CFPB May Become Subject to Trump’s ‘One-In-Two-Out’ Rule

On January 30, 2017, President Donald Trump issued a “one-in-two-out” executive order (“Order”). The Order largely exempts financial regulators, including the CFPB, because they are independent agencies. The CFPB, however, could become subject to the Order if the October 2016 ruling of a D.C. Circuit Panel, which found that the CFPB is an executive agency whose director can be fired at will, is allowed to stand or is affirmed by the U.S. Supreme Court.

The Order provides, generally, that for every one new regulation issued, at least two prior regulations be identified for elimination. Agencies must provide the rules they propose to eliminate to the White House for review prior to enacting rules, and all rule repeal efforts are subject to the full notice and comment rulemaking process. Additionally, the Order provides that each agency subject to the Order will have a set budget each year for new regulations, and that any costs associated with each new regulation must be offset by cutting at least two other existing rules.

Initially, it was unclear whether the Order applied only to executive agencies directly under the president’s control or to all independent regulatory agencies. Since the Order’s release, however, the White House has confirmed that the Order does not apply to independent regulatory agencies. As such, the CFPB, which is currently an independent regulatory agency, is exempt from the Order for now. The CFPB’s exempt status could change, however, if current litigation in the D.C. Circuit over its leadership and regulatory structure stemming from the results of a split D.C. Circuit Panel’s October 2016 ruling, which found that the CFPB is an executive agency whose director can be fired at will, is allowed to stand or is affirmed by the U.S. Supreme Court. If allowed to stand or affirmed, it appears that the CFPB could become subject to the Order and if so, would be required to eliminate two rules for every new one, meaning that certain of its mortgage rules or other regulations would potentially need to be proposed for elimination in order to implement its pending rules, such as those addressing payday lenders, debt collection and mandatory consumer arbitration clauses.