This article previously appeared on Ballard Spahr’s CFPB Monitor and is re-published here with permission.
It has been reported that President-elect Donald Trump has nominated South Carolina Republican Congressman Mick Mulvaney to be Director of the Office of Management and Budget (OMB). Mr. Mulvaney has been described as a “staunch deficit hawk” and his nomination is viewed as sending a signal that federal regulations are likely to face tough scrutiny in a Trump administration.
Although the CFPB is currently not required to submit its regulations to OMB for review, that could change as a result of the D.C. Circuit’s PHH decision. As we previously reported, one of the decision’s potential impacts is that the CFPB would be considered an “executive agency” subject to the regulatory review process of the Office of Information and Regulatory Affairs (OIRA) within OMB. Pursuant to Executive Order 12866, federal agencies, other than those defined as an “independent regulatory agency” by 44 U.S.C. Sec. 3502(5), must submit proposed and final regulations constituting a “significant regulatory action” to OIRA for review prior to publication in the Federal Register.
In PHH, the D.C. Circuit ruled that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional and, to remedy the constitutional defect, severed the removal-only-for-cause provision from the Dodd-Frank Act so that the President “now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time.” As the court stated, the consequence of this structural change is that the CFPB is no longer an “independent agency” and instead “now will operate as an executive agency.”
The D.C. Circuit’s decision is not yet effective because the court issued an order directing the Clerk of the Court of Appeals to “withhold issuance of the mandate herein until seven days after disposition of any timely petition for rehearing or petition for rehearing en banc.” On November 18, 2016, the CFPB filed a petition for rehearing en banc and the D.C. Circuit has entered an order that provides that PHH’s response to the petition must be filed by December 22. (The Solicitor General was also invited to file a response which must be filed by December 22.)
Notwithstanding that the CFPB is currently defined as an “independent regulatory agency” by 44 U.S.C. Sec. 3502(5), if the D.C. Circuit’s decision takes effect, it is possible the CFPB would no longer be considered an “independent regulatory agency” for purposes of Executive Order 12866. Alternatively, Congress could amend the provision so that it no longer defines the CFPB as an “independent regulatory agency” or the new President could revise Executive Order 12866 to subject CFPB regulations to OIRA review.
Copyright Ballard Spahr LLP. Reprinted with permission. Content is general information only, not legal advice or legal opinion based on any specific facts or circumstances.