Independent Research Could Improve the CFPB Rulemaking Process

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Explore:  CFPB Rulemaking Process

Recently, the Research Integrity Council (RIC) held its first Research Academic Forum, a panel discussion that focused on how independent academic research can help inform the agency rulemaking process, especially at the CFPB. As previously reported, the RIC’s objective is to ensure that good, quality research forms the basis for the rulemaking process. RIC Executive Director Irving Daniels introduced the topics and panelists: Thomas Durkin, retired Senior Economist in the Federal Reserve Board’s Division of Research and Statistics; Howard Beales, Professor at George Washington University School of Business and former Director of the Federal Trade Commission (FTC) Bureau of Consumer Protection; and Todd Zywicki, Professor of Law at George Mason University School of Law, Senior Scholar of the Mercatus Center, and former Director of the FTC Office of Policy Planning.

Each panelist spoke about how robust data collection and strong research can inform the rulemaking process. They described how providing agency staff with collected data and relevant research can help predict trends, provide insight on policy questions raised by agency staff, and potentially change the course of a proposed rule.

Mr. Durkin began the discussion with his insights on the research that has been made available by the CFPB so far. He expressed concerns with the overall lack of transparency in how the CFPB conducts its research, including the failure to identify the researchers involved and the authors of research reports. Mr. Durkin observed that there may not be sufficient collaboration taking place between the CFPB’s researchers and legal department, as at least one CFPB research questionnaire demonstrated an inherent failure in understanding of how the relevant law applied while another questionnaire captured the legal nuances, but was deficient in how the questions were structured, leading to faulty research. He also stressed that the CFPB should be reaching out to industry, as needed, to obtain relevant data.

Professor Beales focused on the importance of independence and disinterested analysis in producing high-quality research. He cautioned that without these defining characteristics, research can become malleable and used to pursue a specific agenda. Professor Beales commented that without the availability of strong research, an agency may instead rely on policy presumptions when issuing rules, and with no data or research to refute these underlying assumptions, courts are likely to defer to the agency’s position. By way of example, he discussed the flawed methodology widely observed in the survey that was the basis for the CFPB’s payday loan report. Professor Beales suggested that had the CFPB research been conducted using strong scientific methods, the results contained in the CFPB report may have very different. Professor Beales emphasized that to the extent an agency is not producing strong research internally, stakeholders should take advantage of opportunities to provide an agency with relevant data and research from external sources.

Professor Zywicki focused on how and why good research improves rulemaking; including how independent research differs from lobbying. He stressed that, “bad research beats no research.” If the only research available to an agency is flawed, whether produced internally or from an external source, then an agency will develop its rules based on the flawed research if there is no better research to refute the policy conclusions drawn from the flawed research. Professor Zywicki urged interested stakeholders to be proactive and forward looking in any approach toward research. He noted that because research takes time, and can be costly, it requires a long-term commitment from those individuals and organizations, including trade associations, that are interested in developing research. In his view, this research should be conducted long before a proposed rule is issued by an agency. Professor Zywicki also recommended that any such external research be conducted by academics to provide independent analysis of the raw data that can be collected by industries. He emphasized that researchers should be given the freedom to conduct this research for the purpose of educating both the industry and any relevant agencies, rather than as a tool to lobby for a specific agenda. Professor Zywicki stated, however, that strong, independent research can influence policy and prove to be a valuable resource during the rulemaking process.

During a question and answer session following the panel discussion, the panelists discussed how the RIC, and similar entities, could act as intermediaries between members of industry, academics, and agencies, such that each group could be kept up to date on the work of the others in order to maximize good research and help each group stay current, proactive, and forward looking. The panelists agreed that since research requires such a long lead time, agencies should better communicate in what policy areas future rules are being contemplated, so that high-quality research can be made available to improve the rulemaking process.

The RIC plans to hold its next meeting later this year, which will feature a panel discussion with internal agency research personnel.

 

Topics:  CFPB, Rulemaking Process

Published In: Consumer Protection Updates, Finance & Banking 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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