While some federal agencies paused rulemaking after the election, the Consumer Financial Protection Bureau has been on a blitz.
Rohit Chopra has been going for broke.
With the Biden administration winding down, the Consumer Financial Protection Bureau director has continued to roll out splashy and controversial new regulations, shrugging off angry warnings from Congressional Republicans.
In December, the watchdog agency finalized rules drastically limiting overdraft fees on bank accounts, eliciting furious protests and an immediate lawsuit from the financial industry; it followed this week by finishing a regulation that bars medical bills from being included on consumer credit reports, much to the chagrin of banks, debt collectors, and many hospitals
The damn-the-torpedoes approach carries an inherent risk, however. Republicans have hinted they may try to undo some of Chopra’s moves using the Congressional Review Act, which allows lawmakers and the president to spike recently completed rules. What’s more, the law bans agencies from enacting new regulations that are “substantially the same” as one Congress has reversed — meaning they could, in theory, be permanently repealed.
Industry lobbyists are already urging Republicans to pick up that tool.
“This is exactly what the Congressional Review Act is for,” said Leah Dempsey, a partner with Brownstein Hyatt Farber Schreck, who represents the debt collector trade association ACA International. “This would be a textbook example, some of these actions over the last few weeks.”
The CFBP, however, appears to be gambling that Republicans won’t have the stomach to overturn what regulators view as populist, and likely very popular, consumer protection measures. The rule on overdraft fees — which banks charge to customers in return for letting them overdraw their account — limits them to just $5, down from an average of $27 today. The limits on reporting medical debt would protect cancer patients and others from having their credit marred by unavoidable hospital bills.
“I think that at the end of the day, it’s hard to see how either the incoming administration or members of Congress are going to want to have the first votes of their legacy be standing up for debt collectors, you know, standing up for big banks driving junk fees,” a source familiar with the CFPB’s internal thinking told Yahoo Finance.
How Trump made the CRA great
First passed in 1996, the Congressional Review Act was designed, in part, to prevent an outgoing administration from slipping last-minute regulations under the closing White House door.
How Trump made the CRA great
First passed in 1996, the Congressional Review Act was designed, in part, to prevent an outgoing administration from slipping last-minute regulations under the closing White House door.
In order to scrap a regulation, both the House and Senate are required to pass what’s known as a “disapproval resolution,” which must also be signed by the president. The statute gives lawmakers a limited window of time to reject a new rule after an agency publishes it. But each new Congress also gets an extra 60-day “lookback” period when it is permitted to overturn regulations finished late in the previous term.
Although it had existed on the books for 20 years, Donald Trump was the first president to make heavy use of the law to undo a predecessor’s work, rolling back 16 different regulations that had been finished at the end of the Obama administration. Before then, the statute had only been successfully deployed once, under George W. Bush.
The Biden White House “was clearly cognizant of that experience and didn’t want it to happen again,” said Roger Nober, director of George Washington University’s Regulatory Studies Center. It finalized a flurry of economically significant rules in the spring, early enough that Republicans couldn’t move to repeal them in the event of a Trump win.
Since Trump’s election win, agencies have taken different approaches to tying up regulatory loose ends.
The Department of Education recently withdrew major proposals on trans athletes in women’s sports and student loan forgiveness, moves that were seen as tactical retreats. Leaving those rules unfinished would have given the Trump administration an opportunity to complete them itself, speeding up its own agenda. Finalizing them in a late rush would have left the regulations prone to Congressional review as well as lawsuits if the agency failed to dot-cross all the necessary I’s and T’s.
The Treasury Department, in contrast, finalized rules in recent weeks governing key tax credits from the Inflation Reduction Act, including ones for hydrogen production and zero-carbon electricity. Those rules were seen as must-finish items essential to making Biden’s signature legislative achievement function.
Meanwhile, some of the major banking regulators, including the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency promised to put their rulemaking activity on pause until the next administration took office.
‘Midnight rulemaking’
Chopra, for his part, has chosen to clear his agency’s to-do list in a final burst of activity, telling a Senate committee that he saw no need for the CFPB to be a “dead fish” in the lame-duck period.
Along with late regulations, the regulator has filed a flurry of lawsuits targeting major banks and the company that runs the payment platform Zelle, Walmart, and the manufactured homes company owned by Warren Buffet’s Berkshire Hathaway.
Key Capitol Hill Democrats have cheered on his approach. In December, former Ohio Sen. Sherrod Brown, then the head of the Senate Banking Committee, and Georgia Sen. Raphael Warnock, who also sits on the panel, urged the CFPB to finish its medical debt rule. “This issue is far too important to remain unsettled any longer,” Warnock said in a statement at the time.
But Chopra’s push has infuriated Capitol Hill Republicans, many of whom have opposed the CFPB’s existence since its creation and are hoping to significantly curtail its powers under Trump. Immediately after the election, Senate Banking Committee chair Tim Scott sent a letter to the Biden administration, asking all financial regulators to hit pause on new rules. He and House Financial Services Committee chair French Hill have since blasted Chopra for ignoring their requests, accusing him of engaging in “midnight rulemaking.”
Republicans lawmakers have yet to confirm whether they will try to repeal the regulations, though they have floated the possibility. In a December letter urging Chopra to hit pause on his efforts, Hill pointedly noted that his final actions could be subject to the Congressional Review Act.
“The financial system, its institutions, consumers, and the CFPB itself do not benefit from last-minute partisan rulemaking attempts,” he wrote.
Some of this typical end-of-term partisan sparring. The first Trump administration was similarly accused of engaging in “midnight rulemaking” as it sought to implement a slew of policy changes near its end. (The CFPB itself issued major rules on debt collection and mortgages in December of 2020). Progressives were ultimately frustrated that Democratic lawmakers and the Biden administration only used the Congressional Review Act three times to reverse those actions, in part because leaders on Capitol Hill wanted to focus on their expansive legislative agenda.
Republicans could face similar logistical constraints this year. For that reason, some might prefer to let the Trump administration’s regulators rewrite rules, though that would be a lengthier process, or allow lawsuits challenging them to play out. Industry groups have already filed suit to overturn the overdraft rule, which stands to cost banks billions of dollars annually in fees.
Even if Republicans do overturn rules via the Congressional Review Act, some experts question whether it would actually prevent a future Democratic administration from resurrecting a similar policy down the line.
Although the law bans agencies from implementing a rule in “substantially the same form” once it’s been subject to a disapproval resolution, it does not define what that means and the issue has never been fully litigated in court, said Philip Wallach, a senior fellow at The American Enterprise Institute who studies the regulatory process.
“I feel like if I were in Chopra’s position, you’re thinking why not just take your shot, why not leave your record the best you can?” Wallach said. “Make [Republicans] take their time and spend their political capital rather than meekly tabling it all as you walk out the door.”
