House Leaders Demand CFPB Provide Answers for Recent Actions and Rulemakings

CFPBMembers of Congress seek documentation of the CFPB’s authority to pursue several recent actions impacting regulated entities in the financial services industry.

09/28/2022 2:30 P.M.

3.5 minute read

Two ranking members in the U.S. House of Representatives are seeking details from Consumer Financial Protection Bureau Director Rohit Chopra on the bureau’s authority to justify recent actions, including advisory opinions and interpretive rules.

Following a U.S. Supreme Court decision in West Virginia v. EPA that clarified the limitations of certain federal agency actions, House Financial Services Committee Ranking Member Patrick McHenry, R-N.C., and House Oversight and Reform Committee Ranking Member, James Comer, R-Ky., sent a letter to Chopra for feedback on his initiatives while leading the bureau.

The Supreme Court’s decision in West Virginia v. EPA shows that agency authority must be connected 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,” according to an analysis from Brownstein Hyatt Farber Schreck Shareholders Leah Dempsey and Sarah Auchterlonie.

“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,” Dempsey and Auchterlonie said.

McHenry and Comer believe the case clarifies the limitations of certain agency actions.

“In West Virginia v. EPA, the [c]ourt invoked the ‘major questions doctrine’ to reject an attempt by the EPA to exceed its statutory authority. As the [c]ourt explained, ‘[p]recedent teaches that there are ‘extraordinary cases’ in which the ‘history and breadth of the authority that [the agency] has asserted,’ and the ‘economic and political significance’ of that assertion, provide a ‘reason to hesitate before concluding that Congress’ meant to confer such authority,” their letter states.

McHenry and Comer outline initiatives from the bureau they say circumvent congressional intent and the Administrative Procedure Act (APA), including:

  • 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) and 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.
  • An interpretive rule limiting the Fair Credit Reporting Act’s preemption authority, allowing states to pass laws impacting implementation of the FCRA.

“As we have stated on several previous occasions, you have consistently operated the [b]ureau outside its authority,” McHenry and Comer said in the letter. “Instead of using the procedures Congress intended in the APA, you have worked to use administrative devices that keep Congress, industry, and the tax-paying public in the dark.”

They requested the following from Chopra by Sept. 30:

  • A list of all actions, including the above, the bureau intends to take during the remainder of 2022. This list should include the specific congressional authority for each action.
  • A list of all expected actions, including but not limited to major rulemaking, staff guidance, advisory opinions, and interpretive rules, and the specific congressional authority for each rulemaking.

“The House Committees for Financial Services and Oversight and Reform intend to exercise robust investigative and legislative powers to not only forcefully reassert our Article I responsibilities, but to ensure that neither you nor the Biden administration can continue to exceed Congressional authorizations,” the letter states.

ACA’s Take

In line with these recent interpretive rules and advisory opinions, whether finding solutions to problems or creating new regulatory measures, the bureau’s actions need to be based on current data and results from working with all stakeholders.

Under the Dodd-Frank Reform and Consumer Protection Act, Congress contemplated several checks and balances on the system of creating new rules and policies. In addition to protections already in place requiring a detailed process for creating federal rules, Congress in the Dodd-Frank Act also required the CFPB to go through the Small Business Regulatory Enforcement Fairness Act of 1996 process to protect small businesses from overly burdensome rules that do not properly consider their size and structure.

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