Pub. 12 2017-2018 Issue 4

NEBRASKA BANKERS ASSOCIATION 15 For more information, contact Jeff Makovicka at Kutak Rock LLP at (402) 346-6000 or jeff.makovicka@ kutakrock.com . Makovicka is a member of Kutak Rock LLP’s banking practice group where he concentrates on bank matters. Obama administration and was finalized by a President Obama appointee (Director Cordray). In both instances, a newCongress and a new president (of different parties from the outgoing president) used the CRA to overturn regulations issued at the end of the previous administration. In other words, the CRA gave the incoming Congress and president a tool to overturn a departing president’s “midnight” regulations. Since a president is unlikely to disapprove of his own agencies’ rules, the CRA has been regarded as inconsequential except during a presidential transition. A recent U.S. Government Accountability Office (GAO) ruling may change this. On October 19, 2017, the U.S. GAO issued a relatively rare legal determination concluding that the federal banking agen- cies’ 2013 Interagency Guidance on Leveraged Lending is a rule subject to the CRA.¹⁴ The GAO found that the CRA’s definition of “rule” is “broad, and includes both rules requiring notice and comment rulemaking and those that do not, such as general statements of policy.” Moreover, the GAO determined that the Leverage Lending Guidance does not fall within any of the CRA’s three exceptions to the definition of “rule,” which pertain to: (1) rules of particular applicability; (2) rules relating to agency personnel or management; and (3) rules of agency organization, procedure, or practice that do not substantially affect the rights or obligations of non-agency parties. The GAO’s conclusion that the Leverage Lending Guidance is a rule subject to the CRA potentially could open the door for Congress to disapprove and invalidate the Leverage Lending Guidance. Although it is unclear whether any CRA resolution regard- ing the Leverage Lending Guidance will be proposed, U.S. Sen. Pat Toomey released the following statement regarding the determination: “This is an important reminder that agencies have a responsibility to live up to their obligations under the Congressional Review Act. When they don’t, Congress should hold them accountable. I will explore steps to do so.” Given the GAO’s broad reading of the applicability of the CRA, the determination may be an example of how the CRA could be expanded to bank guidance. Although the banking implications remain unclear, the determination has the potential to lead to enhanced congressional review of old and new bank regulator actions, including policy statements.¹⁵  1 5 U.S.C. §801 et seq. (1996). 2 See 5 U.S.C. § 802(a). 3 See 5 U.S.C. § 801(b)(1). 4 See 5 U.S.C. § 801(b)(2). 5 15 so far. 6 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public L. No. 111-203, 124 Stat. 1376 (2010). 7 Consumer Financial Protection Bureau, Arbitration Study: Report to Congress, pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act § 1028(a) (March 2015). 8 See Bureau of Consumer Financial Protection; Arbitration Agreements, 82 Fe d. Reg. 33210 (July 19, 2017) (12 CFR Pt. 1040) (“FR Release”). 9 FR Release, 82 Fed. Reg. at 33210. 10 The Senate vote followed earlier House passage of H.J. Res. 111. 11 To no avail, in a personal letter dated October 30, 2017, CFPB Director Richard Cordray pleaded to President Trump to veto the arbitration disapproval resolution. In what Cordray termed a personal appeal, he wrote: “Many have told me I am wasting my time writing this letter—that your mind is made up and that your advisors have already made their intentions clear. But this rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them. When people are wronged or cheated, they deserve the chance to pursue their legal rights.” 12 Acting Comptroller of the Currency Statement following the President’s Signature Overturning the Consumer Financial Protection Bureau’s Rule on Arbitration Agreements (November 1, 2017). 13 Passage of the CRA resolution by Congress—and its signing by the president— also brings to an end legal challenges to the arbitration rule. For example, the U.S. Chamber of Commerce, the American Bankers Association, and several other financial services trade groups recently challenged the arbitration rule in federal court. See Complaint for Declaratory and Injunctive Relief, Chamber of Commerce of US, et al. v. Consumer Financial Protection Bureau, et al., No. 3:17-cv-02670-D (N.D. Tex., Sept. 29, 2017). On November 2, 2017, the Chamber of Commerce, et al, filed a Notice of Voluntary Dismissal with the court stating that “[b]ecause the [CFPB] rule has been invalidated pursuant to the Act, and therefore has no continuing effect, Plaintiffs hereby voluntarily dismiss this action without prejudice.” The court entered an order dismissing the case. 14 See Applicability of the Congressional Review Act to Interagency Guidance on Leveraged Lending, B-329272 (GAO, Oct. 19, 2017). The GAO’s determination was issued at the request of Sen. Pat Toomey (R-PA), who inquired by letter whether the Leverage Lending Guidance should be subjected to congressional approval as a “rule” under the CRA. According to the American Banker, in a separate letter, Sen. Toomey requested an opinion as to whether the CFPB’s indirect auto finance guidance issued in March 2013 is a “rule” under the CRA. Toomey seeks GAO’s help in reviewing agency guidance, American Banker (March 2017). As of this writing, the GAO has not responded to the indirect auto finance request. 15 The GAO has made prior determinations on whether guidance or other issuances are rules in at least 11 prior instances but this is the first determination on bank regulator guidance. See Congressional Research Service, The Congressional Review Act: Frequently Asked Questions, No.7-5700 (Nov. 17. 2016). Seven of those resulted in finding a “rule” for purposes of the CRA (similar to the determination for the Leverage Lending Guidance). Notably, none of those led to a joint resolutionof Congress disapproving the guidance/rule. It is unclear whether that record will remain intact with congressional review, if any, of the Leverage Lending Guidance. 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