A split has formed between the United States Courts of Appeals for the Fifth and Tenth Circuits over requirements applicable to obtaining Title V permits pursuant to the Clean Air Act, 42 U.S.C. § 7401 et seq. (“the Act”). See Environmental Integrity Project v. EPA, —F.3d—, 2020 WL 4686995 (5th Cir. Aug. 13, 2020); Sierra Club v. EPA, 964 F.3d 882 (10th Cir. 2020).
The foundation for the disputes in both cases was the propriety of the past issuance of preconstruction permits, i.e., New Source Review (“NSR”) permits, which are issued pursuant to Title 1 of the Act. NSR permits must be obtained before building a new facility or modifying an old one, and they are issued by states through vehicles called “state implementation plans” (“SIPs”). A state must provide notice and an opportunity to comment before a preconstruction permit is granted. See 40 C.F.R. § 51.161(a).
The requirements of a NSR permit differ substantially depending upon whether the new source is deemed a “major source” or “minor source.” If “major,” then the review for a NSR permit and the requirements that must be met are detailed and difficult. If “minor,” then the bar is considerably lower. As a result, this designation is important to interested parties.
This is where Title V becomes important. Title V permits were added to the Act in 1990, well after the introduction of NSR permits in 1977. The purpose of Title V permits is to provide each source with a single permit that contains and consolidates all information needed to comply with the Act without imposing new substantive requirements, and they must be renewed every five years.
The permit must contain:
“enforceable emission limitations and standards, a schedule of compliance, a requirement that the permittee submit to the permitting authority, no less often than every 6 months, the results of any required monitoring, and such other conditions as are necessary to assure compliance with applicable requirements of this chapter, including the requirements of the applicable implementation plan.”
§ 7661c(a) (emphasis added).
The split concerns the meaning of “applicable requirements” when a Title V permit or renewal is sought after, sometimes even years after, having obtained a Title 1 permit. How are the Title 1 requirements incorporated into the Title V permit?
One interpretation is that “applicable requirements” means a Title V permit must incorporate all of the requirements in the previously granted Title 1 permit, but nothing more. Another is that it must include all of the requirements of the SIP, and not simply the requirements contained in the permit, and this means it includes the requirements for major NSR. See 42 U.S.C. §§ 7410(a)(2)(c), 7471, 7502(c)(5).
The difference in this interpretation is enormous. Under the former, a court only determines whether the Title V permit incorporates the requirements contained in the Title I permit as issued. Under the latter, a court can second-guess the issuance of the type of preconstruction permit, i.e., major or minor, at a later point in time.
The difficulty faced by the Fifth and Tenth Circuits is that § 7661c(a) does not define “applicable requirements.” The Tenth Circuit resolved this issue by looking to the definition of this term in 40 C.F.R. § 70.2, the regulation that implements § 7661c(a). Section 70.2 provides, in relevant part:
“Applicable requirement means all of the following as they apply to emissions units in a part 70 source…
(1) Any standard or other requirement provided for in the applicable implementation plan approved or promulgated by EPA through rulemaking under title I of the Act that implements the relevant requirements of the Act, including any revisions to that plan promulgated in part 52 of this chapter”
The Tenth Circuit reasoned “the applicable implementation plan” includes SIPs, and SIPs require major NSR.
The Fifth Circuit, by contrast, discussed (among other factors) the lack of a definition provided in the statute, legal authority indicating Title V does not impose new substantive requirements, and the EPA’s view before enacting § 70.2 that “the intent of [T]itle V is not to second-guess the results of any State’s NSR program.” Environmental Integrity Project, 2020 WL 4686995 at *3. It recognized that preconstruction permits are already subject to a notice and comment period and approval by the EPA, and adopting the petitioner’s view (the view adopted by the Tenth Circuit) could “make Title V a vehicle for the public to (again) challenge preconstruction permits” because it makes possible re-examining the substantive validity of underlying Title I preconstruction permits. Id. at 10. To private and other interested parties, this injects uncertainty in the permitting process because there is, resultantly, no finality to a permitting decision. A preconstruction permit issued in Year 1 could be re-litigated in Year 15 upon renewal of a Title V permit.
The Fifth Circuit decision is binding in Louisiana, Mississippi, and Texas, while the Tenth Circuit’s is binding in Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming. It is possible the split will not be resolved until the United States Supreme Court addresses the issue. However, because the Fifth Circuit rested its decision on the EPA’s interpretation of a statute, i.e., § 7661c(a), and the Tenth Circuit rested its decision on the EPA’s interpretation of a regulation, i.e., § 70.2, it is also possible the Fifth Circuit could revisit the issue and reframe its approach if future arguments raised before the court focus more closely on the EPA’s interpretation of § 70.2. Foundation for this suggestion can be seen in footnote 6 of the Fifth Circuit’s opinion.
