House Subcommittee Chair to Financial Regulators: Stop Misusing Agency Guidance
At issue here is deciding what is considered a rule and what is only guidance.
The chairman of a key House subcommittee on Wednesday warned federal financial regulators, including the NCUA and the CFPB, to stop treating guidance issued by agencies as rules that must be followed.
“Many of my colleagues and I hear frequently from financial institutions that guidance promulgated by your agencies is treated as though it was a rule, a process that has been referred to as ‘regulation by enforcement,’” Rep. Blaine Luetkemeyer (R-Mo.), chairman of the House Financial Institutions and Consumer Credit Subcommittee, said in his letter.
Credit union trade groups have criticized federal agencies that use guidance that way.
In the most recent case, the Government Accountability Office ruled that indirect auto lending guidance issued by the CFPB actually was a rule that should have gone through the regulatory process, which includes opening the proposal to public comment.
Following the ruling, Congress enacted legislation to repeal the guidance—a resolution that was signed by President Trump.
In his letter, Luetkemeyer asked the agencies to publish a statement making clear that guidance documents, supervisory letter, examination manuals and similar documents do not establish “binding legal standards, and thus shall not be the basis of enforcement actions or supervisory directives.”
He also asked that the agencies make it clear that any failure to follow guidance will not form the basis of any adverse actions against a financial institution.
Luetkemeyer also urged the agencies to ensure that examiners are appropriately educated about the use of guidance and are held accountable when they go too far.
He added that a significant number of agency guidance, handbooks and circulars have been issued. Almost none have been withdrawn and almost none have gone through the regulatory process, he said.