American Banker has reported that the Government Accountability Office has accepted a request from Senator Pat Toomey on whether the CFPB’s indirect auto finance guidance issued in March 2013 is a “rule” under the Congressional Review Act (CRA). It reported that the GAO also accepted a similar request from Senator Toomey regarding the leveraged lending guidance issued jointly by the OCC, Fed and FDIC. While we have been unable to obtain a copy of Senator Toomey’s request regarding the CFPB guidance, we presume his request regarding the leveraged lending guidance, which we did obtain, is substantially similar to his CFPB request.
The CRA created a fast-track legislative process for Congress to nullify a covered federal “rule” by passing a joint resolution of disapproval that would then be presented to the President for approval or veto. Under the CRA, “before a rule can take effect,” an agency must submit a final rule to the GAO and Congress. Upon receipt of the rule by Congress, members of Congress have a limited time window 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 establishes a process under which a joint resolution of disapproval cannot be filibustered in the Senate and can be passed with only a simple majority.
A GAO finding that the CFPB guidance is a “rule” under the CRA could have several potential consequences. Because the CRA requires an agency to submit a final rule to the GAO and Congress “before [it] can take effect,” the guidance would potentially be ineffective because it was never submitted to the GAO and Congress under the CRA. As a result, the CFPB would be faced with the choice of challenging the GAO’s finding, withdrawing the guidance, or reissuing it as rule under the Administrative Procedure Act (APA) notice and comment procedures.
Should the CFPB elect to disregard the GAO’s finding, a private plaintiff might file a lawsuit challenging the guidance’s effectiveness based on the CFPB’s failure to comply with the CRA. The CRA provides that “No determination, finding, action, or omission under [the CRA] shall be subject to judicial review.” This prohibition would literally appear to preclude such a lawsuit. However, according to a Congressional Research Service (CRS) report, a joint statement published by the CRA’s principal sponsors in the Congressional Record indicated that the limitation on judicial review was not intended to prohibit a court from determining that a rule has no legal effect due to an agency’s failure to comply with the requirement to submit a final rule to the GAO and Congress.
Finally, in addition to asserting that the guidance is ineffective due to the CFPB’s failure to comply with the CRA, Republican lawmakers might respond to a GAO finding that the guidance is a “rule” by introducing a CRA joint resolution of disapproval. According to another CRS report issued in November 2016, the GAO has issued 11 opinions at the request of members of Congress as to whether an agency action was a rule under the CRA. The report indicates that in seven opinions, the GAO determined that the agency action satisfied the CRA definition of a “rule” and that after receiving these opinions, some members submitted CRA resolutions of disapproval for the “rule” that was never submitted to Congress. The report also indicates that “in these cases, the Senate has considered the publication in the Congressional Record of the official GAO opinions…as the trigger date for the initiation period to submit a disapproval resolution and for the action period during which such a resolution qualifies for expedited consideration in the Senate.”
The CRA’s definition of a “rule” is generally the same as the definition of a rule for purposes of the APA. The APA defines a rule as “the whole or part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing….”
While Senator Toomey’s office confirmed that the GAO had accepted his requests, his staff was unwilling to provide a copy of the two GAO acceptance letters referenced in the American Banker article. The reasons given by a staff member for not providing the letters was that they contained private contact information and little more than a sentence accepting the requests and indicating that the GAO was working on them. According to American Banker, the letters gave no timetable for when the GAO would issue its opinions.
A GAO finding that the CFPB’s indirect auto finance guidance is a “rule” under the CRA could open the door to CRA challenges to other guidance issued by the CFPB. Such guidance has covered a wide range of topics including debt collection, credit reporting, and credit card add-on products.