[Federal Register Volume 85, Number 133 (Friday, July 10, 2020)]
[Rules and Regulations]
[Pages 41330-41331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14936]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X


Ratification of Bureau Actions

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Ratification.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau), through 
its Director, is ratifying a number of previous actions by the Bureau. 
This includes the large majority of the Bureau's existing regulations, 
as well as certain other actions. This ratification provides the public 
with certainty, by resolving any potential defect in the validity of 
these actions arising from Article II of the United States 
Constitution.

DATES: This ratification is issued on July 10, 2020 and relates back to 
the original date of each action that it ratifies.

FOR FURTHER INFORMATION CONTACT: Christopher Shelton, Counsel, Legal 
Division, at 202-435-7700. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    The Bureau was established by the Consumer Financial Protection Act 
of 2010 (CFPA).\1\ Section 1011(c)(3) of the CFPA provided that the 
President may remove the Director of the Bureau only for inefficiency, 
neglect of duty, or malfeasance in office.\2\ The Bureau's first 
Director was appointed on January 4, 2012.\3\
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    \1\ Public Law 111-203, title X, 124 Stat. 1376, 1955-2113 
(2010).
    \2\ 12 U.S.C. 5491(c)(3).
    \3\ From January 4, 2012 until July 17, 2013, Director Richard 
Cordray served as a recess appointee, but his recess appointment was 
not constitutionally proper in light of the Supreme Court's 
subsequent decision in NLRB v. Noel Canning, 573 U.S. 513 (2014). 
See CFPB v. Gordon, 819 F.3d 1179, 1185-86 (9th Cir. 2016) 
(upholding the Bureau's ratification of actions from that period, 78 
FR 53734 (Aug. 30, 2013)).
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    On June 29, 2020, the Supreme Court held in Seila Law LLC v. CFPB 
that the CFPA's removal provision violates the separation of powers.\4\ 
The Court further held that ``the CFPB Director's removal protection is 
severable from the other statutory provisions bearing on the CFPB's 
authority. The agency may therefore continue to operate, but its 
Director, in light of our decision, must be removable by the President 
at will.'' \5\ ``The only constitutional defect we have identified in 
the CFPB's structure is the Director's insulation from removal.'' \6\
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    \4\ 591 U.S.--(2020) (slip op.).
    \5\ Id. at 3.
    \6\ Id. at 32.
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II. Overview of This Ratification

    To resolve any possible uncertainty the Bureau, through its 
Director, has decided to ratify a number of official actions from 
January 4, 2012 to June 30, 2020 (Ratified Actions).\7\ Under 
established case law, any agency may, through ratification, ``purge[] 
any residual taint or prejudice left over from'' a potential defect in 
a prior governmental action.\8\ The Bureau is issuing this ratification 
out of an abundance of caution, and this ratification is not a 
statement that the Ratified Actions would have been invalid absent this 
ratification.
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    \7\ Some of the Ratified Actions were previously ratified by the 
Bureau in August 2013. See supra note 3. The Bureau has used the end 
date of June 30, 2020, in an abundance of caution in order to 
include 85 FR 39055 (June 30, 2020), which the Bureau released on 
its website on June 23, 2020.
    \8\ Guedes v. Bureau of Alcohol, Tobacco, Firearms & Explosives, 
920 F.3d 1, 13 (D.C. Cir. 2019).
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    Part III of this document sets forth the ratification, while part 
IV discusses the ratification, part V discusses certain actions that 
are outside the scope of the ratification, and finally part VI 
addresses some additional administrative law matters.

