On May 8, 2018, the House of Representatives used the Congressional Review Act ("CRA") to vote to repeal the Consumer Financial Protection Bureau's (CFPB's) March 2013 bulletin addressing indirect auto lending and compliance with the Equal Credit Opportunity Act ("ECOA"). That vote follows the Senate's April 18 CRA vote to repeal the bulletin. President Trump is expected to sign the joint resolution (S.J. Res. 57) within 10 days.

In the repealed bulletin, the CFPB (under the leadership of former director Richard Cordray) stated that some indirect auto lenders may be subject to ECOA and Regulation B, and advised them to "take steps to ensure that they are operating in compliance" with those antidiscrimination principles. Most significantly, the bulletin noted that indirect auto lenders may have direct liability under ECOA for allegedly discriminatory pricing disparities. In an indirect auto lending arrangement, instead of providing financing directly to the consumer, the auto dealer facilitates financing through a third party. The CFPB bulletin stated that some indirect auto lenders have policies that allow dealers to mark up lender-established rates and then compensate dealers for those markups, which may result in pricing disparities on a basis prohibited under ECOA.

As explained in a prior Mayer Brown Legal Update, the CRA allows Congress to pass a resolution of disapproval of an agency rule within 60 legislative session days of the rule's publication. Such a resolution, if passed by both houses of Congress and signed by the President (or passed by a two-thirds majority in both houses to overcome a presidential veto), invalidates the rule. The CRA allows Congress to use expedited procedures that effectively prohibit filibusters in the Senate.

The 60-day clock for introduction of a disapproval resolution in Congress begins on the "submission or publication" date of the rule, which the CRA defines as the later of the date on which Congress receives the agency's report related to the rule or the date the rule is published in the Federal Register, if it is published. Although the CFPB issued its indirect auto lending bulletin more than 60 days ago, the CFPB did not submit to Congress a report on the bulletin or publish it in the Federal Register, so arguably the 60-day clock did not begin in 2013.

To date, CRA resolutions have been used to invalidate 17 agency rules, 16 of which have been signed by President Trump to invalidate Obama-era regulations. However, this resolution marks the first time Congress has used the CRA to invalidate agency guidance. Previously, Congress had used the CRA only to repeal rules that the respective agencies viewed as legislative rules or regulations subject to the Administrative Procedure Act's notice-and-comment requirements. Unlike those legislative rules, the CFPB's indirect auto lending bulletin is informal guidance that, as the Government Accountability Office ("GAO") concluded, "offers clarity and guidance on the Bureau's discretionary enforcement approach." Nonetheless, the GAO found that the CFPB bulletin qualifies as a "rule" subject to the CRA. The GAO has responded to requests from members of Congress to opine on the status of agency issuances by consistently noting that the scope of the definition of a rule under the CRA is broad. In a 2012 letter, the GAO explained that the "definition of a rule has been said to include 'nearly every statement an agency may make.'"

If the CRA is available to Congress to invalidate agencies' non-rule guidance that was not reported to Congress or published in the Federal Register, it is unclear what, if any, timing boundaries apply. This novel approach could implicate a large swath of informal agency guidance issued since the CRA's passage. Further, a CRA disapproval extends beyond the rule (or non-rule guidance) itself, and prohibits the agency from issuing any rule that is "substantially the same" as the invalidated rule, absent subsequent statutory authorization.

It is unclear, however, what this means in the context of agency guidance. If agency guidance is an interpretation of existing statutes and regulations, and Congress repeals only the guidance/interpretation, but not the existing statutes (or regulations, if applicable), it is possible that an agency could simply attempt to return to its initial stance (for instance, a CFPB director could possibly refocus on indirect auto lenders, using an approach similar to that announced in the CFPB's 2013 bulletin). Certainly, the actions of Congress under the CRA do not protect entities from scrutiny by the Department of Justice, the Federal Trade Commission, or the states, which also have enforcement authority under ECOA, or from private plaintiffs, who have a cause of action.

In any event, Congress definitely has clarified that it is willing to use the CRA to invalidate both agency regulations and informal guidance, and it remains to be seen which additional Obama-era regulations or guidance documents may be the CRA's next victim.

Originally published May 8, 2018

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2018. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.