More Guidance on Guidance

May 19, 2015 at 9:32 am Leave a comment

When you find out a final regulation has been published, most of you do a good job of figuring out how to comply.  Let’s say a “Guidance” on the same subject came across your desk.  Do you:

  1. Place the notice in your to-do bin where it gathers dust along with that great article on mortgage lending that came out in January 2007?
  2. Skim the cover page, breathe a sigh of relief it isn’t a regulation, and toss it into the garbage?
  3. Assign someone to implement its dictates the same way you would a promulgated regulation?
  4. Use it as a place mat for your lunch?

Readers of this blog know where I am going on this one.  There is too little conformity in how regulatory guidance from NCUA is issued.  This leads to a great deal of unnecessary confusion among regulators, examiners, and credit unions about how much weight Guidance should be given and when a Guidance can be used by an agency instead of the more formal regulatory process.  The problem isn’t unique to NCUA but reflects a need to amend federal law to give regulators more guidance on Guidance.

Yesterday, the Government Accountability Office (GAO) released a report detailing the procedures used by four agencies in deciding when to issue a “significant” Guidance as opposed to a new regulation.  Although the NCUA was not among the analyzed agencies – the Agriculture Department (USDA), Education Department (ED), Health and Human Services (HHS), and the Department of Labor (DOL) – the report’s conclusions were hardly surprising to anyone who has delved into the regulatory morass and tried to make sense of the regulation/Guidance dichotomy.

The Agencies did not use standard terminology for guidance.  For instance some used a Q &A format while others used an Industry Letter format.  “They often based the decision between guidance and regulation on whether the direction was meant to be binding (in which case they issued a regulation). In some cases, issued guidance clarified existing regulations, educated the public, addressed particular circumstances, or shared leading practices.”

The problem is that there is little consistency and a dearth of criteria used when determining when an issue should be dealt with as a regulation as opposed to a guidance.  For instance, the Education Department and the USDA’s written procedures explained the approval and clearance procedures for significant guidance.  DOL officials said they did too but that these procedures “were not readily available” during the GAO audit.  I’m going to go out on a limb and say that not too many DOL employees know these procedures exist.

Like it or not, we live in a regulatory state.  Things were already bad but the Supreme Court’s decision earlier this term in Perez v. Mortgage Bankers Ass’n, No. 13-1041, slip. op (U.S. Mar.9, 2015) upholding the right of the DOL to issue an opinion letter classifying mortgage originators as nonexempt employees gives all regulators even more power and flexibility.  It may not win many votes come election time  but a constructive change that may have bipartisan support would be to amend the Administrative Procedures Act to implement standard procedures for the promulgation of Guidance and to clarify precisely how much legal weight a Guidance has as opposed to a regulation vetted via the rule making process.


Nothing to do with credit unions, but here is a great question from Rep. Jeb Hensarling, (R-Texas) Chairman of the House Financial Services Committee, who is leading the charge against the reauthorization of the Export Import Bank.  “How are we ever going to reform the social welfare state if we can’t reform the corporate welfare state?…Success in America  ought to depend on how hard you work on Main Street not who you know in Washington.”



Entry filed under: Regulatory. Tags: , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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