Sorry, Senator Vitter. The CFPB Is in Full Compliance with Small Business Outreach Law.

James Goodwin

Aug. 15, 2016

While the Rolling Stones' "You Can't Always Get You Want" may be an ill-advised campaign song, perhaps it can still serve as the official theme song for Sen. David Vitter's (R-LA) Government Accountability Office (GAO) report requests. The anti-regulatory senator had requested that the GAO audit the Consumer Financial Protection Bureau (CFPB) – a favorite punching bag of the right – to determine whether it is complying with the small business outreach requirements imposed by the Small Business Regulatory Enforcement Fairness Act (SBREFA). Last week, the GAO released the findings of its audit. Just one tiny problem, though: They are probably not what Vitter wanted to hear. 

Before getting into the GAO's specific findings, a little background is in order. Anti-regulatory members of Congress like Vitter continuously peddle the narrative that the federal agencies that previous congresses have charged with protecting public health, safety, the environment, and financial security are churning out too many regulations and that this crisis of overregulation is in large part due to the fact that agencies are improperly circumventing the myriad procedural hurdles that litter the rulemaking process.  

To support that narrative, they just need evidence of the agencies' noncompliance with significant requirements from credible sources, such as the GAO. SBREFA – and the closely related Regulatory Flexibility Act – are among the biggest anti-regulatory obstacles that agencies face. As CPR has documented in the past, opponents of sensible safeguards lean heavily on the procedural and analytical requirements imposed by these two laws with the expectation that they will delay, dilute, or even block new rules. Consequently, an impartial judgement that the CFPB was systematically failing to abide by SBREFA's outreach requirements would be a powerful weapon in the campaign against regulatory protections. 

And that's where the GAO was supposed to step in and do Vitter a solid. It didn't. 

Instead, the GAO's report basically reads as a ringing endorsement of the CFPB's compliance with SBREFA's procedural requirements. Some highlights include: 

  • One of the biggest requirements for the CFPB under SBREFA is the convening of "Small Business Advocacy Review" (SBAR) panels – a process in which the agency must invite a group of small business representatives to review a draft proposed rulemaking and solicit their feedback on how the rule should be changed to minimize its impacts on affected small businesses. The CFPB is required consider the representatives' feedback and incorporate it into the rule before formally proposing it. Here, the GAO found that the CFPB "accomplished required steps for conducting the four panels that we reviewed—including soliciting the input of small entity representatives at panel meetings" (p. 9).  
  • The GAO further found that the CFPB fulfilled its mandate to assemble reports summarizing the feedback it received during SBAR panel discussions, and that these reports were generally completed on time (p. 11).  
  • The CFPB's proposed and final rules addressed all of the required elements for Initial and Final Regulatory Flexibility Analyses (p. 12).  
  • As part of the audit, the GAO surveyed most of the small business representatives that had participated in the CFPB SBAR panels that the GAO studied. Overall, the GAO found that "small entity representatives' views on the panel process were generally positive." It added, "25 of 57 representatives we interviewed said the SBREFA process was good, 20 stated that they were glad to have served as small entity representatives, and 18 said the process was a good opportunity to be heard" (p. 16).  
  • The small business representatives also generally reported that the CFPB had done a good job preparing them for meaningful participation in the SBAR panels: "Of the 57 small entity representatives we interviewed, 31 believed CFPB's outreach efforts prepared them to provide constructive input during the SBREFA panel meeting . . . and 15 said CFPB efforts partially prepared them . . . ." (p. 18).  
  • Significantly, SBREFA requires the CFPB do more than just collect small business input on their pending rules; agency staff must actually use that input to further refine the rules before formally proposing them. The GAO's survey found that the small business representatives believed that the CFPB was complying with this mandate. "A majority of small entity representatives that we interviewed said that CFPB at least partially reported their views accurately . . . and appeared to at least partially take them into consideration during rulemaking . . . ." (p. 24). "When asked if CFPB amended its proposed rule based on comments the representative made during the panel or in writing . . .  32 believed the agency did" (p. 25). 

It will be interesting to see how, if at all, Vitter attempts to spin this report. The wisest course of action may be just to ignore it and pretend it never happened. (He won't get any help from me on this, though.) Alternatively, he may try to grasp at any straws he can find in the report's findings to support his mythical case that the CFPB is insufficiently attentive to small business concerns. 

But in the end, what's important is not whether Vitter and his corporate allies are getting what they want; it's whether the public, including small businesses and families, are getting the financial protection they need from the CFPB. Americans' financial security is no doubt better off than it was before the CFPB was created, and the agency has much more work to do to help avoid financial crises, both large and small, that can result from the harmful practices and products of irresponsible banks and other financial institutions. For example, the CFPB is currently working on an important new rule that would help safeguard Americans against forced arbitration clauses. We would all be a lot better off if the Vitters of the world got out of the CFPB's way and let this agency pursue its critical mission in a timely and effective manner.

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