After more than two decades in obscurity, the Congressional Review Act (CRA) has now emerged as a major factor in the relationship between the U.S. Congress and the regulatory agencies.
The CRA was enacted in 1996 as part of Speaker Newt Gingrich’s “Contract with America.” It was intended to provide a relatively easy-to-exercise method to check administrative action that was not consistent with the desire of Congress. The CRA allows the two houses of Congress to void an agency rule by passing a joint resolution of disapproval by a majority vote of each house followed by signature of the President. The CRA requires an agency to submit actions that qualify as a “rule” to the both houses and to the Government Accountability Office (GAO) before the rule can take effect.1 If a rule is disapproved under the CRA, the relevant agency is prohibited from issuing a new rule that is substantially the same unless expressly authorized by subsequent legislation.
From 1996 through 2016, Congress disapproved only one rule – an OSHA ergonomics rule issued under the Clinton Administration – which was voided after President Bush came into office. In sharp contrast, during the first four months of the Trump Administration, Congress and the President disapproved 14 rules issued under the Obama Administration.
In a departure from disapprovals of rules issued under a prior Administration of the other party, on October 24, 2017, the Senate joined the House of Representatives in disapproving the Consumer Financial Protection Bureau’s arbitration agreement rule, which was promulgated in July 2017 by Obama Administration appointee Director Richard Cordray. That action is currently awaiting the President’s signature.
In another recent significant CRA development, in an October 19, 2017 letter (GAO Letter), the General Counsel of the GAO responded to an inquiry from Senator Pat Toomey as to whether the Interagency Guidance on Leveraged Lending (Guidance) was a rule for purposes of the CRA.2 The Guidance, which updated prior agency leveraged lending guidance issued in 2001, was published in the Federal Register in March 20133 by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (together, Agencies). The Agencies did not submit a report to Congress or the GAO under the CRA when the Guidance was issued. In response to a recent inquiry from the GAO, the Agencies advised the GAO that the Guidance is a general statement of policy and, as such, is not a “rule” under the CRA.4
The GAO Letter agreed with the Agencies that the Guidance was a general statement of policy, but noted that the GAO had previously held that general statements of policy are rules under the CRA. To this point, the GAO Letter referred to a 2001 GAO letter, in which the GAO “cited to the APA [Administrative Procedure Act] definition of ‘rule,’ which includes ‘the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency.’” In the 2001 instance, the GAO found that the APA definition of “rule” applied both to rules that require notice and comment rulemaking and those that do not, such as general statements of policy, and explained that the CRA adopts its definition of a “rule” from the APA. The GAO Letter went on to note that the legislative history of the CRA confirms that the rules subject to the CRA include general statements of policy. It further found that none of the exceptions to the definition of a rule, as contained in the CRA itself, applied to the Guidance. Accordingly, the GAO Letter concluded that the Guidance should have been submitted to both houses of Congress and the GAO.
The position taken in the GAO Letter is significant, in that there may be other instances where similar Agency guidance statements would be viewed by the GAO as rules that were required to have been submitted to Congress for its review in accordance with the CRA before going into effect. The GAO Letter also may impact “guidance” issued by other federal regulatory agencies, which should have been submitted to Congress and the GAO.
At this point, Senator Toomey and his colleagues will need to decide how to handle the status of the Guidance, as well as other potential situations where general statements of policy or Agency actions that qualify as a rule were not submitted to Congress as required by the CRA. Congress may decide to take specific action with respect to the Guidance, including considering whether to: act to disapprove the Guidance; take some action to declare it is not deemed to be in effect; or to call for the Agencies to withdraw the Guidance. Congress may also direct the Agencies to review their actions and report as to whether any outstanding actions should have been submitted to Congress under the principles expressed in the GAO Letter, and then determine what actions, if any, to take.
Financial institutions subject to the Guidance, particularly those that have been subject to regulatory criticism or supervisory or enforcement action, may wish to assert the position that the Guidance is of no force and effect in light of the GAO Letter. This could occur with respect to an institution’s interactions with the applicable banking agency. Such an argument could also be asserted in an administrative or judicial proceeding.
Beginning with Texas Savings & Community Bankers Association v. Federal Housing Finance Agency5 in 1998, courts have almost uniformly ruled that they do not have jurisdiction over private party claims regarding compliance with the CRA.6 In this regard, the U.S. Court of Appeals for the D.C. Circuit has ruled that the CRA denies courts the power to void rules on the basis of agency noncompliance with the CRA.7 However, in one case a District Court read the provision as preventing judicial review of actions by Congress under the CRA, but not preventing the court from having jurisdiction to review whether an agency rule is in effect when that rule should have been (but was not) reported to the Congress under the CRA.8
The GAO Letter may have a broad-ranging impact on the relationship between Congress and a number of regulatory agencies with respect to the status of agency actions that should have been, but were not, handled in compliance with the CRA. Further, the GAO Letter has the potential to lead to enhanced Congressional review of new agency actions, including policy statements.
1) 5 U.S.C. § 801(a)(1), which provides that “[b]efore a rule can take effect, the Federal agency promulgating such rule shall submit to each House of the Congress and to the Comptroller General” a report containing (i) a copy of the rule; (ii) a concise general statement relating to the rule, including whether it is a major rule; and (iii) the proposed effective date of the rule”). Enhanced review procedures apply to rules that are deemed to be major rules.
2) Letter, dated October 19, 2017, from Susan A. Poling, GAO General Counsel, to Senator Pat Toomey.
3) 78 Fed. Reg. 17766 (Mar. 22, 2013).
4) The Guidance sets forth a comprehensive set of policies that institutions are expected to implement in regard to the conduct of their leveraged lending activities. When published, it also specified a date on which it was to become effective as well as a “compliance date.”
5) 1998 WL 843181 at n. 15 (June 25, 1998).
6) 5 U.S.C. § 805, which provides “No determination, finding, action, or omission under this chapter shall be subject to judicial review.”
7) Montanans for Multiple Use v. Barbouletos, 568 F.3d 225, 229 (D.C. Cir. 2009). See also Via Christi Reg’l Med. Ctr., Inc. v Leavitt, 509 F.3d 1259 n. 11 (10th Cir. 2007).
8) U.S. v Southern Indiana Gas and Electric Co., 2002 U.S. Dist. LEXIS 20936 (S.D. Ind. 2002). See also U.S. v. Reece, 956 F. Supp. 2d 736, 743-46 (W.D. La. 2013) (finding that an agency order is not a rule for purposes of the CRA, and as a result, not reaching the question of the availability of judicial review with respect to a rule).