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Trump signs legislation repealing CFPB auto guidance, Mulvaney praises action; CFPB to reexamine ECOA requirements
On May 21, President Trump signed resolution S.J. Res. 57, which repeals CFPB Bulletin 2013-02 on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The president’s signature completes the disapproval process under the Congressional Review Act (CRA), which began after the Government Accountability Office (GAO) issued a letter in December 2017 to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA. The Senate passed the disapproval measure in April and the House approved it in the beginning of May. (Previously covered by InfoBytes here.)
The repeal responds to concerns that the bulletin improperly attempted to regulate auto dealers, which the Dodd-Frank Act excluded from the Bureau’s authority. In a statement after the president’s signing, CFPB acting Director Mick Mulvaney praised the action and thanked the president and Congress for “reaffirming that the Bureau lacks the power to act outside of federal statutes.” He also stated that the repeal “clarifies that a number of Bureau guidance documents may be considered rules for purposes of the CRA, and therefore the Bureau must submit them for review by Congress. The Bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission.”
Additionally, acting Director Mulvaney announced plans to reexamine the requirements of ECOA, “[g]iven a recent Supreme Court decision distinguishing between antidiscrimination statutes that refer to the consequences of actions and those that refer only to the intent of the actor.” Although the decision is not identified, it is likely the June 2015 Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which concluded that disparate impact claims are permitted under the Fair Housing Act but acknowledged some limitations on its application. (Covered by a Buckley Sandler Special Alert.)
House approves repeal of CFPB’s 2013 indirect auto guidance
On May 8, the House voted to repeal, under the Congressional Review Act (CRA), CFPB Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). As previously covered by InfoBytes, the Senate approved the resolution on April 18 and the White House issued a Statement of Administrative Policy supporting the Senate resolution; it is expected that President Trump will sign the measure soon.
If the measure is successful, this would be the first time that Congress has used the CRA to repeal a regulatory issuance outside the statute’s general 60-day period. In December 2017, the Government Accountability Office (GAO) issued a letter to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA, which allowed for the Senate to introduce the resolution measure years after the CFPB released the Bulletin.
Senate confirms full slate of FTC commissioners
On April 26, the Senate confirmed Joseph Simons to lead the FTC, along with four other nominees—Republicans Noah Phillips and Christine Wilson and Democrats Rohit Chopra and Rebecca Slaughter. The FTC, which has been operating with only two commissioners, will now be headed by a full complement of commissioners. Acting Chairman Maureen Ohlhausen released a statement saying she looks forward to welcoming them to the FTC and noted that Ms. Wilson will take her seat once Acting Chairman Ohlhausen is confirmed as a judge on the U.S. Court of Federal Claims.
Senate votes to block CFPB’s 2013 indirect auto guidance
On April 18, the Senate voted to strike down, under the Congressional Review Act, the CFPB’s Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The vote follows a December 2017 letter issued by the Government Accountability Office (GAO) to Senator Pat Toomey (R-Pa) stating that the Bulletin is a “general statement of policy and a rule” that is subject to override under the Congressional Review Act (CRA). As previously covered by InfoBytes, GAO reasoned that the CRA’s definition of a “rule” includes both traditional rules, which typically require notice to the public and an opportunity to comment, and general statements of policy, which do not. GAO concluded that the Bulletin meets this definition “since it applies to all indirect auto lenders; it has future effect; and it is designed to prescribe the Bureau’s policy in enforcing fair lending laws.” The measure has been sent to the House and is expected to be voted on soon. On April 17, the White House issued a Statement of Administrative Policy which supported the Senate resolution nullifying the guidance, stating that if the resolution were to be presented to the president, his advisors would recommend he sign it. If the measure is successful, this would be the first time that Congress has used the CRA to repeal a regulatory issuance outside the statute’s general 60-day period.
Senate Nullifies CFPB Arbitration Rule
On October 24, the Senate cleared a resolution under the Congressional Review Act to nullify the CFPB’s recently adopted final arbitration rule, with Vice President Mike Pence casting the deciding vote to break the 50-50 tie. As previously covered in InfoBytes, the House passed H.J. Res. 111 earlier in July to invalidate the rule, which prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. The resolution now heads to President Trump.
Both CFPB Director Richard Cordray and Acting Comptroller of the Currency Keith A. Noreika issued statements following the vote. Noreika stated: “The elected representatives acted to stop a rule from going into effect that would have likely increased the cost of credit for hardworking Americans and made it more difficult for small community banks to resolve differences with their customers without achieving the rule’s goal of deterring future financial abuse.” Noreika labeled the action by Congress as a “victory for consumers and small banks across the country.”
