The American Bankers Association (ABA) has issued a new white paper, “Effective Agency Guidance: Examining Bank Regulators’ Guidance Practices,” that is intended to help agencies issue guidance that complies with legal requirements while providing useful advice and information to regulated entities.  The ABA also sent letters to the FDIC and CFPB in which the white paper serves as the foundation for comments on recently-issued guidance that the ABA believes would benefit from public input.

White paper.  The white paper begins with a discussion of the legal requirements applicable to guidance, particularly those related to when agency action should be considered a legislative rule and be subject to the Administrative Procedure Act (APA) notice-and-comment process.  It then discusses instances in which agencies have issued guidance consistent with those legal requirements and contrasts those instances with instances when the ABA believes the agencies deviated from those legal requirements.  The white paper concludes with recommendations for making agency guidance more effective and compliant with legal requirements.  While observing  that the best way to make guidance effective would be to follow notice-and-comment procedures for all but ministerial documents, the ABA acknowledges that time or resource constraints can limit when it is feasible to put guidance through those procedures.  Accordingly, the ABA describes other practices that can help agencies issue more effective guidance and ensure they are complying with their legal obligations. 

To best achieve adherence to good guidance practices, the ABA recommends that the agencies adopt written procedures governing the development, issuance, and use of guidance documents and that, at a minimum, such procedures should:

• Clearly define the term “guidance document” and identify the specific categories of guidance documents used by the agency.
• Ensure that all guidance documents comply with all relevant statutes and regulations.
• Require that all guidance documents identify or include: the term “guidance;” the date of issuance; a short title; a unique numerical identifier; the activity or entities to which the guidance applies; citations to applicable statutes or regulations; a statement indicating whether the guidance is intended to revise or replace previously issued guidance; a short summary of the subject matter covered in the guidance; and a clear and prominent statement declaring that the contents of the document do not have the force and effect of law and are not not meant to bind the public in any way.
• Establish and maintain on the agency’s website a single, searchable, indexed, publicly accessible database containing all guidance documents issued by the agency and identifying whether they are still in effect.
• Publish all guidance in the Federal Register as required by law.
• Establish a process for electronic submission of petitions for issuance, reconsideration, modification, or rescission of guidance documents, and for electronic submission of complaints that the agency is not following its guidance regulations or procedures or is improperly treating a guidance document as a binding requirement.
• Establish a special process for the issuance of “significant” guidance documents, which shall include public notice of a draft of the proposed guidance and a reasonable opportunity to comment before issuance of a final document.
• Submit all guidance documents to both Houses of Congress and the Government Accountability Office for review under the Congressional Review Act, as required by law.
• Require a review of existing guidance documents for conformity to the procedures above and revise or rescind the guidance documents, as necessary.

Letters to agencies.  The white paper was sent by the ABA to the CFPB, FDIC, Federal Reserve, and OCC, together with a letter in which the ABA called to the agencies’ attention the growing concern of its members regarding “the use of ‘guidance’ to advance regulatory policy agendas.”  The letter also references five separate letters sent by the ABA to the FDIC and CFPB consisting of the following:

• A letter to the FDIC regarding its Financial Institution Letter issued in August 2022 (FIL) and revised in June 2023 (Revised FIL) dealing with banks’ nonsufficient funds (NSF) fee  practices.  The ABA expresses its concern with the FDIC’s use of the FIL and Revised FIL to establish new regulatory expectations regarding NSF fees without following the APA’s notice-and-comment process.
• A letter to the CFPB regarding its October 2023 advisory opinion interpreting  Dodd-Frank Section 1034(c) to prohibit large banks and credit unions from requiring a consumer to pay a fee or charge to obtain account information.  The ABA states that the opinion creates substantive legal obligations, which should have been issued through APA notice-and-comment rulemaking.
• A letter to the CFPB regarding its February 2023 advisory opinion addressing the applicability of Section 8 of the Real Estate Settlement Procedures Act to operators of certain digital technology platforms that enable consumers to comparison shop for mortgages and other real estate settlement services.  The ABA states that parts of the advisory opinion are inconsistent with RESPA and Regulation X and urges the CFPB to solicit additional public feedback to ensure that stakeholders have adequate opportunity to raise additional issues or questions about the opinion.
• A letter to the CFPB regarding its September 2023 Circular addressing creditors’ responsibility to provide reasons for adverse action under Regulation B in connection with credit decisions using artificial intelligence or complex credit models. The ABA urges the CFPB to rescind the Circular and reissue it as proposed guidance on which it should solicit public comment.
• A letter to the CFPB regarding the October 2023 Joint Statement issued by the CFPB and the Department of Justice regarding consideration of an applicant’s immigration status in credit decisions.  The ABA urges the agencies to withdraw the Joint Statement and repropose it for public comment.

We have previously criticized the CFPB for its use of a wide variety of documents other than formal regulations to make new law.  Indeed, last year I sent an open letter to Director Chopra about this practice and urged him to reinstitute the use of Official Staff Commentaries for the regulations as to which the Dodd-Frank Act transferred regulatory jurisdiction from the Federal Reserve Board to the CFPB.  Official Staff Commentaries require the use of notice-and-comment procedures.

We completely support the ABA’s white paper and letters to the agencies.  We suggest that the CFPB’s changes to its UDAAP Exam Manual defining “unfairness” to include discrimination is another example of rulemaking by the CFPB without following APA notice-and-comment procedures.  Those changes triggered a lawsuit against the CFPB in which the federal district court vacated the changes.  Although the CFPB has since updated its UDAAP Manual to remove the changes, it has appealed the district court’s decision to the Fifth Circuit.

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