Recent pronouncements from the Bureau of Consumer Financial Protection’s Acting Director Mick Mulvaney have consumer advocates up in arms over how lenders will be regulated for military compliance. Ironically, the military itself seems a little less concerned, at least with respect to the BCFP, though there are plenty of military consumer advocates wringing their hands and beating their breasts. Regardless, the issue at hand is symptomatic of bigger, more important things.
Mulvaney announced that he planned to suspend regular examination of institutions’ compliance with the Military Lending Act (MLA) on the grounds that the legislation did not provide the BCFP with supervisory authority. As the agency has reviewed its internal policies in hopes of simplifying and streamlining obligations, it makes intuitive sense for an agency to avoid exercising authority it has never been granted, and Mulvaney is right. Congress failed to delegate supervisory authority to the BCFP, so it makes sense to limit bureau activities to enforcement of the law.
What the consumer advocates are upset about is that Mulvaney is taking a different tack than his predecessor, Richard Cordray, who apparently supported the decision of his agency’s supervision department to examine for MLA compliance — arguably an overreach. But overreach was at most a venial sin in the Cordray administration. No matter that Congress failed to grant authority when clever minds can imply authority. For example, the Servicemembers Civil Relief Act requires servicemembers to affirmatively invoke some of their rights thereunder.
The Cordray administration — without Congressional authorization — imposed an affirmative duty on financial institutions to actively seek out servicemembers and grant the benefits whether or not they were requested. That is exactly the opposite of what the SCRA says, and a clear violation of congressional intent. The problem with implied authority is that it is subjective. It’s almost an extension of the “originalist” versus “living document” approach to the Constitution that comes up every time we have a seat open on the Supreme Court, but it’s different in that we have a living, breathing Congress available to legislate its intentions should the need arise.
Believe me, I have days where I wish we could resurrect the founding fathers for a few hours to get their view of how we should interpret our Constitution. Fortunately, if we want to know what Congress means when it enacts a statute that is unclear, we can put all those lawyers and lobbyists to work to get Congress on the record with amended legislation. In fact, Sen. Bill Nelson (D-FL) just dropped a bill designed to appease the consumer advocates. It’s the process we have, as messy as it is, and it works.
For all the bellyaching we hear about the administrative state, the fact we have one as active as it is falls at the feet of the Congress. The reasons are not bad — regulating industries requires an intricate understanding of said industries, and few in Congress are qualified to give meaningful input into implementing the plethora of policies they legislate. So, they punt to the agencies which — until recently — are reliably staffed by qualified experts. But the agencies are confined to implementing policy, and then only to the extent of the authority Congress grants. So, what the consumer advocates are objecting to is Mulvaney’s adherence to the rule of law.
They would rather the BCFP commit a venial sin to do the “right” thing than adhere to a procedural construct that has held the power of administrative agencies in appropriate check for decades. All things being equal, I may or may not disagree with the outcome the consumer advocates seek. However, I am rarely, if ever, willing to sacrifice checks and balances and due process to achieve any particular outcome.
In other words, I’m far more concerned with the forest than I am with a few trees. I think our founding fathers might agree with me given that they wrote a document that is so general in its terms (i.e., a forest) that it is clear they were trying to encompass the myriad issues governance might face in the future that they couldn’t foresee in the late 1700s. Thus, Congress, through legislation, can plant all the trees it wants. However, it needs to say what it means when it legislates, at least to the extent it can.
Granting supervisory authority to an agency doesn’t take any specialized skill, so it is reasonable to expect Congress to make any such grant it intends. No agency should assume authority it was not expressly provided. Congress gave the BCFP no supervisory authority under the MLA. We can only conclude that it felt BCFP supervision unnecessary.
Michael Benoit is chairman of Hudson Cook LLP and a partner in the firm’s Washington, D.C., office. Benoit is a frequent speaker and writer on a variety of consumer credit topics and can be reached at 202-327-9705 or firstname.lastname@example.org. Nothing in this article is legal advice and should not be taken as such. Please address all legal questions to your counsel.
Editor’s note: This article was featured in the September issue of Auto Finance News, out now.