III. Ratification

    The Bureau, through its Director, hereby affirms and ratifies the 
following actions from January 4, 2012 to June 30, 2020 (collectively, 
the Ratified Actions):
    1. Each document published by the Bureau in the ``Rules and 
Regulations'' category of the Federal Register,\9\ except the July 2017 
rule titled ``Arbitration Agreements'' \10\ and the November 2017 rule 
titled ``Payday, Vehicle, and Certain High-Cost Installment Loans.'' 
\11\ Aside from those two exceptions, this includes but is not limited 
to all amendments to the Bureau's regulations in 12 CFR chapter X, as 
well as the Bureau's actions in issuing joint regulations with other 
agencies.
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    \9\ The Office of the Federal Register places each document 
published in the Federal Register in one of four categories: 
``Presidential Documents,'' ``Rules and Regulations,'' ``Proposed 
Rules,'' or ``Notices.'' See 1 CFR 5.9.
    \10\ 82 FR 33210 (July 19, 2017).
    \11\ 82 FR 54472 (Nov. 17, 2017).
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    2. Each consumer information publication issued by the Bureau under 
Regulation X, 12 CFR part 1024, and Regulation Z, 12 CFR part 1026.\12\
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    \12\ These consumer information publications are reflected in 
the notices of availability at 79 FR 1836 (Jan. 10, 2014); 80 FR 
17414 (Apr. 1, 2015); 80 FR 57154 (Sept. 22, 2015); 85 FR 35292 
(June 9, 2020).
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    3. Each notice titled ``Fair Credit Reporting Act Disclosures.'' 
\13\
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    \13\ 77 FR 20011 (Apr. 3, 2012); 77 FR 74831 (Dec. 18, 2012); 78 
FR 79410 (Dec. 30, 2013); 79 FR 74068 (Dec. 15, 2014); 80 FR 72711 
(Nov. 20, 2015); 81 FR 81745 (Nov. 18, 2016); 82 FR 53481 (Nov. 16, 
2017).
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    4. The official approval titled ``Final Redesigned Uniform 
Residential Loan Application Status Under Regulation B.'' \14\
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    \14\ 82 FR 55810 (Nov. 24, 2017).
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    5. The preemption determination titled ``Electronic Fund Transfers; 
Determination of Effect on State Laws (Maine and Tennessee).'' \15\
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    \15\ 78 FR 24386 (Apr. 25, 2013).
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    6. The Bureau's concurrences with respect to the April 2018 and 
October 2019 rules by the three Federal banking agencies and the July 
2019 and April 2020 rules by the National Credit Union Administration, 
each titled ``Real Estate Appraisals.'' \16\
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    \16\ See 83 FR 15019 (Apr. 9, 2018); 84 FR 35525 (July 24, 
2019); 84 FR 53579 (Oct. 8, 2019); 85 FR 23909 (Apr. 30, 2020).
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    In the event that the Bureau's ratifying of any individual Ratified 
Action or the application of this ratification to any person or 
circumstance is held to be invalid for any reason, the remainder of 
this ratification is severable and shall continue in force.\17\
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    \17\ Additionally, this ratification does not waive any statute 
of limitations or other restriction on challenges to the Ratified 
Actions.
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IV. Discussion of the Ratification

    The Bureau's Director is familiar with the Ratified Actions and has 
also conducted a further evaluation of them for purposes of this 
ratification. Accordingly, the Director is making an informed decision 
to ratify them.
    Based on the Director's evaluation of the Ratified Actions, it is 
the Director's considered judgment that they should be ratified. This 
decision is reinforced by the fact that, based on the Bureau's 
experience as a regulator of markets for consumer financial products 
and services, the Director is acutely aware that many of the Ratified 
Actions have engendered significant reliance interests. Consumers, the 
business community, State and local governments, and other individuals 
and entities have all relied upon the validity of the Ratified Actions 
in organizing their activities. This ratification secures those 
existing reliance interests by avoiding doubt as to the validity of the

[[Page 41331]]

actions following the Court's decision in Seila Law. The Bureau's 
ratification does not foreclose the Bureau from revisiting the Ratified 
Actions through rulemaking or other initiatives when warranted going 
forward.

V. Actions Outside the Scope of the Ratification

    As noted above, this ratification does not include two actions that 
were published in the ``Rules and Regulations'' category of the Federal 
Register during the relevant time periods. First, the July 2017 rule 
titled ``Arbitration Agreements'' \18\ is not within the scope of the 
ratification. Prior to the compliance date of that rule, Congress 
passed, and the President signed, a joint resolution under the 
Congressional Review Act that ``disapproves the rule'' and provides 
that the ``rule shall have no force or effect.'' \19\
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    \18\ 82 FR 33210 (July 19, 2017).
    \19\ Public Law 115-74, 131 Stat. 1243 (2017).
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    Second, the November 2017 rule titled ``Payday, Vehicle Title, and 
Certain High-Cost Installment Loans'' \20\ is also not within the scope 
of this ratification. The Bureau has revoked the mandatory underwriting 
provisions of that rule. The Bureau has separately ratified the payment 
provisions of the rule. The entire rule is subject to litigation and 
its compliance date has been stayed.\21\
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    \20\ 82 FR 54472 (Nov. 17, 2017).
    \21\ Order, Cmty. Fin. Servs. Ass'n of Am., Ltd. v. CFPB, No. 
1:18-cv-00295 (W.D. Tex. Nov. 6, 2018) (Dkt. No. 53).
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    The Bureau is considering whether ratifications of certain other 
legally significant actions by the Bureau, such as certain pending 
enforcement actions, are appropriate. Where that is the case, the 
Bureau is making such ratifications separately. On the other hand, the 
Bureau does not believe that it is necessary for this ratification to 
include various previous Bureau actions that have no legal consequences 
for the public, or enforcement actions that have been finally resolved.

