” as one having (i) an annual effect on the economy of at least $100 million; (ii) a major increase in costs or prices for consumers, individual industries, or federal and state governments; or (iii) significant adverse effects on competition, employment, and U.S.-based enterprises. Should OIRA consider the regulatory action to be a “major rule,” the rule will be submitted to Congress with OIRA’s report and will not become effective sooner than 60 days after its submission. The memo instructs agencies to provide OIRA a quantitative analysis, which includes costs, benefits, and transfer impacts relative to a baseline, “when reasonably possible.” Additionally, the agency’s analysis should include whether the regulatory action would impose a disproportionate cost on a particular group or place a significant burden on the economy.
Trump signs legislation repealing CFPB auto guidance, Mulvaney praises action; CFPB to reexamine ECOA requirements
On May 21, President Trump signed resolution S.J. Res. 57, which repeals CFPB Bulletin 2013-02 on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The president’s signature completes the disapproval process under the Congressional Review Act (CRA), which began after the Government Accountability Office (GAO) issued a letter in December 2017 to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA. The Senate passed the disapproval measure in April and the House approved it in the beginning of May. (Previously covered by InfoBytes here.)
The repeal responds to concerns that the bulletin improperly attempted to regulate auto dealers, which the Dodd-Frank Act excluded from the Bureau’s authority. In a statement after the president’s signing, CFPB acting Director Mick Mulvaney praised the action and thanked the president and Congress for “reaffirming that the Bureau lacks the power to act outside of federal statutes.” He also stated that the repeal “clarifies that a number of Bureau guidance documents may be considered rules for purposes of the CRA, and therefore the Bureau must submit them for review by Congress. The Bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission.”
Additionally, acting Director Mulvaney announced plans to reexamine the requirements of ECOA, “[g]iven a recent Supreme Court decision distinguishing between antidiscrimination statutes that refer to the consequences of actions and those that refer only to the intent of the actor.” Although the decision is not identified, it is likely the June 2015 Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which concluded that disparate impact claims are permitted under the Fair Housing Act but acknowledged some limitations on its application. (Covered by a Buckley Sandler Special Alert.)
On May 8, the House voted to repeal, under the Congressional Review Act (CRA), CFPB Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). As previously covered by InfoBytes, the Senate approved the resolution on April 18 and the White House issued a Statement of Administrative Policy supporting the Senate resolution; it is expected that President Trump will sign the measure soon.
If the measure is successful, this would be the first time that Congress has used the CRA to repeal a regulatory issuance outside the statute’s general 60-day period. In December 2017, the Government Accountability Office (GAO) issued a letter to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA, which allowed for the Senate to introduce the resolution measure years after the CFPB released the Bulletin.
On April 18, the Senate voted to strike down, under the Congressional Review Act, the CFPB’s Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The vote follows a December 2017 letter issued by the Government Accountability Office (GAO) to Senator Pat Toomey (R-Pa) stating that the Bulletin is a “general statement of policy and a rule” that is subject to override under the Congressional Review Act (CRA). As previously covered by InfoBytes, GAO reasoned that the CRA’s definition of a “rule” includes both traditional rules, which typically require notice to the public and an opportunity to comment, and general statements of policy, which do not. GAO concluded that the Bulletin meets this definition “since it applies to all indirect auto lenders; it has future effect; and it is designed to prescribe the Bureau’s policy in enforcing fair lending laws.” The measure has been sent to the House and is expected to be voted on soon. On April 17, the White House issued a Statement of Administrative Policy which supported the Senate resolution nullifying the guidance, stating that if the resolution were to be presented to the president, his advisors would recommend he sign it. If the measure is successful, this would be the first time that Congress has used the CRA to repeal a regulatory issuance outside the statute’s general 60-day period.
On March 22, Senator Moran, R-Kan, with 15 GOP co-sponsors introduced a resolution under the Congressional Review Act to block the CFPB’s Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The resolution follows a December 2017 letter issued by the Government Accountability Office (GAO) to Senator Pat Toomey (R-Pa.) stating that the Bulletin is a “general statement of policy and a rule” that is subject to override under the CRA, previously covered by InfoBytes here.
On the same day, Senator Graham, R-SC, introduced a resolution to overturn the CFPB’s final rule addressing payday loans, vehicle title loans, and certain other extensions of credit. A similar resolution was introduced in the House in December 2017 by a group of bipartisan lawmakers. As previously covered by InfoBytes, while acting Director Mick Mulvaney has suggested he would not seek his own repeal of the Bureau’s rule but may “reconsider” it, he has expressed his support for the Congressional measures to block the rule. Additionally, according to media reports, the CFPB has recently dropped a case against an online payday loan company and Mulvaney is currently reviewing whether to continue three other investigations into lenders of similar products.
