White House Issues Regulatory Freeze Memo

On Friday, January 20, 2017, White House Chief of Staff Reince Priebus issued a memo freezing new or pending regulations in efforts to give President Trump’s appointees a chance to review them. According to the memo, no new regulations should be sent to the Office of the Federal Register (OFR) until reviewed by a department or agency head appointed by President Trump. Further, any regulations sent to the OFR but not yet published in the Federal Register should immediately be withdrawn until reviewed. The memo also says effective dates of regulations having been published in the OFR but not yet effective should be temporarily postponed until 60 days from the date of the memo.

It remains unclear how the memo may affect “independent agencies” such as the CFPB, the OCC, the FDIC and the Federal Reserve.  A 2012 report by the Congressional Research Service discusses similar freeze memos issued by the Chiefs of Staff to Presidents Bill Clinton, George W. Bush, and Barrack Obama.  The report states such memos “have generally exempted regulations issued by independent [agencies].”  However, although compliance may not be mandatory, it is often customary for independent agencies to comply. 

Another facet for how the memo affects the CFPB is the current holding in the PHH case, in which the D.C. Circuit ruled unconstitutional the agency’s structure of a single director removable only for cause.  To remedy the constitutional defect, the “removal only for cause” provision was severed from the Dodd-Frank Act giving the President “the power to supervise and direct the Director of the CFPB,” allowing him to remove the Director at will at any time.   The Court stated as a result of this structural change, the agency is no longer an “independent agency” and instead “now will operate as an executive agency.”  The PHH decision is on hold for a possible en banc review in the Circuit Court and uncertainty remains about how the current administration will interpret the holding.

CFPB Director Richard Cordray on Wednesday noted the CFPB is taking the memo under consideration.  Given the uncertain nature of PHH, it is unclear if the director believes the memo effects the CFPB.  If the Bureau complies, rule makings for arbitration, small-dollar lending and debt collection would be stalled, if not stopped.  The memo also calls for rules already published but not yet effective to be temporarily postponed, and their effective date extended “for 60 days from the date of this memorandum.”  This suggests the White House is considering items published with a short delayed effective date.  If the effective date already is post the 60-day period, this may not impact current rules with later effective dates.  However, if the Administration intended a 60-day postponement from any particular rule’s finalized effective date, and the Bureau believes it needs to comply, current rules for prepaid cards, mortgage servicing amendments and HMDA amendments would be in scope.