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 celebrated case, the CFPB issued auto sales guidance, which the Government Accountability Office said, in an opinion requested by Sen. Pat Toomey (R-Pa.), should have gone through the regulatory process. That process gives stakeholders the opportunity to comment on proposals before they become final.

Congress rescinded the rules using the Congressional Review Act, which allows Congress to examine rules before they go into effect.

The House Financial Services Committee recently approved legislation imposing new requirements on the CFPB.

Credit unions said they have a particular problem with the manner in which the CFPB issues guidance. Credit union leaders were critical of former CFPB Director Richard Cordray, who they said overstepped his legislative authority through guidance. And, they contend, agencies, including the CFPB, have failed to issue guidance they contend is necessary to explain how the agencies intend to enforce regulations.

"Credit unions across the country continue to be frustrated with the sluggish issuance of guidance from the [agency], which has created uncertainty and ambiguity not only for credit unions, but all industry stakeholders," CUNA President/CEO Jim Nussle wrote in a letter to the Financial Services Committee.

For instance, Nussle wrote, the agency was not clear in issuing guidance dealing with the recent Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rules.

"These complex regulatory requirements spurred numerous questions from the industry with little guidance from the BCFP, creating massive confusion for the industry and consumer," Nussle wrote.

In their memo issued this month, the five agencies said supervisory guidance outlines the agencies' supervisory expectations or priorities, and nothing more.

The agencies also said they will not use numerical thresholds or other "bright lines" in describing expectations in supervisory guidance. Numerical thresholds may be used, but the agencies will make it clear that they are not binding requirements.

Financial institutions will only be cited for violation of laws, regulations or a failure to comply with enforcement orders, the agencies said. Examiners may reference information contained in guidance to provide examples of safe and sound practices.

The agencies said they might, at times, solicit public comment on guidance, adding that simply soliciting public comment does not make something a regulation.

And the agencies pledged to try to limit providing multiple guidance documents on the same subject.

In January, the Justice Department issued a memo stating the DoJ is making it clear that failure to follow agency guidance will not result in an enforcement action.

A key House member, who had criticized the use of agency guidance said he is pleased with the financial 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 earlier this year sent regulators a letter saying that over the years, the regulators had issued a wide variety of guidance, handbooks and circulars, adding that almost none have been rescinded. He added that almost none of them had gone through the notice and comment rulemaking process or was submitted to Congress for its review.

Still, 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.

Congress has already taken action on one set of guidance that Republicans said exceeded CFPB authority.

Earlier this year, Congress passed a resolution nullifying the CFPB's indirect auto guidance after Toomey 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 nullifying the guidance, Acting CFPB Director Mick Mulvaney applauded the effort and said Cordray's effort had been "misguided."

Also, House Republicans earlier in September approved legislation they contend will rein in the CFPB's guidance process.

"The rules of the road aren't clear when they come from the bureau," bill sponsor Rep. Sean Duffy (R-Wis.), said as the committee considered the bill.

The committee approved the legislation, H.R. 5534, on a 38-14 vote.

The CFPB legislation would prohibit the CFPB from taking action against financial companies if they are making a good faith effort to follow guidance and would require the agency to develop a matrix of penalties the agency may impose.

"You need a crystal ball on your desk or a team of attorneys" to stay in compliance with CFPB rules, Rep. Blaine Luetkemeyer (R-Mo.) said.

However, ranking committee Democrat Maxine Waters of California accused the Trump Administration of attempting to dismantle the CFPB, adding that Congress needs to do everything it can to protect the bureau.

The legislation, she said, would "unduly hamstring the bureau's ability to be nimble."

On Sept. 17, Senate Finance Chairman Orrin Hatch (R-Utah) and Sen. James Lankford introduced companion legislation in the Senate.

"This is a good, commonsense bill that will provide clarity for consumers and help prevent 'gotcha' enforcement," Lankford said.

But the measure faces an uncertain future in the Senate, where some Democrats are likely to oppose it. If such opposition were to surface in the Senate – and it likely will – it would doom the proposal since it will likely take 60 votes to enact the plan.