Toomey Says to Strengthen Agency Guidance Plan

A proposal by federal regulators to clearly state that agency guidance does not have the force of law is not tough enough, a key Republican senator said this week.

“The final rule should be crafted to prevent such misuse of supervisory guidance, which can unduly and unfairly burden the financial institution under your supervision,” said Sen. Pat Toomey (R-Pa.), who depending on the results of the Georgia Senate runoffs, will likely be the Senate Banking Committee chairman or the panel’s ranking Republican.

In October, financial regulators, including the NCUA and CFPB, proposed codifying a policy statement issued in 2018. That statement stated that supervisory guidance does not create legally binding obligations.

But Toomey said the agencies should do more and review all existing supervisory guidance, and either rescind guidance that has not gone through a “meaningful opportunity for comment” or subject the guidance to a public comment period.

In the proposed rule, the agencies said supervisory guidance outlines the agencies’ expectations or priorities. It may include examples of practices that mitigate risk, they said. The proposed rule also makes it clear that agencies do not issue sanctions based on supervisory guidance.

The agencies said they agree that supervisory criticism should continue to be specific concerning practices that could have a negative impact on the safety and soundness of a financial institution.

In a separate letter, CUNA said it supports the regulators’ proposal, but that supervisory guidance can be useful.

Toomey has been pushing for the regulatory change for the past several years.

When former CFPB Director Richard Cordray issued auto sales guidance, Toomey asked the Government Accountability Office to examine the guidance. The GAO said the guidance 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Congress rescinded the rules using the Congressional Review Act, which allows Congress to examine rules before they go into effect.