However, according to many media outlets, Director Cordray condemned the Senate’s action. Cordray explained: “Tonight's vote is a giant setback for every consumer in this country. Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”
Senate Special Committee Hearing Focuses on Continuing Efforts to Combat Illegal Robocalls
On October 4, the Senate Special Committee on Aging (Committee) held a hearing entitled “Still Ringing Off the Hook: An Update on Efforts to Combat Robocalls” to discuss efforts to combat illegal robocalls. Committee Chairman Susan M. Collins (R-Me.) opened the hearing by reinforcing the importance of utilizing technology not only to block robocalls but to better understand the scams that continue to impact consumers. Sen. Collins also stressed the positive impact “aggressive law enforcement” has had on these efforts.
According to a hearing-related press release issued by the FTC, the Commission received more than 3.4 million robocall complaints from consumers in 2016 and at least another 3.5 million complaints between January and August 2017. The FTC’s ongoing efforts to address these complaints include: (i) initiating enforcement actions targeting robocall violators; (ii) cooperating with law enforcement at the state, federal, and international level to develop solutions to prevent and detect calls; and (iii) as previously discussed in InfoBytes, publicly posting robocall numbers received from consumer complaints to help enable industry groups develop call-blocking solutions. The following four witnesses offered testimony on industry and state efforts to protect consumers from scams and increase education efforts.
- Ms. Lois C. Greismann, Associate Director of the Division of Marketing Practices, Bureau of Consumer Protection, FTC (testimony);
- The Honorable Josh Shapiro, Pennsylvania Attorney General (testimony);
- Mr. Kevin Rupy, Vice President for Law and Public Policy, USTelecom (testimony); and
- Ms. Genie Barton, President, BBB Institute for Marketplace Trust (testimony).
Massachusetts AG Leads AG Coalition Urging Senate to Oppose Joint Resolution to Set Aside CFPB Arbitration Rule
On July 28, Massachusetts Attorney General Maura Healey, along with 20 other state attorneys general, issued a letter to Senate Majority leader Mitch McConnell and Minority Leader Charles Schumer, urging Senate leaders to oppose S.J.Res. 47—a joint resolution that would set aside the CFPB’s arbitration rule. As previously discussed in InfoBytes, on July 25, the House exercised its authority under the Congressional Review Act to pass a measure to strike down the rule. The coalition of state attorneys general support the CFPB’s proposed rule, which prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. The letter asserts that most customers lack the time and resources to enter into arbitration and that “[t]he CFPB’s Arbitration Rule would deliver essential relief to consumers, hold financial services companies accountable for their misconduct, and provide ordinary consumers with meaningful access to the civil justice system.”
In 2016, AG Healey led a group of 17 state attorneys general who offered support to the CFPB in favor of the Bureau’s proposed rule and asserted a need for regulations that would prohibit such clauses outright. (See previous InfoBytes coverage here.)
Senators Reintroduce Truth in Settlements Act to Increase Transparency of Agency Settlements
On May 17, Senators Elizabeth Warren (D-Mass.) and James Lankford (R-Okla.) reintroduced a bipartisan bill entitled the Truth in Settlements Act of 2017 (S. 1145) to increase the transparency of major settlements reached by federal enforcement agencies. The bill—which was referred to the Committee on Homeland Security and Governmental Affairs—seeks to inform the public and hold federal regulators accountable for the true value of these settlements by requiring more accessible, detailed disclosures and “adequate information regarding the tax treatment of payments” made by companies and individuals under settlements with federal agencies. As previously covered in InfoBytes, the bill was first introduced in 2014. Sen. Warren commented that “more transparency means Congress, citizens and watchdog groups can better hold regulatory agencies accountable for enforcing laws so that everyone—even corporate CEOs—are equal under the law.” Similarly, Sen. Lankford remarked, “Taxpayers deserve an open and transparent government that is accountable to the American people.”
Notably, the proposed bill would demand more specificity and transparency by requiring federal agencies to post online, in a searchable format, a list of each covered settlement agreement, criminal or civil, with payments totaling $1 million or more. Furthermore, agencies will be required, among other things, to justify confidentiality provisions and explain whether any portion of the settlement amount is potentially tax deductible. The Senators also released a fact sheet detailing past settlements by federal agencies that have allowed tax deductions, offset credits, or designated agreements as confidential.
