This week, two House Republican Committee Ranking Members, Reps. Patrick McHenry (R-NC) from the House Financial Services Committee and James Comer (R-KY) from the House Oversight and Reform Committee, sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra seeking feedback on several recent CFPB actions.

The letter makes reference to the recent Supreme Court decision in West Virginia v. EPA that the members of Congress believe clarified the limitations of certain agency actions. In this case, the court confirmed that agency authority must be traceable to a clear delegation from Congress, and that attempts to expand delegated power through obscure provisions in enabling legislation is not enough, even though it might be textually plausible. There has been a lot of discussion arguing that this decision is a step forward to curb agency overreach and remind Congress of its legislative power and responsibilities.

Justice Gorsuch’s concurrence points out that going forward, courts must look to the legislative provisions on which the agency seeks to rely with a view to their place in the overall statutory scheme. He further argues that oblique or elliptical language will not supply a clear statement and agencies may not “seek to hide elephants in mouseholes, or rely on gap-filler provisions.”

In their letter, the members of Congress point out that Article I, Section 1 of the United States Constitution vests “all legislative powers” in Congress. The letter states that,

“The clear delegation of authority contemplated by the Court is not limited to just rulemaking but extends to other agency actions. Actions that are intended to avoid transparency and accountability. Since becoming Director of the Consumer Financial Protection Bureau, you have undertaken a number of so-called ‘initiatives’ that circumvent not only Congressional intent, but the Administrative Procedure Act (APA).”

The list of CFPB actions in question outlined by the members includes:

  • An interpretive rule expanding the authority of states to enforce the Consumer Financial Protection Act of 2010 beyond what was intended by Congress;
  • An advisory opinion expanding Equal Credit Opportunity (Regulation B); as well as making revocations or unfavorable changes to the terms of existing credit arrangements;
  • An advisory opinion narrowly interpreting the Fair Credit Reporting Act with respect to name-only matching procedures; and
  • An interpretive rule limiting the Fair Credit Reporting Act’s preemption authority, allowing states to pass laws impacting implementation of the FCRA.

The letter ends by pointing out that the House  Financial Services and Oversight and Reform committees intend to exercise robust investigative and legislative powers to not only forcefully reassert their Article I responsibilities, but to ensure that the CFPB cannot “continue to exceed Congressional authorizations.”

Brownstein’s Take

The CFPB has shown a clear preference for using other tools to effectuate policy changes outside the scope of the rulemaking process. Congress, through its enactment of the Administrative Procedures Act, mandates that before undertaking certain actions, federal agencies publish a “[g]eneral notice of proposed rulemaking” in the Federal Register, 5 U.S.C. § 553(b), and “give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments,” 5 U.S.C. 553(c). Section 553, however, exempts “interpretative rules” and “general statements of policy” from the notice-and-comment process, 5 U.S.C. § 553(b)(3)(A). Nevertheless, labeling a substantive change to a rule and interpretation simply to avoid the notice and comment requirements is not permissible. See Appalachian Power Co. v. EPA, 208 F.3d 1015, 1024 (D.C.Cir. 2000).

Congress also added several checks in the normal notice and comment process through the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act (SBREFA) to ensure financial service providers were not unduly burdened by new rules and that the costs do not outweigh the benefit. The SBREFA process, in particular, was enacted to ensure small providers were not harmed by CFPB actions that do not account for their size and structure.

We expect that the CFPB will continue to issue interpretive rules and advisory opinions at a rapid pace. Director Chopra even referenced these tools at an Exchequer Club meeting in Washington, D.C., this week. We also expect that Congress will continue to ratchet up the oversight tools they have when the CFPB oversteps their authority or does not follow the APA, particularly if House or Senate leadership flips in the election.