During the COVID-19 pandemic, employers have been forced to address the application of virtually every legal labor and employment obligation in the context of the pandemic. One of these obligations includes an employer’s responsibilities under the federal Occupational Safety and Health Act (OSHA), which is administered by the U.S. Department of Labor (DOL). The DOL previously published its Guidance on Preparing Workplaces for COVID-19, in which it outlined steps for employers to protect their employees.
On April 10, 2020, the DOL issued additional guidance addressing the agency’s enforcement of OSHA’s recordkeeping requirements amid the COVID-19 pandemic. Generally, OSHA recordkeeping requirements command “covered employers” to record certain work-related injuries and illnesses on their OSHA 300 log. However, since the on-set of this pandemic, employers have wrestled with whether they are required to record an employee’s COVID-19 illness—and if so, when.
According to the DOL, COVID-19 is “recordable” and must be included on an employer’s OSHA 300 log, if:
- The case is a confirmed case of COVID-19, as defined by Centers for Disease Control and Prevention (CDC);
- The case is “work-related,” (as defined by 29 CFR § 1904.5); and
- The case involves one or more of the general recording criteria, (as outlined by OSHA and set forth in 29 CFR §1904.7). Per OSHA, cases meet this recording criteria if it results in death, days away from work, restricted work or transfer to another job, medical treatment beyond “first aid,” or loss of consciousness.
In the same guidance, the DOL expressly stated that it will not require covered employers to make a determination regarding “work-relatedness” (Step # 2 above), except where:
- There is objective evidence that a COVID-19 case may be work-related; and
- The evidence was reasonably available to the employers.
The DOL expressly states that this limited recordkeeping waiver does not apply to employers in the healthcare industry, emergency response organizations (e.g., emergency medical, firefighting and law enforcement services), and correctional institutions.
The DOL’s stated goal of this limited enforcement is to “help employers focus their response efforts on implementing good hygiene practices in their workplaces, and otherwise mitigating COVID-19’s effects, rather than on making difficult work-relatedness decisions in circumstances where there is community transmission.”
On Saturday (March 15, 2020), the U.S. House of Representatives passed H.R. 6201—the Families First Coronavirus Response Act (“the Act”)—a sweeping economic stimulus plan aimed at addressing the on-going COVID-19 coronavirus outbreak and its continued impact on American workers and their families. The Act includes a variety of provisions, including:
- Free COVID-19 testing
- Multiple types of paid emergency leave (to be paid for by employers)
- Enhanced unemployment insurance
- Additional funding for nutritional programs
- Protections for health care workers and employees responsible for cleaning at-risk places.
- Additional federal funds for Medicaid
Among these provisions, the Act sets out several key mandates that impacts employers: (1) new, enhanced leave entitlements under the federal Family Medical Leave Act (“FMLA”), including paid leave under FMLA; and (2) new, separate paid sick leave rights for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19. Both of these emergency provisions would apply to all employers with less than 500 employees and would cover employees who have worked for the employer for at least 30 days.
At this point, the Act has not passed Congress. While we expect the Senate to take quick action, key provisions could change, including those concerning employer coverage. Brunini’s Labor & Employment Group is providing this report to let its clients know the current status of the legislation, as well as its potential effects. However, we encourage readers to keep alert to further developments.
New FMLA Entitlements
Under the Act’s temporary expansion of FMLA, any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave to allow the employee to:
- Comply with a requirement or recommendation to quarantine due to exposure to, or symptoms of, coronavirus;
- Care for an at-risk family member who is adhering to requirement or recommendation to quarantine due to exposure to, or symptoms of, coronavirus; or
- Care for the employee’s child if the child’s school or place of care (including if the childcare provider is unavailable) has been closed due to a public emergency.
The first two weeks of this leave can be unpaid, although employees may elect to use other paid benefits to cover (including vacation or sick leave) some or all of the unpaid period. After the initial two week period, the employer must pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled. (Part-time employees would be paid based on the average number of hours the employee worked for the 6 months prior to taking the leave, or the average number of hours the employee would normally be scheduled to work.) Employers with bargaining unit employees would apply the new FMLA provisions consistent with the bargaining agreement.
Of note, the Act also expands the definition of who is eligible as a “parent” under FMLA, to include a parent-in-law of the employee, a parent of a domestic partner of the employee, and a legal guardian or other person who served as the employee’s parent (also known as in loco parentis) when the employee was a child.
If enacted as written, thousands of employers not previously subject to the FMLA must provide job-protected leave to employees for a COVID-19 coronavirus-designated reason. The Act allows subsequent regulations (to be crafted by the Secretary of Labor) to exclude certain healthcare providers and emergency responders from the definition of “eligible employee” and to exempt small businesses with less than 50 employees when it would jeopardize the viability of the business as a going concern.
