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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 1/21/13

Posted in Executive - OMB Review, Judicial Review & Remedies, Regulatory Process

This past week saw the January thaw from the holidays in regulatory movement.  The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) completed review on a number of substantial (if not economically significant) regulations, from arms exports to domestic gun control, and health care privacy.  The Consumer Finance Protection Bureau (CFPB) released a raft of new mortgage rules and proposals.  At the other end of Pennsylvania Avenue, the Internal Revenue Service lost its tax preparer regulations, leaving an open field (for better or worse) for those who want to help others (for a fee) navigate the tax code labyrinth.

Arms Exports:  OMB completed review on substantial changes in the arms export field, a long term Administration goal, including:

Department of Commerce, Bureau of Industry and Security,

  • EAR Revision: Items Related to Launch Vehicles, Missiles, Rockets, and Military Explosive Devices That the President Determines No Longer Warrant Control Under the United States Munitions List (proposed rule), and
  • Revisions to the Export Administration Regulations: Implementation of Export Control Reform; Retrospective Regulatory Review (final rule); and

Department of State:

  • Amendment to the International Traffic in Arms Regulations: Revision of U.S. Munitions List Category XVI (proposed rule),
  • Amendment to the International Traffic in Arms Regulations: Revision of U.S. Munitions List Category IV (proposed rule), and
  • Amendment to the International Traffic in Arms Regulations: Initial Implementation of Export Control Reform (final rule).

Gun Control:  Domestically, OMB completed review of the Department of Justice (DOJ) Proposed Changes to NICS Intended To Promote Public Safety, To Enhance the Efficiency of NICS Operations, and To Resolve Difficulties Created by Unforeseen Processing Conflicts Within the System (one of POTUS’ “gun control” “executive actions” that had been pending at OMB for over a year).  Among other things, the rule appears to propose authorizing law enforcement agencies to run a full background check on an individual before returning a seized firearm.

This regulation may be the only one of 23 “executive actions” that has any substance.  Nearly all of these 23 actions have no real substance, but look good, such as:

  • Research and reports from various officials on various subjects;
  • Interagency cooperation memoranda (which may require further action through Privacy Act Systems of Records Notices and Exemption Rules); and
  • Nomination to fill the long-vacant director of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (their proper name, which would be ATFE, but they like ATF).

Key Point:  Executive Orders (or directives or memoranda – they are really all the same thing) may not increase the obligations or liabilities of private citizens without a Congressional delegation of regulatory authority.  The real issues over gun control will be fought before Congress.

Mortgage Financing:  The CFPB released its Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act (Regulation Z) final rule to require mortgage lenders to consider a consumers’ ability to repay home loans before extending credit, to take effect on January 10, 2014.  CFPB released also a proposed rule on whether to adjust the final rule for certain community-based lenders, housing stabilization programs, certain refinancing programs of Fannie Mae or Freddie Mac, and small portfolio creditors.

In effect, the CFPB has taken both proposed and final steps at the same time, rather than sequentially.  The CFPB may be presumed to consider the comments on the proposed rule, but the publication of a final rule, even more so than an interim final rule, should raise questions about whether CFPB has actually already made up its collective mind.

The CFPB also has finalized its Escrow Requirements under the Truth in Lending Act (Regulation Z) and High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act (Regulation Z) and Homeownership Counseling Amendments to the Real Estate Settlement Procedures Act (Regulation X).  In sum, nearly 2,000 pages of reading (without the supporting analyses) for the mortgage industry.

HIPAA:  On a totally different but equally important move, OMB completed review of the economically significant Department of Health and Human Services (HHS) Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules under the Health Information Technology for Economic and Clinical Health Act and the Genetic Information Nondiscrimination Act; Other Modifications to the HIPAA Rules final rule, which is scheduled for publication on January 25, 2013.  This “retrospective review” rule is expected to cost $114 million to $225.4 million.

Tax Preparers:  The United States District Court for the District of Columbia set aside the Department of the Treasury Internal Revenue Service (IRS) rule requiring that paid tax return preparers (who are not attorneys, Certified Public Accountants, or otherwise enrolled agents) to pass a qualifying examination, register with the IRS, pay a fee, and take continuing education courses in Loving v. Internal Revenue Service.  The court found that the rule was not authorized by pre-16th Amendment legislation, as contrasted with long-standing rules governing the registration of attorneys, accountants, and others who “represent” a taxpayer in proceedings before the IRS.  The IRS estimated that the rule sweeps in 600,000 to 700,000 previously unregulated tax-return preparers.  The IRS has lost a significant rule to regulate those preparers – whether a good idea or not, the IRS lacked statutory authority to promulgate the rule.  Expect an appeal.

Supreme Court Argument:  The Court heard argument last Wednesday in City of Arlington v. FCC, on whether courts should defer to an agency regulatory interpretation of its own statutory jurisdiction.  The transcript reveals fundamental arguments of how the Justices view “jurisdiction,” leading one to wonder whether a decision in this case will provide any real guidance.