House takes up legislation requiring more CFPB transparency

The Give Useful Information to Define Effective Compliance Act was introduced by Rep. Sean Duffy (R-Wis.) and Rep. Ed Perlmutter (D-Colo.) on April 17.

Two members of the U.S. House of Representatives introduced a bill April 17 that would significantly alter regulations issued by the Consumer Financial Protection Bureau.

The bill, found here, was introduced by Rep. Sean Duffy (R-Wis.) and Rep. Ed Perlmutter (D-Colo.) and bears the title “Give Useful Information to Define Effective (GUIDE) Compliance Act.”

When the CFPB issues “guidance” to regulated entities, the GUIDE Compliance Act would require the director of the CFPB to ensure that it is “necessary or appropriate to enable the bureau to carry out Federal consumer financial law, including facilitating compliance with such law.”

For purposes of the Act, “guidance” is defined as “any written interpretive or legislative rule, interim final rule, bulletin, statement of policy, letter, examination manual, frequently asked question, or other document issued by the Bureau regarding compliance with a Federal consumer financial law.”  The scope of the requirement is limited to “guidance” that is exempt from notice and comment rulemaking requirements under section 553(b) of the Administrative Procedure Act.

“I’m proud to sponsor bipartisan legislation to bring predictability and transparency to the CFPB’s rule-making process,” Duffy said. “The CFPB should focus on its mission to actually protect consumers rather than playing ‘gotcha’ with ambiguous and surprising guidance for mortgage lenders.”

The GUIDE Act does not provide any parameters on specific laws or issues that the CFPB should address, or the nature of the “guidance” to be provided. However, the bureau would be required to create a process for amending or revoking guidance, including a process for public notice and comment. The act would require that a proposed rule be published within one year of the date that the act becomes law, with a final rule being published within 18 months of that date.

Also within that timeframe, the bureau would be required to issue guidelines for determining the size of any monetary penalties at stake “based on the severity of the actionable conduct in violation of a Federal consumer financial law and the level of culpability.” The bill calls this a “penalty matrix.” Finally, the act would provide that no person could be held liable for any act done or omitted in good faith in conformity with CFPB guidance.

The act would address calls from various industry members that the CFPB issue authoritative guidance on rules so that regulated entities could work to remain in compliance. Similarly, the bill requires that the bureau provide a framework for the imposition of predictable civil money penalties.