May 24, 2019

May 23, 2019

Subscribe to Latest Legal News and Analysis

May 22, 2019

Subscribe to Latest Legal News and Analysis

May 21, 2019

Subscribe to Latest Legal News and Analysis

Dramatic changes to CFPB proposed by House not part of appropriations bill under consideration by Senate

According to media reports, the Senate was scheduled to begin debate yesterday afternoon on H.R. 6167, the “Interior, Environment, Financial Services, and General Government Appropriations Act, 2019.”  The bill, which was passed by the House last week by a vote of 217–199 with no Democrats voting for the bill, would make several dramatic changes to the CFPB as described below.

Although the Congressional Record does reflect that the Senate began consideration of H.R. 6167, such “consideration” consisted of the introduction by Senator Shelby of an amendment substituting the Senate’s financial services and general government appropriations bill, S. 3017, for the corresponding portions of the House bill.

While the House bill would make the CFPB subject to the regular appropriations process, the Senate bill would not change Section 1017 of Dodd-Frank which provides that the CFPB is funded through transfers from the Federal Reserve.  However, it contains a provision (Section 747) that would require the CFPB, during fiscal year 2019, to notify the House and Senate Appropriations Committees, the House Financial Services Committee, and the Senate Banking Committee when it makes a request for a transfer of funds from the Federal Reserve pursuant to Section 1017 and to post the notification on the CFPB’s website.

In contrast, the House bill would make the following changes to the CFPB:

  • Appropriations.  The bill would make the CFPB subject to the regular appropriations process beginning in fiscal year 2020.  For fiscal year 2019, it would prohibit the CFPB Director from requesting more than $485 million in transfers from the Federal Reserve.
  • Removal of Director.  The bill would strike from Dodd-Frank the provision that sets a five-year term for the Director and places a “for-cause” limit on the President’s authority to remove the Director.  Thus, the Director would have an unlimited term but serve at the will of the President.
  • Congressional approval of CFPB rules.  Subject to a narrow exception for national security and other special circumstances, the bill would provide that no major CFPB rule can take effect unless Congress has enacted a joint resolution of approval pursuant to the procedures set forth in the bill.  The bill would also allow Congress to block a nonmajor rule from taking effect by enacting a joint resolution of disapproval pursuant to the procedures in the bill.  A “major rule” means any rule that the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget (OIRA) finds has resulted in or is likely to result in: (1) an annual cost to the economy of $100 million or more, (2) a major increase in costs or prices for consumers, individual industries, federal, state, or local government agencies, or geographic regions, or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprise to compete with foreign-based enterprises in domestic and export markets.  (This standard is similar to the “significant regulatory action” standard that applies under Executive Order 12866.  That Executive Order requires federal agencies, other than those defined as an “independent regulatory agency” by 44 U.S.C. Sec. 3502(5), to submit proposed and final regulations constituting a “significant regulatory action” to OIRA for review prior to publication in the Federal Register.  As an independent agency, the CFPB has been exempt from this OIRA review process.)
  • “Cut-go” requirement.  The bill would require the CFPB “in making any new rule” to “identify a rule or rules that may be amended or repealed to completely offset any annual costs of the new rule to the United States economy.”  The new rule could not take effect until the CFPB “make[s] each such repeal or amendment.”
  • Publication requirements.  In addition to satisfying the cut-go requirement before a new rule can take effect, the bill would require the CFPB to publish in the Federal Register “a list of information on which the rule is based, including data, scientific and economic studies, and cost-benefit analyses, and identify how the public can access such information on line” and to submit a report to Congress and the GAO containing the rule and other specified information that includes a classification of the rule as major or nonmajor.

Had the Senate given actual consideration to the House bill, there would have been little likelihood of its passage by the Senate.  Because an appropriations bill requires at least 60 votes in the Senate to pass, it could have been blocked by Democrats who are likely to remain opposed to the CFPB changes contained in the House bill.

Copyright © by Ballard Spahr LLP

TRENDING LEGAL ANALYSIS


About this Author

Barbara S. Mishkin, Ballard Spahr, Philadelphia, Deceptive Practices Lawyer, Fair Debt Collection Practices Act, Gramm Leach Bliley
Of Counsel

Barbara Mishkin focuses on consumer compliance and banking law. The federal laws with which Ms. Mishkin has dealt extensively include the Truth in Lending Act, Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, and Gramm-Leach-Bliley Act. She also has significant experience with state usury and lender licensing laws, as well as state laws prohibiting unfair and deceptive acts and practices.

American Bar Association, member, Consumer Financial Services Committee;...

215-864-8528