Two members of the House Committee on Financial Services, each of whom chairs a subcommittee, have sent a letter to Director Cordray asking a series of questions about the CFPB’s intended approach to rulemaking. Authored by Randy Neugebauer, Chairman of the Subcommittee on Oversight and Investigations, and Shelley Moore Capito, Chairman of the Subcommittee on Financial Institutions and Consumer Credit, the letter was sent on March 29 as a follow-up to Director Cordray’s testimony on the same date to the full Committee. The letter requests Director Cordray’s “assurance that the CFPB will conduct rigorous, transparent cost-benefit analysis whenever it drafts a new rule,” and seeks his views on specific rulemaking requirements.

Among those requirements is the one in Section 1022 of the Dodd-Frank Act for the CFPB to consider the “potential benefits and costs” of a proposed rule. The letter asks Mr. Cordray whether Section 1022 creates a “statutory obligation” for the CFPB to determine “the economic implications” of a proposal and, in light of Section 1022, whether a rule would be “arbitrary and capricious” if the CFPB failed to quantify the rule’s costs and benefits or to explain why it could not do so.  It also asks whether, given the requirements imposed by Section 1022, the CFPB will commit to solicit, in any notice of proposed rulemaking, public comments on the CFPB’s cost-benefit analysis and what the CFPB would consider a “significant rule” for purposes of Section 1022’s requirement for the CFPB to evaluate the effectiveness of a “significant rule” five years after the rule’s effective date.

Several questions are also addressed to Executive Order 12866 signed by President Clinton in 1993, which requires federal agencies other than ones deemed “independent regulatory agencies” to follow certain principles when developing regulations, including the use of cost-benefit analysis. The letter asks whether the CFPB is an “independent regulatory agency” for purposes of the Executive Order and, if so, whether the CFPB will nevertheless commit to conduct rulemaking consistent with the Executive Order.

Director Cordray is requested to respond to the questions within 21 days. We eagerly await his response and will be sharing our thoughts on it.