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Guidance v. Rule: Congressional Review Act Invalidation of Auto Lending Bulletin Shows this Distinction Makes a Big Difference

April 26, 2018

On April 18, 2018, the United States Senate exercised its authority under the Congressional Review Act (CRA) by repealing a longstanding “rule” issued as a guidance on March 21, 2013 (see CFPB Bulletin titled Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act(Bulletin)) by the Consumer Financial Protection Bureau (CFPB), now known as the Bureau of Consumer Financial Protection (BCFP).  The Bulletin provided “guidance” (according to the BCFP) to automobile dealerships facilitating indirect financing from third-party lenders. The Bulletin made clear that such automobile dealerships, or indirect auto lenders, “should take steps to ensure that they are operating in compliance with the [Equal Credit Opportunity Act] and Regulation B as applied to dealer markup [of interest rates] and compensation policies.” While CRA action is noteworthy even on its own, the reclassification of what an agency claimed was guidance instead of a rule subject to Congressional review is even bigger news, and should be viewed as a cautionary tale for federal regulators. 

Under established administrative law precedents, “guidance” typically is a non-binding statement of policy or advice provided by the agency in connection with implementation of a rule. A “rule” is a statement of general or particular applicability designed to implement, interpret, or prescribe law, and is binding on the agency and regulated entities. The CRA is an important tool that permits a level of congressional oversight over federal agency final rules. Under the CRA, federal agencies must submit major final rules to Congress for review. Congress may overturn such rules by enacting a joint resolution of disapproval within sixty days of the agency’s submission for review.  The CRA, however, prescribes no such review authority with respect to agency guidance.

In December 2017, the Government Accountability Office (GAO) determined, in response to a request from Senator Pat Toomey (R-PA), that the BCFP’s March 2013 Bulletin provided a “general statement of policy designed to assist indirect auto lenders to ensure . . . compliance with [applicable law]” and “[a]s such, it is a rule subject to the requirement of CRA.” Because the BCFP characterized the Bulletin as guidance, it never published it in the Federal Register, provided an opportunity for notice and public comment, nor presented the Bulletin to Congress for review. In the absence of this process, the sixty-day CRA review period was never triggered.  Acting on the GAO’s decision, and despite the passage of considerable time, the Senate exercised its authority under the CRA by overturning this now-designated “rule.”

The GAO decision that the Bulletin is, in fact, a “rule” and not “guidance” presents a potentially significant, unprecedented opportunity for the Republican-controlled and deregulatory-focused Congress.  As a result of the GAO’s decision, all “guidance” published by federal agencies since the adoption of the CRA in 1996 is potentially subject to congressional review and nullification.  Some pundits, including a member of the House Financial Services Committee, are even suggesting that any “guidance” found to be a “rule” by the GAO is automatically ineffective and unenforceable as it was never submitted to Congress for review under the CRA.

In addition to the impacts the GAO’s decision might have on federal agency guidance already in place, this development has significant implications for future federal agency practice.  Will federal agencies be required to submit all guidance documents to Congress for review under the CRA, even if only out of an abundance of caution? Certainly a stricter approach toward the issuance of guidance will limit certain agencies’ untethered discretion in pursuing their delegated authority and could result in the use of enhanced regulatory process in adopting guidance.   Federal financial services regulators have traditionally relied heavily on guidance documents and should be particularly vigilant about these new developments. The current Administration’s deregulatory priorities are consistent with Congress’ interest in reining in the authority of the administrative state. In response, agencies will be forced to formulate guidance documents that can withstand CRA scrutiny and the alternative review that final agency rules could face in the form of challenges in federal court.  Regulated entities should give careful thought to their rights, and opportunities this new interpretation of the law may present. 

For further information please contact Tommy Brooks at, 202 552 2356, Jane Luxton at, 202.572.8674, Joann Needleman at, 215 640 8536 or Tim Lee at, 248.530.6332.

Clark Hill's Financial Services Regulatory & Compliance Practice Group is a national leader in the field of consumer financial services law, providing strategic legal counsel to clients in all areas of consumer finance. Our group can help you navigate this rapidly evolving regulatory environment. Our exceptional team of lawyers and government and regulatory advisors has extensive experience in — and an in-depth understanding of — the laws and regulations governing consumer financial products and services.

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