HAPPY ST. PATRICK'S DAY! On Saturday, March 16, 2019 I left these Comments on the CFPB's proposed new rule which would stay the 2017 Payday Loan Final Rule from taking effect. The last day to leave YOUR Comments on this particular proposed new rule is Monday, March 18, 2019.
The CFPB has proposed a separate rule to repeal and replace the Payday Loan Rule. Leave your Comments on that proposed rule by May 15, 2019. It is Docket No. CFPB-2019-0006-0001 on https://www.regulations.gov.
March 16, 2019
Consumer Financial Protection Bureau
Online at: https://www.regulations.gov
Re: Payday, Vehicle Title, and Certain High-Cost Installment Loans;
Delay of Compliance Date proposed rule.
Docket No. CFPB-2019-0007
RIN 3170-AA95
To the Director of the Consumer Financial Protection Bureau:
The Payday Loan Final Rule took effect on January 16, 2018.
Your proposed postponement of its operative date was the subject of a "statement" which the CFPB did not issue until January 16, 2018. A proposed rule for postponement of the Payday Loan Final Rule's operative date was published in the Federal Register more than a year after that, on February 14, 2019.
Parenthetically, the CFPB also published a proposed rule on February 14, 2019, to repeal and replace the Payday Loan "addressing reconsideration of certain provisions" which you "published separately in this issue of the Federal Register." 84 F.R. at 4298.
- As a matter of settled law, the Administrative Procedure Act does not permit an agency to effectively repeal a final rule simply by postponing its operative date. Therefore your proposed rule to postpone the operative date of the Payday Loan Final Rule is prohibited by the APA.
"The APA does not permit an agency to 'guide a future rule through the rulemaking process, promulgate a final rule, and then effectively repeal it, simply by indefinitely postponing its operative date.'' California v. U.S. Bureau of Land Mgt., 277 F. Supp. 3d 1106, 1121 (N.D. Cal. 2017), dismissed by agreement after mediation, 2018 WL 2735410 (9th Cir., March 15, 2018) (Corrigan, Circuit Mediator). For the reason that the Administrative Procedure Act prohibits the postponement you have proposed in the subject rule, the CFPB's proposed stay rule is void.
- The CFPB's claim to "discretion" does not preempt the Administrative Procedure Act and the serial claims of current Federal agencies to "proposed compliance date delays" are all subject to the APA including this one.
The CFPB's proposed new rule relies on "discretion" as its "Legal Authority" for what the CFPB calls "proposed compliance date delay." There is no such discretion and what the CFPB is doing here is subject to the Administrative Procedure Act.
The proposed new rule relies for its "Legal Authority" for its claim to "discretion," on Section 1031 of the Dodd-Frank Act "and each of the other legal authorities" cited in the CFPB's 2017 Final Rule. If the "other legal authorities" actually existed that are now broadly claimed to support discretion in the CFPB's proposed new rule, now is the time to tell them. See Bauer v. DeVos, 325 F. Supp. 3d 74, 108-09 (D.D.C. 2018) ("The arbitrary and capricious standard of the APA, however, requires that agencies 'provide an explanation that will enable the court to evaluate the agency's rationale at the time of decision.'"). If the authorities are not stated by the CFPB in its proposed new rule, then for purposes of the APA they do not exist.
Section 1031 of the Dodd-Frank Act specifically provides as follows regarding rulemaking:
SEC. 1031. PROHIBITING UNFAIR, DECEPTIVE, OR ABUSIVE ACTS OR PRACTICES.
(a) IN GENERAL.—The Bureau may take any action authorized under subtitle E to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.
(b) RULEMAKING.—The Bureau may prescribe rules applicable to a covered person or service provider identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. Rules under this section may include requirements for the purpose of preventing such acts or practices.
There is absolutely nothing about this statutory authorization to make rules that affords any agency "discretion" about changing the date for compliance with a previously issued Final Rule.
The CFPB's invocation of the above-quoted Section 1031 illustrates the major point that the CFPB, as a creation of Congress, has limited authority. An agency has only the authority conferred by Congress, and the powers necessarily implied from that authority. Delaying the date for compliance with an established Final Rule is not among the powers necessarily implied from the rulemaking authority conferred upon the CFPB in Section 1031, quoted above.
Since the CFPB lacks the "discretion" it claims as its Legal Authority to issue the subject proposed new stay rule, the subject proposed new stay rule is void and of no effect.
More specifically, the recurring issue of "proposed compliance date delay" is an issue subject to the Administrative Procedure Act. Internet searches have revealed what appears to be a serial use of this phrase in new rules proposed by agencies of the current Federal Government, all seemingly contained in attempts to delay or repeal pre-existing Final Rules, as here.
