CFPB establishes when a final rule is “issued”

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The CFPB has published a final procedural rule that addresses what constitutes official issuance of  a CFPB final rule. The procedural rule establishes that the CFPB’s final rules, including interim final rules, are deemed issued upon the earlier of when the final rule is posted on the CFPB website or when it is published in the Federal Register. The procedural rule became effective on December 28, 2012.

In publishing the procedural rule, the CFPB apparently felt it needed to publicly formalize the position it had been espousing in informal communications. According to the supplementary information accompanying the rule, the CFPB decided that “[c]larifying what constitutes issuance of a rule is beneficial because in some cases the date of issuance of a rule has legal consequences.” As an example, the CFPB cites section 1400(c)(3) of Dodd-Frank which makes various mortgage loan provisions automatically effective 18 months after the designated transfer date unless regulations have been issued by that date. The CFPB plans to generally issue rules by posting them on its website but has designated publication in the Federal Register as an alternate issuance date as “a precaution” if “by inadvertence or some other reason” the CFPB does not post the rule or the rule is published in the Federal Register before it is posted.

By providing that a final rule is deemed issued when posted on the CFPB website, if such posting precedes the rule’s publication in the Federal Register, the CFPB likely was addressing, at least in part, the various Dodd-Frank mortgage regulations that it soon will finalize. As noted by the CFPB, under Dodd-Frank section 1400(c)(3) various mortgage-related provisions in Dodd-Frank Title XIV become effective on the date that is 18 months after designated transfer date (i.e., January 21, 2013), unless relevant regulations have been “issued” by that date. While the CFPB plans to finalize the various regulations by January 21, the regulations may not be published in the Federal Register by that date. The procedural rule, thus, appears to be an attempt by the CFPB to address the matter of when regulations are issued for purposes of the Dodd-Frank deadline. (As January 21 is a federal holiday, it is likely that the CFPB will finalize the various regulations by January 18.)

While Dodd-Frank section 1400(c)(3) refers to regulations being “issued” by the date noted above, Dodd-Frank section 1400(c)(1) refers to those regulations as required to be “prescribed.” The CFPB does not address what constitutes the “prescribing” or the adoption or promulgation of a final regulation. The CFPB also does not address Administrative Procedure Act requirements for publication of regulations in the Federal Register.  These issues may prove to be interesting.

There also is a practical issue regarding the timeframe to implement changes based on a final regulation. The CFPB will presumably set the effective dates of the final mortgage regulations and other CFPB final rules based on when the final rules are posted on the CFPB website rather than when they are published in the Federal Register, potentially accelerating the effective dates of CFPB final rules and reducing the time for coming into compliance. This was an issue over the past summer with proposed mortgage rules. While the procedural rule does not address CFPB proposals, the CFPB appears to informally take the position that proposals are also issued when they are posted. That position resulted in extremely abbreviated time periods between formal publication and the comment deadlines for two major mortgage proposals, a situation we found to be inconsistent with the CFPB’s commitment to transparency.

Topics:  CFPB, Dodd-Frank, Final Rules, Mortgages

Published In: Administrative Agency Updates, General Business Updates, Consumer Protection Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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