On Wednesday,
October 19th, Republican Congressman Jeb Hensarling, Chairman of House
Financial Services Committee, sent a letter to Consumer Financial Protection Bureau (CFPB) Director Cordray
asking him to provide written
assurance that the CFPB will comply with certain limits on executive agencies
set forth in various prior Executive Orders.
The letter was in
response to the October 11, 2016 decision by the U.S. Court of Appeals for the
District of Columbia Circuit in PHH Corp. v. Consumer Financial
Protection Bureau, (United States Court of Appeals, D.C. Cir., Case No.
15-cv-01177).
In the PHH case
the federal appeals court ruled the structure of the CFPB was
unconstitutional. insideARM has provided
extensive coverage of the case and its impact. See our initial Breaking News story, our analysis by Kelly Knepper-Stephens,
and our Collection of Reactions From ARM Industry
Experts.
In the PHH decision, the
D.C. Court of Appeals panel ruled that the CFPB’s single-director, “removable-only-for-cause,”
structure was unconstitutional. To remedy the constitutional defect, the
court struck the “removal-only-for-cause” provision from the Dodd-Frank Act. In doing so, the court determined 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.”
The court then opined that as a result of this court mandated structural
change, the CFPB is no longer an “independent agency” and instead “now will
operate as an executive agency.”
Congressman Hensarling wrote:
“As you may be aware, President Obama and past
Presidents have issued several Executive Orders governing the rulemaking
activities of executive agencies. Because some of these executive orders were
advisory rather than mandatory for independent
regulatory agencies, you and your staff may have been previously under the
impression that these orders do not apply to the CFPB. However, the PHH
decision makes clear that the Constitution requires that the CFPB be treated as an executive agency,
and that the CFPB is not, and may no longer be considered to be, an independent
regulatory agency. Consequently, it is also clear that Executive Orders
applicable to executive agencies apply in full to the CFPB.” [Emphasis added by insideARM]
Congressman
Hensarling’s letter then cites various Executive Orders that impose
regulatory requirements on executive agencies. Among the Orders Hensarling
raised are:
Executive Order 12866: Regulatory Planning
and Review
Issued by
President Clinton in October, 1993, Executive Order 12866 mandates that federal
agencies “promulgate only such regulations as are required by law, are
necessary to interpret the law, or are made necessary by compelling public
need, such as material failures of private markets to protect or improve the health
and safety of the public, the environment, or the well-being of the American
people. In deciding whether and how to regulate, agencies must:
Assess all costs and benefits of available alternatives, including the
alternative of not regulating. Costs and
benefits shall be understood to include both quantifiable measures (to the
fullest extent that these can be usefully estimated) and qualitative measures
of costs and benefits that are difficult to quantify, but nevertheless
essential to consider. Further, in choosing
among alternative regulatory approaches, agencies should select those
approaches that maximize net benefits (including potential economic,
environmental, public health and safety, and other advantages; distributive
impacts; and equity), unless a statute requires another regulatory approach.
Executive Order 13563: Improving
Regulations and Regulatory Review
Issued by President Obama in January 2011, Executive Order
13563 reiterates the general principals of Executive Order 12866 and says
agencies must: (1) propose or adopt a regulation only upon a reasoned
determination that its benefits justify its costs; (2) tailor regulations to
impose the least burden on society; and (3) select regulatory approaches that
maximize net benefits. The order also directs agencies to “use the best
available techniques to quantify anticipated present and future benefits and
costs as accurately as possible.” It also requires agencies to develop a plan
under which they would periodically review their existing significant rules.
In his letter,
Mr. Hensarling asks Director Cordray to provide written assurance by October
26, 2016 “that the CFPB will comply in full with the requirements of the
Executive Orders referenced in the letter prior to issuing any future final
rule, including rules governing arbitration agreements; payday, vehicle title,
and installment loans; and debt
collection.” [Emphasis added by
insideARM]
insideARM Perspective
It will be interesting to see Director Cordray’s response to
Congressman Hensarling, assuming he provides a response at all.
Congressman Hensarling’s letter raises issues that are very
real to the ARM industry. They are issues that have been previously raised
during the SBREFA process. The potential
costs to agencies to comply with the CFPB’s Outline of Proposed Rules are
significant, regardless of whether you are a still considered a small business or a large
business. They are costs of the magnitude that could
potentially cause businesses to close.
The additional “cost/benefit” review required by the
Executive Orders referenced by Congressman Hansarling may provide some
additional consideration for all ARM participants. On the other hand, if the
CFPB complies with these fairly general orders which are open to interpretation, it may do little other than prolong the
rulemaking process.
