CFPB ratified the majority of its existing regulations, as well as certain other guidance, to address any potential defect in the validity of CFPB's prior actions under Article II of the Constitution. The CFPB relied on an "established case law," that "any agency may, through ratification, 'purge[] any residual taint or prejudice left over from' a potential defect in a prior governmental action."

CFPB ratification follows a Supreme Court ruling in the case of Seila Law LLC v. Consumer Financial Protection Bureau, in which the Court held that the "for cause" removal protection in  12 U.S.C. 5491(c) enjoyed by CFPB's single Director violated the Constitution's separation of powers. As a remedy, the Court severed the removal clause from the rest of the agency's authorities, allowing CFPB to continue to operate, but bringing the Director under Presidential control (see  previous coverage). The Court, however, expressly declined to address the impact of its ruling on prior agency actions.

With the ratification, CFPB is attempting to "resolve any possible uncertainty" regarding the validity of its prior actions. Specifically, the CFPB "has decided to ratify a number of official actions from January 4, 2012 to June 30, 2020," including:

  • each CFPB-published document categorized under "Rules and Regulations" by the Federal Register, except the July 2017 "Arbitration Agreements" rule and the November 2017 "Payday, Vehicle, and Certain High-Cost Installment Loans" rule;
  • each CFPB-issued consumer information publication under Regulation X and Z;
  • each "Fair Credit Reporting Act Disclosures" notice;
  • the official approval titled "Final Redesigned Uniform Residential Loan Application Status Under Regulation B";
  • the preemption determination titled "Electronic Fund Transfers, Determination of Effect on State Laws (Maine and Tennessee)"; and
  • CFPB's concurrences with series of rules by the Federal banking agencies titled "Real Estate Appraisals."

As for other agency actions, CFPB "is considering whether ratifications of certain other legally significant actions by the Bureau, such as certain pending enforcement actions, are appropriate." CFPB stated that it will make such ratifications separately, and that it does not believe ratification is necessary for previous CFPB actions that "have no legal consequences for the public, or enforcement actions that have been finally resolved."

The ratification is effective upon publication in the Federal Register.

Commentary Rachel Rodman

CFPB is taking a scalpel to the question of ratification. Instead of ratifying all prior agency actions, CFPB has selected the majority of its rules and a handful of other regulatory actions for ratification. As for enforcement actions, CFPB states it is still "considering" whether to ratify pending enforcement actions asserting that enforcement actions "that have been finally resolved" do not require ratification. Today's action by CFPB thus leaves open significant questions for financial services companies as to the validity of prior enforcement actions.

Originally published July 7, 2020.

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