Regulators clarify that guidance does not have the force of law

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WASHINGTON — Five regulators issued a joint statement Tuesday clarifying that agency-issued supervisory guidance lacks the “force and effect of law” that is more akin to rules and regulations.

The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and National Credit Union Administration said supervisory guidance articulates their general views for appropriate practices but does not lead to enforcement actions.

“A law or regulation has the force and effect of law,” the agencies said. “Unlike a law or regulation, supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.”

In an effort to clarify the role of guidance, the agencies said they will limit the use of numerical thresholds in describing expectations in supervisory guidance. When they use numerical thresholds, the agencies said, they will clarify that they are not suggestive of requirements.

The agencies may identify unsafe or unsound practices or other deficiencies that do not constitute violations of the law and reference guidance in writing, but they will not issue citations relating to violations of supervisory guidance.

"Any citations will be for violations of law, regulation, or non-compliance with enforcement orders or other enforceable conditions," the agencies said in the statement.

They also said they will continue to seek public comment on supervisory guidance, but that seeking public comment does not mean that the guidance is intended to be a regulation or have the force and effect of law.

The joint statement comes as Republicans in Congress have used the Congressional Review Act to repeal agency guidance that had been viewed as a rule or regulation. Congress was able to revoke the CFPB’s 2013 auto lending guidance in April after the Government Accountability Office determined it operated like a rule. The GAO made a similar determination about the 2013 interagency leveraged lending guidance last year.

Once used, the Congressional Review Act prohibits agencies from issuing similar rules.

Ed Mills, a policy analyst at Raymond James, said the joint statement “significantly” weakens the impact of guidance.

“They leave it as a tool in their toolbox, but it’s not the bright line that it used to be,” Mills said. “It’s no longer de facto law.”

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