The federal government shutdown continues and, in the wake of the President Donald Trump’s Oval Office address in support of the border wall, it appears that it could continue for some time. Press reports say approximately 800,000 federal workers are furloughed or working without pay. Consumer-facing companies are asking: What is the impact of the shutdown on their regulatory and litigation docket, as well as anticipated regulatory matters?
At a high level, from a consumer protection point of view, the most notable emerging impacts are on the federal judiciary, the U.S. Department of Justice and the Federal Trade Commission; on the other hand, the banking regulators are fully operational and open for business. Here’s a summary of the state of the judiciary and the federal regulatory agencies under the shutdown.
The Administrative Office of the U.S. Courts estimates that the court system has enough money to run through Jan. 18, 2019, by using court fee balances and other funds not dependent on a new appropriation. If the shutdown continues past that date and exhausts the federal judiciary’s resources, courts will have to develop plans for reduced operations, including forcing nonessential workers to stay home while skeleton crews (without pay) handle matters deemed essential under law. Under such a scenario, criminal cases and other critical cases will likely be prioritized while civil cases may be delayed. Judges will have significant latitude to determine which cases move forward and which are deferred. Some courts have already begun to issue directions in anticipation of a prolonged shutdown. Ruben Castillo, chief judge of the District Court for the Northern District of Illinois in Chicago, plans to shut down civil trials. Other courts, such as the District Court for the Southern District of Ohio, have issued orders affirmatively stating that despite the shutdown, the judiciary remains open and “all proceedings and deadlines remain in effect as scheduled, unless otherwise advised.”
Other federal courts, including the District Court for the Western District of Kentucky and the District Court in the Southern District of West Virginia, have issued sua sponte general orders holding in abeyance any civil matters involving the government as a party to “avoid any default or prejudice to the United States or other civil litigants occasioned by the lapse in funding.”
In sum, the shutdown appears likely to create a complex, court-by-court or even judge-by-judge response. The shutdown could consequently cause confusion and a patchwork of differing and conflicting orders among the courts. The main general impact may be felt on civil matters, and those functions that require involvement by court staff, such as trials, hearings and some clerk’s office functions. However, absent intervening court orders, functions not requiring human attention, such as execution by parties of deadlines by nonfiled discovery papers or filing papers through Case Management/Electronic Case Files, may not be impacted at all. Department of Justice The DOJ aims to “enforce the law and defend the interests of the United States according to the law,” as well as “ensure fair and impartial administration of justice for all Americans.” The DOJ enforces consumer protection laws against, among others, chartered banks. The DOJ is currently operating on a partial shutdown in accordance with its contingency plan. Until the shutdown is resolved, expect more extension requests from DOJ attorneys in civil cases. However, the DOJ’s plan calls for criminal litigation to “continue without interruption as an activity essential to the safety of human life and the protection of property.”
The CFPB is funded through the Federal Reserve Board and not funded by congressional appropriations. Therefore, the CFPB is not impacted by the government shutdown. All CFPB operations are continuing as normal. Closely watched regulatory initiatives, including anticipated debt collection rules, should not be affected. CFPB enforcement activity has picked up recently and that pace could continue. However, CFPB often coordinates enforcement activity with other federal agencies which are affected by the shutdown, which could complicate and hence delay some work.
Federal Trade Commission
The FTC is closed as of midnight on Dec. 28, 2018, due to the lapse in government funding. The FTC website is not being updated, but some online services remain available. For example, the FTC will accept public comments, e-filings and Freedom of Information Act requests, but no staff will handle the filings or inquires until after operations resume.
The FTC has announced that the following will not be available during the shutdown: the National Do Not Call Registry, the Consumer Sentinel Network, Complaint Assistant, identifytheft.gov and econsumer.gov. Practically, suspending FTC operations includes pausing all pending investigations and litigation, such as the probe into Facebook over the Cambridge Analytica data sharing.
The FCC suspended most operations at mid-day on Jan. 3, 2019, in light of the government shutdown. The FCC had used on-hand funds to temporarily continue operations when the government initially shut down but ran out of money. The FCC furloughed more than 80 percent of employees and notified the public that while most online databases remain operational, the FCC will not update content after Jan. 2, 2019. All operations are suspended other than those immediately necessary for protection of life or property or activities funded through a source other than lapsed appropriations. The FCC has extended normal filing deadlines until the second day after the FCC resumes normal operations.
