CFPB, NCUA Pledge to Rein in Regulatory Guidance
CUs and members of Congress have criticized agencies for regulating through guidance that does not have to go through the regulatory process.
“Unlike a law or regulation, supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the CFPB and the five prudential agencies, including the NCUA said, in a statement issued Tuesday.
Credit unions and members of Congress have criticized agencies for regulating through guidance that does not have to go through the regulatory process, which includes public comment.
In one recent case, members of Congress asked the Government Accountability Office to determine if CFPB auto sales guidance amounted to regulations. When the GAO said they did, Congress repealed the guidance.
The agencies said that supervisory guidance outlines the agencies’ expectations or priorities and “articulates the agencies’ general views regarding appropriate practices for a given subject area.”
The guidance often provides examples of practices that the agencies consider consistent with safety and soundness standards or other laws, including those protecting consumers, they said.
The agencies also said they will not use numerical thresholds or other “bright-lines” in describing expectations in supervisory guidance. Numerical thresholds will only be used as examples or to tailor the applicability of guidance to institutions.
Examiners also will not criticize a financial institution for a “violation” of supervisory guidance, the agencies said.
The agencies also pledged to reduce issuance of multiple supervisory guidance documents on the same issue.
A key House member, who had criticized the use of agency guidance said he is pleased with the agency memo.
“I’m very pleased that the federal financial agencies have finally taken the first step in drawing the important distinction between rule and guidance, something I’ve pressed them to do for some time,” Rep Blaine Luetkemeyer (R-Mo.) chairman of the House Financial Institutions and Insurance Subcommittee, said.” For too long, regulators have inappropriately used guidance as if it had the full force of a formal rulemaking.”
Luetkemeyer said he will introduce legislation requiring all federal agencies to include in agency guidance documents a statement that the guidance has not gone through the federal regulatory process.
Earlier this year, Congress passed a resolution nullifying the CFPB’s indirect auto guidance, after Sen. Pat Toomey (R-Pa.) challenged it, asking the GAO to determine if it was, in reality a regulation that should have been opened for public comment before it became effective.
The guidance had been issued by former CFPB Director Richard Cordray.
The GAO agreed with Toomey.
After President Trump signed the resolution, Acting CFPB Director Mick Mulvaney applauded the effort and said that Cordray’s effort had been “misguided.”