State AGs file protective petition to stop rollback of net neutrality rules; Senate Democrats announce plans to reverse FCC rule
On January 16, a coalition of 22 state attorneys general filed a protective petition for review in the D.C. Circuit Court of Appeals against the Federal Communications Commission (FCC) and the United States to block the FCC’s Declaratory Ruling, Report and Order released last December to rollback the 2015 Open Internet Order rules (known as “Net Neutrality” rules). As previously covered in InfoBytes, the rollback removes the restrictions barring providers from slowing down or speeding up web traffic based on business relationships, and places the enforcement authority of the new regulatory framework with the Federal Trade Commission (FTC).
In the petition, the states allege violations of the Administrative Procedure Act’s notice-and-comment rulemaking requirements, and claim that the FCC's actions with respect to Net Neutrality were “arbitrary, capricious, and an abuse of discretion.” According to a press release issued by New York Attorney General Eric T. Schneiderman:
The FCC’s new rule fails to justify the Commission’s departure from its long-standing policy and practice of defending net neutrality, while misinterpreting and disregarding critical record evidence on industry practices and harm to consumers and businesses. . . Moreover, the rule wrongly reclassifies broadband internet as a Title I information service, rather than a Title II telecommunications service, based on an erroneous and unreasonable interpretation of the Telecommunications Act. Finally, the rule improperly and unlawfully includes sweeping preemption of state and local laws.
Separately that same day, Senate Democrats announced plans to formally introduce a resolution of disapproval under the Congressional Review Act to reverse the FCC’s vote and restore the Net Neutrality rules. Once the rule is submitted to both houses of Congress, the resolution will be formally introduced, published in the Federal Register, and voted upon within 60 legislative days.
On January 10, Judge Timothy Kelley denied CFPB Deputy Director Leandra English’s request for a preliminary injunction to prevent OMB Director Mick Mulvaney from serving as the acting director of the CFPB. In his opinion, Judge Kelley emphasized that English failed to show a likelihood of success on the merits because, among other reasons, “[t]he best reading of the two statutes [at issue] is that Dodd-Frank requires that the Deputy Director ‘shall’ serve as acting Director, but that under the [Federal Vacancies Reform Act] the President ‘may’ override that default rule.” Additionally, in finding that English failed to demonstrate irreparable harm, Judge Kelley stated that “[t]he CFPB is not and will not be shuttered; it continues to operate with Mulvaney functioning as acting director” with “the backing of the CFPB’s General Counsel and senior management.” He concluded his opinion by stating:
There is little question that there is a public interest in clarity here, but it is hard to see how granting English an injunction would bring about more of it…. The President has designated Mulvaney the CFPB’s acting Director, the CFPB has recognized him as the acting Director, and it is operating with him as the acting Director. Granting English an injunction would not bring about more clarity; it would only serve to muddy the waters.
The decision follows a hearing on December 22, 2017, where Judge Kelley heard arguments from both parties, as previously covered by InfoBytes. While English’s requests have now been denied twice, as expected, she has filed an appeal to the U.S. Court of Appeals for the D.C. Circuit, which is also currently considering the challenge to the CFPB’s constitutionality by PHH Corporation.
In addition to the English litigation, Mulvaney and President Trump face similar arguments in a complaint brought by a credit union in the U.S. District Court for the Southern District of New York, as previously covered by InfoBytes here. On December 22, 2017, the defendants responded to the complaint with a motion to dismiss, arguing that the credit union does not have standing to sue, will not succeed on the merits, and will not suffer irreparable harm from the appointment. In its reply, the credit union added an additional argument that the CFPB’s decision to slow HMDA enforcement will remove the compliance incentive and HMDA data “will cease being reliable” to show compliance with the Community Reinvestment Act (“CRA”). The credit union asserts that banks deposit at their institution to meet CRA objectives but may cease to do so without an incentive to comply with HMDA. A hearing is scheduled for January 12.
As previously covered by InfoBytes, the CFPB issued a statement that supervisory examinations of 2018 HMDA data will be “diagnostic” to help “identify compliance weaknesses, and will credit good-faith compliance efforts” and that it does not intend to impose penalties with respect to errors reported in the 2018 data.
