The Senate has voted to repeal a 2013 Consumer Financial Protection Bureau (CFPB) regulatory guidance document that took the form of a “bulletin” on “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act.” The House is on track to adopt this “resolution of disapproval,” (ROD), as presumably is President Trump to sign it.
The CFPB bulletin limits the ability of automobile dealers to offer discounts to customers allegedly in the name of credit fairness and eliminating racial bias. The controversial guidance maintained that “When such disparities exist within an indirect auto lender’s portfolio, lenders may be liable under the legal doctrines of both disparate treatment and disparate impact.”
This repeal is happening via the 1996 Congressional Review Act (CRA; 5 U.S.C. § 801), which says that before a “rule can take effect” the “agency promulgating such rule shall” submit a “report” on all rules (comprising a copy of the rule, a summary statement, and effective date) to both Houses of Congress and to the Government Accountability Office (GAO). At that point, Congress has a 60-legislative day window within which to reject the rule.
The novelty today is the recognition that many regulations were never submitted to Congress or GAO, even in this simple, pro-forma way. That means that, technically, starting the 60-day clock now, years or even decades later on such rules, provides a means of eliminating them.
The legislative history of the Congressional Review Act makes clear that guidance of any form—including the CFPB bulletin—counts as a “rule,” too, and is fully subject to the CRA. GAO interpretations of recent and long-ago queries from members of Congress have (redundantly) certified this as well. “CRA requirements apply to general statements of policy,” GAO said in its December 5, 2017 letter to Sen. Pat Toomey (R-PA) on the present CFPB question.
Given the size of the auto lending marketplace, CFPB’s action, despite the legally non-binding character that is supposed to define interpretive guidance, was arguably an economically significant one that should have motivated a normal public notice and comment rulemaking. Even the CFPB recognized internally that it was overestimating bias.
Technically, guidance is supposed to interpret, not be legally binding on the public. However, the gravity of this example was such that the 114th Congress even saw bipartisan passage in the 114th House of Representatives of the “Reforming CFPB Indirect Auto Financing Guidance Act” (H.R. 1737) to force the CFPB “to withdraw the flawed guidance that attempts to eliminate a dealer’s ability to discount auto financing for consumers. The bill also would have required the minimal safeguards the agency failed to follow, such as public participation and transparency.”
So the CFPB guidance was and is a ripe candidate to invoke the CRA. And it is a very positive development if Congress is interested in rolling back sub-regulatory guidance in addition to ordinary rules.
But if many of the administrative state’s directives remain unreported in violation of the CRA’s clear language, a serious question presents itself. Should Congress be repealing rules that are already invalid? In taking this backward approach, is Congress unintentionally certifying the body of unpresented rules and guidances in some unfortunate manner that will actually benefit the regulatory state, and undermine future reform and streamlining?
With this new action, the Senate and soon the House and presumably President Trump, will be on record as behaving as if all issued and yet to be issued guidance — despite not having been properly submitted as required by law to GAO and Congress — is nonetheless effective unless Congress steps in and does something about it later.
Let me be clear that there exists controversy over parameters for judicial review of adherance to the CRA. My colleague Ryan Radia pointed out to me that the court held (Montanans For Multiple Use v. Barbouletos) the CRA’s own language precludes courts from invalidating an agency rule based on any allegation of noncompliance with CRA itself. This may not be definitive, but rather something that must be further litigated. For example, can a rule be invalidated if it arguably had not formally become a rule at all via presentation? That is, while it is a rule as defined by the CRA, had it “taken effect” to even need a court’s invalidation? I feel there are questions here.
Nor is it evident to me how the letter from GAO affirming the CFPB guidance as a rule is what started the 60-day clock for Congress. I’m no parliamentarian, but there is nothing definitive in the law that I can see.
Even a loss for my point of view would be “good” in a sense, because it would demonstrate that the administrative state is even more out of control that many thought, and might perhaps (finally) spur some form of comprehensive liberalization, and a reaffirmation of the separation of powers.
Put it this way: when rules or guidance are properly presented, and Congress elects to issue or to not issue a Resolution of Disapproval, that is straightforward.
But now Congress is taking a major step in contemplating RODs as the only tool of relief in circumstances in which a rule was never presented at all (and may therefore not actually qualify as a rule-in-effect). If Congress is implying validity of in-reality-illegitimate rules and guidance (and, OK, rolling back a few), that is a victory for the administrative state, I fear, not a victory for foundational rule of law.
If it becomes the standard interpretation that unreported guidance (and rules) are inherently valid despite the CRA reporting requirements, we know that not much (invalid) legacy guidance will be eliminated, whatever the enthusiasm over the CFPB case.
How do we know? There ware hundreds of eligible Obama “midnight rules” that could have been eliminated under the CRA, but only 14 were eliminated (as unprecedented as that was). Further, it is notable that Congress hasn’t even eliminated new guidance under CRA procedures yet. There is solely this one reach-back on a years-old directive. Finally, there has been no appetite for going after “unreported” notice-and-comment rules, the existence of which rose to prominence before attention turned to guidance.
Congress is going about addressing this issue backward. Rather than more letters to GAO asking if one particular agency action is a “rule” (we know they all are), what we need instead is a GAO catalog of guidance documents in effect that were submitted to Congress and GAO as required. Anything not on the list would not have been properly submitted.
I think it would be a short list, and a House Committee on Oversight and Government Reform report called Shining Light on Regulatory Dark Matter seems to affirm that: “Of the more than 13,000 guidance documents [since 2008] identified for the Committee, only 189 were submitted to Congress and the Government Accountability Office (GAO) in accordance with the CRA.”
If many rules and potentially regulatory (in effect if not law) directives are technically invalid, yet citizens bow to them anyway, the administrative state itself is invalid. This borders on a serious crisis of constitutional governance.
You see the trouble. Congress’s relinquishment of its genuine authority, its failure to steadfastly maintain its constitutional lawmaking power, is precisely how the administrative state achieves the permanence that may be inadvertently cemented further now. Tweaks and non-fundamental one-off pushbacks in the face of massive passive-aggressive agency power grabs mean a growing state.
While I appreciate the rollback of the CFPB guidance, there is arguably no need to repeal such directives, they may be simply invalid. If so, the approach being taken risks legitimizing the entire remaining body of illegitimate rules against which no action is being taken, nor likely ever will be taken.