VI. Administrative Law Matters

    Courts have ``consistently declined to impose formalistic 
procedural requirements'' for ratifications by agencies.\22\ An agency 
need not ``repeat'' or ``redo'' the original administrative process, 
such as the notice-and-comment procedures of the Administrative 
Procedure Act (APA).\23\
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    \22\ State Nat'l Bank of Big Spring v. Lew, 197 F. Supp. 3d 177, 
184 (D.D.C. 2016) (citing FEC v. Legi-Tech, Inc., 75 F.3d 704, 706 
(D.C. Cir. 1996); Doolin Sec. Sav. Bank, FSB v. Office of Thrift 
Supervision, 139 F.3d 203, 214 (D.C. Cir. 1998); Intercollegiate 
Broad. Sys., Inc. v. Copyright Royalty Bd., 796 F.3d 111, 120 (D.C. 
Cir. 2015)).
    \23\ State Nat'l Bank, 197 F. Supp. 3d at 184 (quoting Legi-
Tech, Inc., 75 F.3d at 706; Doolin, 139 F.3d at 214) (internal 
brackets omitted).
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    Moreover, the APA's notice-and-comment procedures are not 
applicable by their terms to this ratification. As case law explains, a 
ratification ``relates back'' to the prior action, and it is treated as 
effective at the time the prior action was done.\24\ It follows that 
this ratification is not a ``rule'' as defined by the APA, because it 
is not an ``agency statement of general or particular applicability and 
future effect . . . .'' \25\ Instead, the Bureau is ratifying a number 
of existing actions, including existing rules, with effect on the 
original dates of those actions. Further, this is not a ``rule making'' 
as defined by the APA, because the Bureau is not ``formulating, 
amending, or repealing a rule.'' \26\ Accordingly, this ratification is 
not subject to the APA's notice-and-comment procedures for ``rule 
makings.'' \27\
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    \24\ See, e.g., Advanced Disposal Servs. E., Inc. v. NLRB, 820 
F.3d 592, 602 (3d Cir. 2016).
    \25\ 5 U.S.C. 551(4) (emphasis added). Similarly, the procedures 
for certain ``rules'' under the Congressional Review Act are not 
applicable. See 5 U.S.C. 804(3) (providing that for purposes of the 
Congressional Review Act the ``term `rule' has the meaning given 
such term in section 551'' of the APA, with certain exceptions).
    \26\ 5 U.S.C. 551(5).
    \27\ 5 U.S.C. 553. Similarly, the procedures for certain 
``rules'' under the Regulatory Flexibility Act are not applicable. 
See 5 U.S.C. 601(2) (defining a ``rule'' for purposes of the 
Regulatory Flexibility Act as, in relevant part, ``any rule for 
which the agency publishes a general notice of proposed rulemaking 
pursuant to'' section 553 of the APA).
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    Even if notice-and-comment procedures were required for this 
ratification, they have already been satisfied by the original 
rulemaking processes for the relevant Ratified Actions.\28\ 
Additionally, as a further alternative basis, the Bureau finds that new 
notice-and-comment procedures for this ratification would be 
``impracticable'' and also ``contrary to the public interest.'' \29\ 
This is because, based on experience as a regulator of markets for 
consumer financial products and services, the Bureau believes that 
prompt issuance of this ratification is important in order to avoid 
public uncertainty about the status of the Ratified Actions after Seila 
Law. Had the Bureau not promptly issued this ratification, that 
uncertainty could have had a deleterious effect on the ongoing 
operations of the affected markets, given the significant role of the 
Ratified Actions in these markets. This authoritative ratification 
resolves that uncertainty.
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    \28\ In ratifying the Ratified Actions, the Bureau ratifies the 
procedural steps, including issuance of notices of proposed 
rulemaking, that were necessary to issue the Ratified Actions.
    \29\ 5 U.S.C. 553(b)(B). For the same reasons, even assuming 
this were a rulemaking, there would also be ``good cause'' to waive 
the normal requirement that a rule be published not less than 30 
days before its effective date. 5 U.S.C. 553(d).

    Dated: July 7, 2020.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2020-14936 Filed 7-9-20; 8:45 am]
BILLING CODE 4810-AM-P