On January 20, President Biden’s Chief of Staff Ronald Klain issued memorandum to the heads of executive departments and agencies setting forth the terms of a regulatory freeze.
The memorandum requires the following subject to limited exceptions:
- No rules can be issued or proposed until a department or agency head appointed by President Biden has reviewed and approved the rule.
- A rule that has been sent to the Federal Register but not yet published must be immediately withdrawn from the Office of the Federal Register and approved by a department or agency head appointed by President Biden.
- For a rule that has been issued or published in the Federal Register but has not yet become effective, a department or agency head should consider postponing the rule’s effective date for 60 days from January 20 for the purpose of reviewing any questions of fact, law, and policy raised by the rule. During this 60-day period, where appropriate and consistent with applicable law, consideration should be given to opening a 30-day comment period and petitions for reconsideration should be considered.
The memorandum is directed to “heads of executive departments and agencies.” It is not intended to apply to heads of independent agencies, such as the FDIC, the OCC and the Federal Reserve Board. While the CFPB was created as an independent agency with a Director only removable by the President “for cause,” it now functions as an executive agency as a result of the U.S. Supreme Court’s Seila Law decision making the CFPB Director removable by the President at will.
Pending CFPB Rules
Several CFPB rules are impacted by the memorandum as follows:
- The following rules have been published in the Federal Register but have not yet taken effect. Acting Director Oejio must consider whether to postpone the effective dates until March 22, 2021 in order to engage in a review of any questions of fact, law, and policy raised by the rules:
- The final rule replacing the existing general Qualified Mortgage based on a strict 43% debt-to-income ratio limit with a new general Qualified Mortgage based on the loan price was published in the Federal Register on December 29, 2020 and scheduled to go into effect on March 1, 2021.
- The final rule creating the new seasoned loan qualified Mortgage was also published in the Federal Register on December 29, 2020 and scheduled to go into effect on March 1, 2021.
- The following rule has not yet been published in the Federal Register. It must be immediately withdrawn from the Office of the Federal Register and reviewed and approved by Acting Director Oejio (or Director Chopra once confirmed and sworn in):
- The final rule implementing the exemption in the Economic Growth, Regulatory Relief, and Consumer Protection Act from the requirement to maintain an escrow account in connection with a higher-priced mortgage loan (HPML) for insured depository institutions and insured credit unions (insured creditors) that meet certain conditions was issued on January 19, 2021.