CRA Resolutions Against Agency Guidance Are Meaningless

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GAO is wrong to think that Congress can use the CRA to overturn agency guidance.

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After years of dormancy, the Congressional Review Act (CRA) has helped Congress overturn multiple Obama-era regulations. Congress has even overturned an agency guidance document, leading many observers to assert that an enormous amount of additional guidance documents are vulnerable.

But we believe that using the CRA to overrule agency guidance documents and interpretations will be an empty gesture. The CRA is meant to attack “legislative”-type policymaking, rules that have legal consequence of their own. A guidance document, by contrast, only informs the public about policies or preferences that an agency could maintain with or without the guidance. Invalidating the message—or even the messenger—does not change the underlying agency activity.

The CRA gives Congress a time-limited opportunity to nullify any agency rule via a joint resolution that simply states that the rule “shall have no force or effect.” A “rule that does not take effect (or does not continue)” thanks to a CRA resolution “may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued.” Some lobbyists have called this feature “salting the earth” on that rule.

Before 2017, only one CRA resolution had passed, so the meaning of phrases in the CRA—like “no force and effect” and “substantially the same”—has not been tested in court. Under President Donald J. Trump, 16 CRA resolutions have passed, disapproving rules ranging from a new procurement regulation to a ban on certain arbitration clauses. Nearly all those rules were “legislative” rules: They created rights and obligations, were adopted through the full notice-and-comment rulemaking process, and were published in the Federal Register. But the latest resolution overturned an agency guidance document.

The document in question was a 2013 bulletin from the Consumer Financial Protection Bureau (CFPB) about discrimination risks in indirect auto lending. The bulletin pointed out that certain auto lenders could be liable for discriminatory conduct under the Equal Credit Opportunity Act and identified ways to mitigate that risk. Like many guidance documents, this one had not even been submitted to Congress for CRA review. However, the U.S. Government Accountability Office (GAO) concluded—in response to an inquiry from Senator Pat Toomey (R-Pa.)—that the bulletin was a rule for CRA purposes. GAO acknowledged the document was only a general statement of enforcement policy. But GAO said that all general statements of policy are “rules” under the Administrative Procedure Act (APA) definition, which the CRA incorporates. GAO concluded that a general statement of policy “is a rule subject to the requirements of CRA.” In May 2018, the bulletin became the first guidance document to be disapproved under the CRA.

Some commenters have argued that GAO is mistaken in concluding that guidance documents are rules. For example, David Zaring suggests that many of these documents are not rules because they are not designed to “prescribe law or policy”—part of the APA definition of a “rule.” We note, however, that a document designed to “implement” policy is also a rule, and that description is broad enough to capture a great many guidance documents.

Yet, even though guidance statements can be CRA “rules,” resolutions disapproving them will be ineffectual. Pure guidance provides information—about policy priorities, enforcement plans, or regulatory expectations, for example—or explains the agency’s interpretation of underlying law. It does not establish binding rights or obligations. Disapproving a guidance document would not alter any of the underlying law.

Granted, sometimes a document presented as a guidance document actually is a legislative rule in disguise. And a subset of interpretive rules do have the force of law, in part because they issue via “relatively formal administrative procedure.” But aside from that category, a guidance document is neither a prerequisite to nor authority for any other regulatory or enforcement action. The agency’s authority depends on the underlying statute or regulation, regardless of what the guidance document says. The agency “must be prepared to support the policy just as if the policy statement had never been issued.”

For example, consider the CFPB’s auto lending guidance. The bulletin interprets “creditor,” a term in the Equal Credit Opportunity Act, and it describes two practices that would “likely” make an indirect lender a “creditor.” It then points out that a certain mode of lending called “dealer markup” may result in disparate impact and warns indirect lenders that they “may be liable” in such cases. The bulletin urges lenders “to ensure that they are…in compliance,” and it identifies some steps that would help in the context of dealer markup.

Whether the bulletin’s observations are correct depends on the content of the Equal Credit Opportunity Act and its implementing regulation, Regulation B. Given the interpretation and the warning, it would be unsurprising if the CFPB sued a lender on allegations that its dealer markup produced discrimination. But the CFPB would have to prove that claim, and the bulletin would be at most a light thumb on the scale in the decision. The bulletin favors certain risk-mitigation practices, but it does not, and cannot, make them obligatory.

To be sure, a regulated entity may as a practical matter perceive little difference between a regulation and a guidance document. A typical lender might, as one court has put it, “feel pressure to voluntarily conform” with the auto lending bulletin. For example, after a 2013 guidance document indicated that the Federal Deposit Insurance Corporation would carefully scrutinize deposit advance loans, all but one bank reportedly stopped offering the product. Nonetheless, in a guidance document “there has been no ‘order compelling the regulated entity to do anything,’” and the real rights and duties of the agency and the public are the same as if there were no guidance document.

Consequently, a CRA resolution against a guidance document would be rather useless.

A legislative rule is the source of law on which an agency acts—the nullification of which has real consequence—but eliminating a guidance document does not change the rights or obligations of the agency or the public. Whether particular behavior by a lender constitutes a violation depends on the Equal Credit Opportunity Act and Regulation B—and those remain unaltered, even after Congress disapproved the CFPB bulletin.

So the CFPB can still bring an enforcement case based on dealer markup. Just as the guidance document did not justify or authorize such cases, its absence does not bar them. And the CFPB can still encourage the practices that the bulletin recommended. For example, the CFPB could settle an enforcement action in exchange for a defendant’s promise to undertake the recommended actions. It could also ask for an injunction requiring them, or it could accept a reduced penalty conditioned on adoption of such practices.

In short, if the CFPB still wanted to pursue the policies outlined in the bulletin, a lender potentially liable for discriminatory conduct should take little comfort from the CRA resolution disapproving the bulletin. Congress’s disapproval of a guidance document under the CRA has no real-world consequence—even if guidance documents are, strictly speaking, rules.

Thus far, we have based our argument on the practical effects of a CRA resolution. We can also reach the same place from the text of the CRA. The CRA-mandated language for a disapproval resolution does not apply to guidance documents because the resolution has to say the rule “shall have no force or effect.” A guidance document, by nature, has “no force or effect” anyway. Similarly, although a disapproved rule “shall be treated as though such rule had never taken effect,” a guidance document simply cannot be “made of no force or effect” by a CRA resolution. It never had any “force or effect” in the first place.

Nor does the CRA’s “salting the earth” provision matter for a guidance document. The CFPB has asserted that it could never create another rule “substantially similar” to the auto lending bulletin. But the “salting the earth” provision only says that a “rule that does not take effect” thanks to a CRA resolution “may not be reissued in substantially the same form.” This matters for legislative rules, for which issuance is a key step. For a guidance document, issuance is simply a convenient way to provide information. The agency can implement its policy in the same way without issuing a “substantially similar” guidance document.

Ultimately, a CRA disapproval of a guidance document makes no difference for what an agency can do in the future. Resolutions like the one against the auto lending bulletin may have political or rhetorical value, but they are an empty exercise from a legal point of view.

Keith Bradley

Keith Bradley is a partner at Squire Patton Boggs.

Larisa Vaysman

Larisa Vaysman is an associate at Squire Patton Boggs.