English Litigation Continues as Mulvaney Delays CFPB Enforcement Cases and Lawmakers Begin New Payday CRA Action
On December 6, Deputy Director of the CFPB, Leandra English, filed an amended complaint for declaratory and injunctive relief and a motion for preliminary injunction with a supporting memorandum. In her amended complaint, English adds, among other things, a constitutional claim alleging that President Trump’s appointment of Mulvaney violates Article II, section 2 of the U.S. Constitution, which empowers the President to appoint “Officers of the United States,” subject to “the Advice and Consent of the Senate.” According to English, since Mulvaney was appointed without Senate approval and the Federal Vacancies Reform Act (FVRA) allegedly does not provide the President with a separate authority, President Trump does not have the constitutional authority to appoint Mulvaney in the manner he chose.
The amended complaint also alleges that the appointment of Mulvaney under the FVRA is illegal because that act cannot be used to make an appointment to an “independent multi-member board or commission without Senate approval,” and the CFPB Director is, by law, a member of the FDIC’s board. This argument mirrors the argument made in a new complaint filed on December 5 by a New York-based credit union against President Trump and Acting CFPB Director Mick Mulvaney in the U.S. District Court for the Southern District of New York to contest the legality of Mulvaney’s appointment. The defendants have yet to respond to the credit union’s complaint.
With respect to English’s litigation, the defendants are set to respond to the motion for preliminary injunction, which builds off the arguments in the amended complaint, by December 18, and a hearing on the motion is set for December 22.
Mulvaney has continued his work as Acting Director at the CFPB. On December 4, according to sources, he met with reporters to announce his decision to delay at least two active litigation cases as part of his plan to reevaluate the Bureau’s enforcement and litigation practices. The first case concerns a district court dispute between the Bureau and an immigration bond company over whether the CFPB has the authority to enforce a civil investigative demand for personal information about the company’s customers. The second case involves Mulvaney’s decision to withdraw the Bureau’s demand that a mortgage payment company post bond after being ordered to pay a $7.9 million civil money penalty (see previous InfoBytes coverage here). Mulvaney’s December 4 statements also included a freeze on the Bureau’s collection of consumers’ personally identifiable information. These actions follow directions issued by Mulvaney during his first week at the Bureau as previously covered by InfoBytes here.
Mulvaney has also suggested that he would not seek to repeal the Bureau’s final rule concerning payday loans, vehicle title loans, deposit advance products, and longer-term balloon loans but expressed his support for resolution H.J. Res. 122, which was introduced December 1 by a group of bipartisan lawmakers to override the rule under the Congressional Review Act (CRA). The final rule is set to take effect January 16, 2018, but compliance is not mandatory until August 19, 2019. A press release issued by the House Financial Services Committee in support of the resolution stated, “small-dollar loans are already regulated by all 50 states, the District of Columbia and Native American tribes. The CFPB’s rule would mark the first time the federal government has gotten involved in the regulation of these loans.”
On December 5, the Government Accountability Office (GAO) issued a letter to Senator Pat Toomey (R-Pa.) stating that CFPB Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA) is a “general statement of policy and a rule” that is subject to override under the CRA. According to GAO, the CRA’s definition of a “rule” includes both traditional rules, which typically require notice to the public and an opportunity to comment, and general statements of policy, which do not. GAO concluded that the Bulletin meets this definition “since it applies to all indirect auto lenders; it has future effect; and it is designed to prescribe the Bureau’s policy in enforcing fair lending laws.” GAO’s decision may allow Congress to repeal the four year old Bulletin through a House and Senate majority vote under the CRA, followed by the President’s signature. Sen. Toomey issued a statement saying, “I intend to do everything in my power to repeal this ill-conceived rule using the [CRA].”
Additionally, and as expected, on December 5, former Director Richard Cordray officially announced his candidacy for governor of Ohio.
- Jonice Gray Tucker to join CFPB panel at CBA’s Washington Forum
- Jonice Gray Tucker to moderate “Pandemic relief response and lasting impacts on access, credit, banking, and equality” at the American Bar Association Business Law Section Spring Meeting
- Jeffrey P. Naimon to discuss "Post-pandemic CFPB exam preparation" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Making fair lending work for you" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Reading the tea leaves of President Biden’s initial financial appointees" at LendIt Fintech
- Moorari K. Shah to discuss “CA, NY, federal licensing and disclosure” at the Equipment Leasing & Finance Association Legal Forum
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference