Trump’s CHOICE on CFPB?
By: Tom Brannon / CEO, Compliance Umbrella
Many statutes and regulations have a sponsoring agency, one that is assigned primary rulemaking (and perhaps enforcement) responsibility and authority. Dodd-Frank bundled much of the rulemaking and enforcement authority and passed it solely (or primarily) to the CFPB. The controversy and short history of enforcement (since 2012) by the CFPB led to a stinging rebuke in an early Executive Order by the new administration (EO13772, Core Principles for Regulating the United States Financial System). In its Summary of Recommendations, under “Driving Economic Growth,” the CFPB was referred to as unaccountable, abusive, and unduly broad. The Bureau would be replaced by the pending CHOICE ACT (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs).
Much of the private sector (and this writer) agrees that the CFPB is an anomaly best done away with. Its power is exercised with impunity, no accountability, and it presents a draconian example of rulemaking and enforcement. Some of their leading cases lie between “horrific” and “hilarious,”
So, the CHOICE Act came out of committee, on its way down the track toward the Senate. We’ve been waiting to see what Trump would do to simplify regulatory compliance – will he abolish the CFPB? Well, CHOICE would replace the CFPB and there are several very interesting changes that would be signal flags for his new regulatory track. Here’s what caught the writer’s eye about the new CHOICE ACT agency – renamed CLEA, Consumer Law Enforcement Agency.
Proposed rules/regulations may be deemed to be “major” due to significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based businesses to compete with foreign-based businesses in domestic and export markets. Such major rules must, prior to implementation, be preceded by a Federal Register publishing of a list of information on which the rule is based, including data, scientific and economic studies, and cost-benefit analysis and submitted by report to Congress.
The Act is written in an ombudsman frame-of-mind but the writers did choose to side with business over consumers in several instances. They chose, in overriding the Second Circuit, to codify the “valid when made” rule - “A loan that is valid when made as to its maximum rate of interest in accordance with this section shall remain valid with respect to such rate regardless of whether the loan is subsequently sold, assigned, or otherwise transferred to a third party, and may be enforced by such third party notwithstanding any State law to the contrary.”
The CLEA, Fed, FDIC, OCC, NCUA, SEC, FHFA, and Commodity Futures Trading Commission (federal financial agencies) would be required to include specified information in notices of proposed (ANPR) and final rulemaking for proposed and final regulations constituting a “significant regulatory action,” including an assessment of a regulation’s anticipated costs and benefits and an identification and assessment of available alternatives.
One of this writer’s favorite sections is the CLEA cancellation of the application of the deference principle (aka Chevron Deference) where courts are bound to side with an agency by supporting the agency’s claim that courts should assume that its position coincides with its original intent in a rulemaking. This principle frequently leads to violator’s claims of court bias and unjust or inequitable claims during enforcement actions.
If you’re wondering about compliance, the laws you’re complying with have mostly been around for some time. Compliance isn’t going anywhere, although Dodd-Frank’s demise would be big news. Trends and possibilities that seem most important are:
a) The desire to move the huge costs and risks in compliance off the balance sheet, somehow;
b) Technology as the primary tool to do that (watch for AI, blockchain, data security solutions);
c) The rise of new chairs in the C-level suite (newest is CECO, Chief Ethics and Compliance Officer);
d) The expansion of the FCPA (Foreign Corrupt Practices Act) horizontally across many businesses in the U.S., UK, Europe and Asia-Pacific;
e) The growth of vendor risk (somewhat due to FCPA) and cybersecurity as the new gorillas in the room;
<This Blog compliments of ComplianceUmbrella.com>