FTC Commissioners Testify Before Senate Committee on Enforcement Efforts to Combat Fraud
On March 21, Federal Trade Commission (FTC) Acting Chairman Maureen K. Ohlhausen and Commissioner Terrell McSweeny testified before the Senate Committee on Commerce, Science, and Transportation’s Subcommittee on Consumer Protection, Product Safety, and Data Security to describe the agency’s law enforcement work to combat fraud. The testimony noted that in the past year, the agency obtained judgments of more than $11.9 billion to consumers “harmed by deceptive and unfair business practices” and received more than three million consumer complaints. Commissioner Terrell McSweeny noted that the “top three categories of complaints were debt collection, impostor frauds, and identity theft,” and that for the first time “imposter scam complaints . . . surpassed the number of identity theft complaints.” FTC Acting Chairman Maureen K. Ohlhausen also presented testimony and emphasized two populations in particular—military consumers and small businesses—both of whom are attractive targets for fraudsters, and for whom the agency actively works with to provide fraud recognition tools to prevent future victims. Also discussed at the hearing was the creation of the Office of Technology Research and Investigation to help the agency “keep abreast of technology changes affecting consumers” as well as the agency’s fraud prevention and education outreach initiatives that impact “tens of millions of people and businesses each year.”
FCC, FTC Issue Joint Statement on Broadband Data Security Regulation; Senate Resolution Introduced to Repeal FCC Privacy Rules
On March 1, FCC Chairman Ajit Pai and acting FTC Chairman Maureen K. Ohlhausen issued a Joint Statement announcing an FCC Order (Stay Order) staying the enactment of certain data security provisions (§ 64.2005) adopted by the Commission late last year as part of its Broadband Privacy Order while the Commission and Congress consider an appropriate resolution of the broader Net Neutrality proceeding. Absent a stay, the rule was set to go into effect on March 2. Separate and apart from explaining the Stay Order, the Joint Statement effectively serves as a commitment by both the FCC and FTC to return “jurisdiction over broadband providers’ privacy and data security practices … to the FTC, the nation’s expert agency with respect to these important subjects.” Moreover, the statement also highlights what might be considered a guiding principle behind the new leadership at both the FCC and the FTC – namely, that “[a]ll actors . . . should be subject to the same rules” and “[t]he federal government shouldn’t favor one set of companies over another.”
The Stay Order arose out of an October 2016 decision to amend the Broadband Privacy Order to include new “sector-specific privacy rules” that the FCC determined were “necessary to address the distinct characteristics of telecommunications services.” This final version, the Broadband Privacy Order – was published in the Federal Register (81 Fed. Reg. 87,274) on December 2, 2016.
This amendment marked a substantial change from the original language included in the order as proposed back in March 2016, where the Commission “propose[d] to apply the traditional privacy requirements of the Communications Act to . . . broadband Internet access service (BIAS).” Then-commissioner and current FCC Chairman Pai strongly disagreed with the amendment at the time, filing a dissenting statement in which he argued, that “it makes no sense” for the FCC to enact “rules that apply very different regulatory regimes based on the identity of the online actor” because, among other reasons, it will inhibit competition in the online advertising market and also “lead to consumer confusion about which online companies can and cannot use their data.” Thereafter, eleven separate timely petitions to reconsider the October 2016 Order were filed, along with a petition requesting that the Commission stay the effective date of the Order.
The decision to delay the enactment of the new privacy regulations relied on Chairman Pai’s earlier argument that the data security rule as amended is not consistent with current FTC privacy standards, and thus found the March 2 effective date to be based on the incorrect underlying assumption that “carriers should already be largely in compliance with these requirements because the reasonableness standard adopted in [the] Order . . . resemble[] the obligation to which they were previously subject pursuant to Section 5 of the FTC Act.” As made clear by Chairman Pai in the Joint Statement, “[t]he stay will remain in place only until the FCC is able to rule on a petition for reconsideration of its privacy rule.”
Notably, shortly after the release of the Joint Statement, on March 7, Sen. Jeff Flake (R-Ariz), chairman of the Senate Judiciary Subcommittee on Privacy, Technology and the Law, introduced a joint resolution to formally provide for “congressional disapproval” of 81 Fed. Reg. 87,274, i.e., the Broadband Privacy Order referenced above, under the Congressional Review Act (CRA). The CRA is a 1996 law that empowers Congress to repeal federal regulations. According to a statement released by his office, Sen. Flake—who has long opposed the privacy regulations at issue—sent a letter back in January of last year to FCC Chairman Tom Wheeler expressing concerns that the FCC is “overreaching its authority” with its planned broadband regulations. The Arizona Senator thereafter, on May 11, 2016, chaired a Privacy, Technology and the Law Subcommittee hearing seeking “answers on the legality of the proposed FCC rules and the consequences for consumers and the future of the internet.” And, most recently, on March 1, Sen. Flake wrote a Wall Street Journal op-ed laying out his position on the matter.