Last week, the Wall Street Journal reported that the CFPB is pushing to finalize its arbitration rule before Donald Trump’s inauguration as President on January 20.  The comment period on the proposed rule closed on August 22, 2016.

The article suggested that the CFPB may also attempt to finalize its rule on payday, title, and high-cost installment loans by January 20.  However, the possibility of the CFPB accomplishing that seems more remote given that the comment period on the CFPB’s proposal closed on October 7, 2016 and the CFPB received an unprecedented level of comments, numbering approximately one million.

If the CFPB were to issue a final arbitration rule or any other new final rule by January 20, it could find its efforts thwarted by Congress.  A relatively obscure law entitled the “Congressional Review Act” (CRA) establishes a special set of procedures through which Congress can nullify final regulations issued by a federal agency.  (Indeed, according to an article issued by the Congressional Research Service (CRS), the CRA could potentially be used to overturn final CFPB rules issued after mid-May 2016, which would include the CFPB’s final prepaid card rule issued on October 5, 2016.)

The CRA (5 U.S.C. Sections 801-808) was enacted in 1996 as part of the Small Business Regulatory Enforcement Fairness Act (SBREFA).  Under the CRA, an agency must submit a final rule to Congress and the Government Accountability Office before the rule can take effect.  Upon receipt of the rule by Congress, members of Congress have a specified time period during which they can submit and take action on a joint resolution disapproving the rule.  If the resolution is passed by both the House and Senate, it is sent to the President for signature or veto.  Most significantly, the CRA’s special procedures establish a process under which a joint resolution of disapproval cannot be filibustered in the Senate and can be passed with only a simple majority.

The enactment of a CRA joint resolution disapproving a final rule prevents the rule from taking effect.  If a rule has already become effective, it no longer continues in effect and “shall be treated as though such rule had never taken effect.”  The joint resolution’s enactment would also bar an agency from reissuing the rule “in substantially the same form” or issuing a “new rule that is substantially the same” as the disapproved rule “unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”  A CRS report on the CRA states that the CRA does not define the meaning or scope of “substantially the same,” what criteria should be considered in determining if a reissued or new rule is “substantially the same,” or who would make such a determination.

The CRA also provides that “[n]o determination, finding, action, or omission under this chapter shall be subject to judicial review.”  The CRS report indicates that two federal appeals courts and several federal district courts have determined that this CRA provision prohibits judicial review of any question arising under the CRA while one federal district court ruled that it could review a claim based on noncompliance with the CRA.

According to the CRS, the CRA procedure has only successfully overturned one agency final rule—a 2000 OSHA workplace-related rule.  The reason most commonly cited for why only one rule has been successfully overturned using the CRA over the 20 years since its enactment is that a de facto supermajority vote is required to enact a CRA resolution of disapproval.  While all congressional votes related to such a resolution can be simple majority votes, if the resolution is vetoed by the President, a two-thirds majority of both houses of Congress would be necessary to override the veto.  It is expected that a President will veto a joint resolution attempting to strike down a rule issued by his or her own Administration.  (The CRS indicates that in the 114th Congress (2015-2016), President Obama has vetoed four CRA disapproval resolutions.)

The election of Donald Trump as President presumably makes it unlikely that a CRA joint resolution disapproving a final CFPB arbitration rule would face a Presidential veto.  Having retained control of the House and Senate, Republicans would therefore be able to use the CRA to nullify a final CFPB arbitration rule through a simple majority vote and not have to overcome the hurdle of a supermajority vote.

In addition to the CRA, CFPB rulemaking could face another potential roadblock should the D.C. Circuit’s decision in CFPB v. PHH Corporation take effect.  That roadblock is Executive Order 12866, which requires a federal agency that is not considered an “independent regulatory agency” to submit regulations that qualify as a “significant regulatory action” to the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget for review before publication in the Federal Register.  For the reasons discussed in our recent blog post, the CFPB could be required to submit any rules it has not yet finalized for OIRA review and even face challenges to its final rules, including those that have already become effective, on the basis that such rules were not, but should have been, reviewed by OIRA.