Senators Warner (D-VA), Portman (R-OH) and Collins (R-ME) have introduced a bill that could require the CFPB (and other independent federal agencies) to conduct the same, thorough cost-benefit analysis required of executive agencies of any new rules or regulations. Senator Portman explained that this bill, S. 3468—the Independent Agency Regulatory Analysis Act of 2012, would “close the loophole for independent agencies by authorizing the president to bring them within the same regulatory review framework that applies to other agencies.” He added that “[t]his is a bipartisan, consensus reform with broad support, and it will promote a more stable regulatory environment for economic growth and job creation.”

The legislation would authorize the president to require that all independent agencies compare the costs and benefits of proposed and final rules and submit those rules to the Office of Information and Regulatory Affairs (OIRA) for approval. Executive Order 12866 issued by President Clinton requires executive branch agencies to complete cost-benefit analysis of all rules before they are adopted and to obtain OIRA approval before they are published. Independent regulatory agencies such as the CFPB are currently exempt from this requirement. If enacted, the CFPB, would be required to:

  • Identify the problem that the agency intends to address by a new rule and assess the significance of that problem;
  • Examine whether any existing rule (or other law) has created or contributed to the problem that a new rule is intended to correct, and whether the existing rule (or other law) should be modified to achieve the intended goals of the new rule more effectively;
  • Identify and assess available alternatives to direct regulation, including providing economic incentives;
  • Design rules in the most cost-effective manner to achieve the regulatory objective. In doing so, consider incentives for innovation, consistency, predictability, the costs of enforcement and compliance, flexibility, distributive impacts, and equity;
  • Base its rulemaking decisions on the best reasonably obtainable scientific, technical, economic, and other information concerning the need for, and consequences of, the intended rule;
  • Tailor rules to impose the least burden on society, including individuals, businesses of differing sizes, and other entities (including small communities and governmental entities), consistent with achieving the regulatory objectives, and taking into account, among other factors, and to the extent practicable, the cost of cumulative rules; and
  • Periodically review its existing significant rules to determine whether any such rules should be modified, streamlined, expanded, or repealed.

According to Senator Warner’s office, only one of the 58 new major final rules that have been issued by independent agencies since 2008 was based upon a complete cost-benefit analysis. Senator Portman remarked that this legislation is necessary because, “Independent agencies exercise vast power over major sectors our economy—from telecom, to agriculture, to financial services—but they are exempt from common-sense requirements including cost-benefit analysis of major regulations to ensure they do more good than harm.” While this legislation could slow the CFPB’s breakneck rule making pace, Senator Warner explained that it “will help to ensure that all agencies only advance major regulations with a firm understanding about their impact on the economy.”

It is expected that this legislation will be discussed during the Sept. 20 meeting of the Senate Committee on Homeland Security and Governmental Affairs. Stay tuned to the CFPB-Lawblog for continuing coverage on this issue.