Lame Duck Update: Here’s How the 115th Congress Tried to Streamline Agency Guidance Documents
Despite surprisingly deep bipartisan pedigree of significant regulatory reforms and proposals of the past, few Democrats in the 115th Congress were inclined to work with Republicans and President Trump on regulatory streamlining, so it stalled in the Senate.
Exceptions included Congressional Review Act “resolutions of disapproval” of some of President Obama’s “midnight rules” (15 out of hundreds that were eligible).
The House of Representatives, but not the Senate, passed legislation to enhance Administrative Procedure Act (APA) scrutiny of rules (the Regulatory Accountability Act); and to require congressional approval of the costliest new agency rules (the Regulations from the Executive in Need of Scrutiny, or REINS, Act).
There’s a bigger Senate majority in the 116th Congress, but prospects for regulatory reform or streamlining, barring the unforeseen like some economic calamity, look rather dim but not extinguished.
One exception could be ostensibly non-binding federal agency guidance documents and statements of policy that have drawn concern from both parties. These include memoranda, notices, circulars, bulletins, letters, administrative interpretations and the like. In some respects, agencies don’t even need to write rules anymore, a problem will raise new concerns over time.
Assuming one can even locate them, such agency proclamations are not supposed to be legally binding on the public, nor even on the agencies themselves. Yet, agencies sometimes invoke or reference guidance in correspondence or interaction with regulated entities. While businesses do frequently request clarifying guidance, the Administrative Conference of the United States (ACUS) acknowledges that “members of the public may feel bound by what they perceive as coercive guidance” and “sometimes find they have no practical escape from the terms of a policy statement.”
Congress Demanded an “Inventory” of Guidance:Recognizing the potential burdens of guidance, in March 2018 the House Oversight and Government Reform (OGR) Committee released the report Shining Light on Regulatory Dark Matter. This report is the most explicit official congressional treatment of overregulation via guidance since a series of hearingsconducted by Sen. James Lankford (R-Okla.) in the 114th Congress, and since House Speaker Paul Ryan’s (R-Wisc.) 2016 “Better Way” task force report series, which sought a path for reforming rulemaking and the Administrative Procedure Act and reaffirming Congress’s Article I powers.
The OGR report presented the results of a survey of 46 executive and independent agencies for “a list of all guidance documents issued” since January 2008, with detail on:
- The form of guidance;
- the issuing agency or office;
- an indication of whether the guidance was considered significant;
- an indication of whether the guidance was submitted to the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (or OIRA) for review;
- an indication of whether the guidance was submitted to Congress and the GAO as required by the Congressional Review Act;
- and an indication of whether the guidance had been or would be reviewed by the agency’s Regulatory Reform Task Force if the agency was covered under Executive Order 13,771.
Notable Legislative Proposals to Address Guidance Should be Re-introduced in the 116th Congress: The ungoverned and ungovernable nature of guidance has yet to be adequately confronted. In the meantime, assuming no lame-duck breakthrough, certain key proposals offered in 115th Congress can help make headway if revived next year.
- A provision of the House-passed Regulatory Accountability Act would “reform the process by which Federal agencies analyze and formulate new regulations and guidance documents,” codify elements of the regulatory review executive orders, and provide statutory definitions of “guidance” and “major guidance.” The latter would be similar to the traditional understanding of a standard regulatory action with an annual effect on the economy of $100,000,000 or more.
- The Reforming Executive Guidance (REG) Act (H.R. 462), sponsored by Rep. Jason Lewis (R-Minn.), would formally subject significant guidance to the APA notice-and-comment procedures as well as (redundantly) the Congressional Review Act.
- The Regulations Endanger Democracy (RED) Tape Act, sponsored by Sen. Dan Sullivan (R-Alaska), would introduce a one-in, two-out requirement for regulations and guidance with some similarities to the well-known Trump executive order.
- The Regulatory Predictability for Business Growth Act would require interpretive rules and guidance intended to alter previously issued ones to undergo public notice and comment before taking effect.
- The House-passed Guidance Out of Darkness (GOOD) Act ( S. 2296/H.R. 4809), introduced by Senate Homeland Security and Governmental Affairs Committee Chairman Sen. Ron Johnson (R-Wisc.) and Rep. Mark Walker (R-N.C.), would require agencies to conspicuously publish their guidance documents online. The bill states: “On the date on which an agency issues a guidance document, the agency shall publish the guidance document on the Internet website of the agency” in a centralized location. Such guidance may include (vebatim):
(I) a memorandum;
(II) a notice;
(III) a bulletin;
(IV) a directive;
(V) a news release;
(VI) a letter;
(VII) a blog post;
VIII) a no-action letter;
(IX) a speech by an agency official; and
(X) any combination of the items described in subclauses (I) through (IX).”
Congressional Appeals to GAO and OMB Regarding Potentially Illegitimate Guidance Should Continue: The Congressional Review Act will soon be a quarter-century old. The issue of non-submitted notice-and-comment regulations’ illegitimacy gained prominence after a 2017 column by The Wall Street Journal’s Kimberley Strassel. Congress has largely ignored its application to guidance as well.