Currently pending with the FCC is anticipated guidance interpreting the Telephone Consumer Protection Act. In addition, consumer electronics manufacturers will likely feel the effect first as they will not be able to obtain the FCC equipment certification needed to release new products to the market. All rulemaking, enforcement, and complaint proceedings are similarly affected. This may impact the wireless industry, which supports more than 4.7 million jobs.
The OCC charters, regulates and supervises all national banks and federal savings associations and is an independent bureau of the U.S. Department of the Treasury. The OCC is not funded by congressional appropriations and instead relies on funding through assessments on the institutions it supervises. As such, the OCC is not impacted by the government shutdown. The OCC advised its operations are continuing as normal and all bank examination and supervisory activities are continuing as scheduled.
Federal Reserve Board
The FRB is responsible for implementing the United States’ monetary policy and supervises and regulates financial institutions, as well as monitoring these institutions’ impact on the financial system as a whole. The FRB is the primary federal regulator for state-chartered, member banks. The FRB is not funded by congressional appropriations and instead derives its income primarily from the interest on U.S. Treasury securities acquired through open-market operations. Therefore, the FRB is not directly impacted by the government shutdown.
The FDIC provides economic stability by insuring deposits of member financial institutions and by examining and supervising financial institutions. The FDIC is the primary federal regulator for state-chartered, non-Federal Reserve member banks. The FDIC is not funded by congressional appropriations and instead is funded by premiums paid by banks and thrift institutions for deposit insurance coverage and from interest on U.S. Treasury securities. Therefore, the FDIC is not impacted by the government shutdown and continues to operate as normal.
The SEC is currently operating on a partial shutdown with only a very limited staff, in accordance with its operations plan. The SEC advised they are able to respond to emergency situations impacting market integrity and investor protection, and commission systems, such as the Electronic Data Gathering, Analysis and Retrieval system, are still operating. However, the agency stated it would stop approving registration statements which are prerequisites for initial public offerings, as well as proposed IPO filings. Until the shutdown ends, companies without previously approved SEC registrations will have to wait to conduct any planned IPO activity.
The CFTC is currently operating on a partial shutdown with only employees necessary to address imminent issues with risk to the human life or protection of property still working, in accordance with the agency’s plan for lapse in appropriations. The essential employees will continue to oversee the derivatives markets to prevent fraud and manipulation. Further, employees in the whistleblower and consumer protections offices are continuing to work as these offices are funded outside of congressional appropriations. Nonessential CFTC operations have ceased during the shutdown, including previously ongoing work to promulgate rules under the Dodd-Frank Act and to regulate cryptocurrency.
All NHTSA activities funded by highway traffic grants remain operational, which means that state projects undertaken under the administration of NHTSA’s Office of Regional Operations and Program Delivery continue unaffected by the government shutdown. However, most of NHTSA’s other operations are suspended, including vehicle safety activities, rule-making, new car assessment testing, defects investigations, review of consumer complaints, and compliance testing of vehicles and equipment. Employees whose work is suspended are furloughed until funding is restored. When the government shut down in December, the NHTSA had 13 active investigations open regarding vehicle defects. All investigations remain suspended until federal funding is restored. NHTSA’s website for vehicle identification number lookup for motor vehicle safety recalls on motor vehicles remains functional.
The CPSC is in a shutdown and posted a notice on its website informing the public that information on the website may not be current and the agency “may not be able to process transactions or respond to inquiries which do not constitute a threat to safety, health or property for which an immediate response is necessary.” All CPSC activities are suspended and staff are furloughed, other than essential employees necessary to protect against imminent threats to the safety of human life.
Practically, while a few senior-level CPSC employees remain to make emergency decisions, CPSC is without its field agents, port inspectors, hazard analysts, etc. In light of the shutdown however, companies face the challenge of potentially issuing “unilateral” recalls, which the CPSC typically disfavors because of the importance of the government announcement acting as a megaphone to inform consumers of the recall.
The FDA is operating on a partial shutdown, but the agency is continuing operations to the extent permitted by law. Routine food safety inspections are stopped. During the shutdown, the agency will continue to maintain other “core functions to handle and respond to emergencies,” including: emergencies related to foodborne illness and the flu; food and medical product recalls endangering the public; civil investigations when “public health is imminently at risk;” evaluating imported food and medical products; as well as “addressing other critical public health issues that involve imminent threats to the safety of human life.”