To date, I was able to find one proposed rules change dated before 2017. In 2003, the Office of Comptroller of the Currency claimed, without authority, that it would change the compliance date on a previously issued Final Rule. An unchallenged OCC rule is not precedent. Parenthetically, the OCC did not even bother to invent uncited "Legal Authority" to support its proposed power grab in its proposed rules change in 2003.
3. The CFPB's proposed postponement rule is arbitrary and capricious because it clearly was not written to stay pending litigation but instead it was plainly written to stay the rules pending reconsideration. This is impermissible under the APA and so the CFPB's proposed stay or postponement rule is void.
Although the CFPB's proposed stay rule does not say it, presumably the CFPB is relying on the stay authority found in 5 U.S.C.A. § 705. As you know, 5 USCA § 705 provides for a stay pending judicial review, but it requires a finding "that justice so requires[.]" The CFPB's subject proposed stay rule is arbitrary and capricious because it plainly does not relate to a stay pending litigation but instead it clearly recites that it was written to stay the rules pending reconsideration of the 2017 Final Rule.
The subject proposed rule does not even say that a stay pending litigation is the reason why the proposed stay rule was written.
The subject proposed stay rule cannot provide for a stay pending judicial review under Section 705 because the litigation in question mentioned by the CFPB in its proposed stay rule, Community Fin. Serv's Ass'n of Am., Ltd. v. Consumer Fin. Prot. Bureau, (W.D. Tex. Case No. 1:18-cv-00295-LY), has been stayed as the CFPB mentioned. 84 F.R. at 4298 n.5, referencing Docket No. 29, the Court's Order filed on June 12, 2018 reciting in part that "this action is STAYED pending further order of the court." The same Court entered a later order concluding "that the stay of litigation in this action ordered June 12, 2018, should be continued in full force and effect." That Court's stay of litigation is still in full force and effect, unchanged by any further order after a review of the Clerk's electronic docket.
That Court also purportedly stayed the effective date of the 2017 Payday Loan Final Rule. Community Fin. Serv's Ass'n of Am., Ltd. v. Consumer Fin. Prot. Bureau, Dkt. No. 53, Order, filed November 6, 2018 (W.D. Tex. Case No. 1:18-cv-00295-LY).
For all these reasons, the CFPB's proposed stay rule is arbitrary and capricious and therefore void and of no effect:
While there is no prohibition against having more than one justification for invoking Section 705, provided that one of them meets the statutory requirements, [the agency defendants] must show that they properly invoked the statutorily required ground of "pending judicial review." Defendants have not done so here.
California v. U.S. Bureau of Land Mgt., 277 F. Supp. 3d at 1122.
- The CFPB's proposed stay rule is arbitrary and capricious because (1) costs of compliance are an insufficient basis for a stay of an agency's final rule, and (2) "more immediate compliance dates" required by States does not give any reason to postpone the Federal Government's Payday Loan Final Rule.
Alternatively and cumulatively, the CFPB's proposed stay rule is arbitrary and capricious because it only takes into account the costs to the industry of complying with the Rule and completely ignores the benefits that would result from compliance. California v. U.S. Bureau of Land Mgt., 277 F. Supp. 3d at 1122.
The CFPB's proposed stay rule does not even set out a finding by the agency that justice requires the stay. Instead, in the proposed rule the CFPB offers two asserted reasons for a stay. The first reason is cost to the industry of compliance with the already-established final rule. Costs of compliance are an insufficient basis for a stay of an agency's final rule. In addition to the California v. U.S. Bureau of Land Management decision which has already been mentioned, see, e.g., Bauer v. DeVos, 325 F. Supp. 3d at 107-08: "The mere fact that parties would avoid the costs of complying with the existing regulations, however, is plainly insufficient to support a § 705 stay."
The CFPB's second asserted reason for the proposed stay rule is that some States have adopted similar requirements under State law which have "more immediate compliance dates." 84 F.R. at 4299. This is not a good reason, either, for a stay of the Federal Government's rule with a later compliance date.
In sum, the proposed stay rule is really a reflection of an agency's change in position due to a change in the people in power. An unacknowledged and unexplained inconsistency "is the hallmark of arbitrary and capricious decision-making." Bauer v. DeVos, 325 F. Supp. 3d at 109.
Conclusion.
For each and all of the foregoing reasons, whether taken separately or together, the CFPB's subject proposed stay rule is arbitrary and capricious. As such, it is prohibited by the Administrative Procedure Act as was the case in earlier challenged iterations of much the same type of recent "rulemaking" by other Federal agencies, which Federal Courts have struck down.
Thank you for your consideration.
Sincerely,
Dennis Wall
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