So it was a welcome development that the phenomenon of regulation-via-guidance induced some members to send letters to the Government Accountability Office inquiring into whether particular instances of guidance were “rules” for purposes of the CRA such that they should have been submitted for Congress to consider a resolution of disapproval.
On March 31, 2017, Sen. Pat Toomey (R-Penn.) queried the GAOregarding a 2013 “Interagency Guidance on Leveraged Lending” that had been issued jointly by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, and the Federal Deposit Insurance Corporation. The GAO’s October 19, 2017 reply to Toomey affirmed that the definition of “rule” is “broad, and includes both rules requiring notice and comment rulemaking and those that do not. The GAO wrote that it is “[c]lear the CRA covers general statements of policy,” and that the leveraged-lending should have been submitted to Congress for an opportunity to review and disapprove.
Toomey also inquired, in a separate letter also dated March 31, 2017, into the status of Consumer Financial Protection Bureau guidance on indirect auto lending, which that agency had issued in 2013. A December 5, 2017 GAO reply was likewise favorable: “CRA requirements apply to general statements of policy.” The notable development here was that the GAO determination resulted in a congressional resolution of disapproval overturning the indirect auto lending guidance, the first ever such use of the CRA. Todd Gaziano of the Pacific Legal Foundation, a pioneer of efforts to address illegal rules under the CRA, characterized the significance of the congressional—as opposed to GAO or executive—affirmation of what should already have been “crystal clear:”
The first historic precedent established by what is now Public Law 115-172 is that all agency “guidance documents” that impact the public are within the definition of a “rule” that Congress can overturn using the CRA’s streamlined procedures—regardless of whether the guidance documents are published in the Federal Register. … The second historic precedent established by Congress’s vote and the now-final law is that old rules not delivered to Congress as required by the CRA, whatever type, are not insulated from the CRA’s streamlined review procedures simply by the passage of time. … The consequence for rulemakers’ failure to follow the rules that apply to them is not to protect their rules from congressional review….Thus, the thousands of old rules never sent to Congress remain vulnerable to CRA rejection by simple majority vote of Congress.”
What About the Future of Iffy Guidance in the 116th Congress? The leveraged lending rule and all other “Non-Effective Guidance” documents are still out there. In principle, the GAO does not need to designate guidance as anything: Guidance documents are simply rules subject to the CRA, period. Furthermore, it would seem too great a concession to accept the premise that outstanding but never-submitted rules are valid and that Congress would need to affirmatively reject them.
Both GAO replies to Toomey were seven pages long and contained similar language affirming that policy statements are subject to CRA requirements—almost, but not quite, boilerplate. Each letter cited instances in prior Congresses in which GAO had reached the same conclusion regarding agency guidance and notices counting as a “rule” for CRA purposes. It is clear that any future queries will get the same answer.
In a related development, on November 2, 2017, House Financial Services Subcommittee Chairman Blaine Luetkemeyer (R-Mo.) wrote to financial regulatory agencies asking them to draw up a list of guidance issued over the past 20 years to determine whether it should be submitted to Congress for review. Luetkemeyer subsequently sent regulators letters “urging them to ensure that guidance is appropriately treated as guidance,” as described in the accompanying news release. To this, five financial regulatory agencies respondedthat they could confirm that “supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.”
The problem with the precedent set by inquiries to GAO about particular instances of guidance is that it puts Congress in the position of regarding the status of a given guidance as an open question. The GAO letters have affirmed the reality of “rule-ness” for guidance as far as the CRA is concerned. Overturning never-submitted rules seems to artificially succumb to agency primacy when nothing has taken effect in the first place. (“Before a rule can take effect, the Federal agency promulgating such rule shall submit to each House of the Congress and to the Comptroller General a report….,” the CRA says).
Should an agency wish to proceed on some long-ago unsubmitted guidance, it may legitimately “report”; but there would seem to be no need for Congress affirmatively to reject the non-effective, something the law already says is not in effect (The CRA does not say anything regarding Congress submitting a rule to start a clock for issuing a disapproval. Instead, it refers to “date on which the report … is received” by Congress from the initiating agency). In seeming affirmation of this interpretation, a 2014 white paper for the Administrative Conference of the United States regarding unsubmitted rules that “technically none of them could take effect (even though the agencies issuing the rules are likely treating them as if they were already in effect.)”
This is a tough issue. Guidance subject to congressional review could go back decades, but the 115th Congress is on record behaving as if all guidance issued that never got properly submitted to GAO and Congress, as required by law, is “live” (rather than invalid) unless they step in and do something about it later, which rarely happens. To date, the Toomey initiative has been both the start and finish of revocation of similarly situated guidance. Critics’ concern that the use of the CRA on guidance could lead to repeal “overkill” seems a non-issue.
In an upcoming column we’ll likely take a look at what the administration did with respect to streamlining guidance alongside these congressional moves.
Originally published at Forbes.