New Paid Sick Leave Entitlement
In addition to the pay required under the expanded FMLA, covered employers (those with less than 500 employees) will be required to immediately provide employees (regardless of length of employment) with paid sick leave for use under the following circumstances:
- To comply with a requirement/recommendation to quarantine due to exposure to, or symptoms of, COVID-19;
- To self-isolate because the employee is diagnosed with COVID-19;
- To obtain a diagnosis or care because the employee is exhibiting symptoms;
- To care for or assist an at-risk family member who is self-isolating due to a diagnosis, who is exhibiting symptoms of COVID-19 and needs to obtain medical care, or who is adhering to the requirement or recommendation to quarantine due to a exposure to, or symptoms of, COVID-19; or
- To take care of the employee’s child if the child’s school or place of care has been closed due to COVID-19 (including if the childcare provider is unavailable).
Under the Act, full-time employees would receive up to eighty (80) hours of paid sick leave at the employee’s regular rate of pay for reasons 1, 2 and 3. For reasons 4 and 5, paid sick leave will be provided at 2/3 the employee’s regular rate of pay. (Part-time employees would be paid based on the average number of hours the employee worked for the 6 months prior to taking the leave, or the average number of hours the employee would normally be scheduled to work.)
Importantly, this paid sick leave must be provided IN ADDITION to whatever the employer already provides. An employer may not change its current paid leave policy after enactment of the Act to avoid the obligations of the additional mandated leave. At his/her request, an employee can seek this new paid sick leave in place of the initial 14 days of unpaid leave required by the new FMLA paid leave entitlements.
Tax Credits for Paid Sick Leave & Paid Family and Medical Leave
In order to mitigate the cost of the Paid Sick Leave mandate, the Act grants to employers a credit against their federal payroll tax obligations of up to 10 days of Paid Sick Leave pay each quarter, at a maximum rate of $511 per day for each employee that is directly impacted by the COVID-19 or up to $200 per day for each employee that is caring for a family member impacted by COVID-19 or a child whose school is closed or for whom childcare is unavailable due to COVID-19. If the amount of the allowable credit exceeds the employer’s payroll tax liability, the excess will be refunded. Employers are also entitled to a payroll tax credit for Paid Family & Medical Leave of up to $200 per day per employee, up to $10,000 in the aggregate for all calendar quarters.
Self-employed individuals are granted a similar refundable credit against their federal income tax liability based upon their average daily self-employment income, subject to the same $511 and $200 daily limits.
Based on its plain language, the Act does not provide paid leave coverage to employees who are not able to report to work solely due to business determinations or closures. Under the Act, to qualify for paid sick leave pay or family and medical leave, employees must fall into one of the above leave situations. If an employer prohibits employees from reporting to work on-site due to Coronavirus/COVID-19 concerns, and employees are unable to work remotely and do not otherwise fall within the leave reasons discussed above, it appears they would not be eligible for benefits under the Act. In such circumstances, leave will be governed by state or local statutory sources and the company’s policies or collective bargaining agreements.
As mentioned above, the Senate is expected to pass the legislation, in some form or fashion, and the President is expected to sign it shortly thereafter. However, commentators expect that there may be changes made by the Senate before the legislation is finalized. In addition, many states are proposing similar emergency legislation to enact or expand their own paid sick leave or family and medical leave laws to cover Coronavirus-related issues—in addition to any new requirements at the federal level.
Both the new FMLA entitlement and the new Paid Sick Leave entitlement will take effect 15 days after enacted. As written, the Act is slated to remain in place until the end of 2020. We will continue to monitor this rapidly evolving situation and provide updates as appropriate.
Chris Fontan and Lauren Lawhorn spoke at the Employment and HR Law Brunch & Learn Workshop given by Rankin County Chamber and TempStaff in Flowood on July 17, 2019. Their presentations provided to attendees may be viewed in the links below.
The 2019 edition of Chambers USA, which lists leading law firms and individual lawyers in an extensive range of practice areas, jointly awarded high rankings to nine Brunini attorneys and six of the firm’s practice areas.
Chambers USA ranked six of Brunini’s practices, with the firm’s Energy & Natural Resources practice receiving the highest ranking possible in the state. The firm’s Commercial Litigation, Corporate/Commercial and Environmental practices were also highly ranked as well as Labor & Employment and Real Estate.
A collective list of the nine Brunini attorneys recognized as among the best in their fields in Mississippi by Chambers USA include:
Energy & Natural Resources
Litigation: General Commercial
On Thursday, March 7, 2019, the United States Department of Labor (the DOL) released its newest Proposed Rule that, if implemented, would broaden federal overtime pay regulations to cover millions of additional workers who are currently exempt from overtime eligibility. Under the Proposed Rule, the DOL seeks to update the regulations governing which executive, administrative, and professional employees (the so-called “white collar” workers) are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (the FLSA).
The FLSA requires employers to pay its “non-exempt employees” overtime (1 ½ the workers’ “regular rate of pay”) for all hours worked in excess of forty (40) per week. See 29 U.S.C. § 207. The DOL’s regulations implementing the FLSA sets forth a variety of employment classifications that are “exempt” from the FLSA’s overtime requirement—including employees performing executive, administrative, and/or professional job duties. Since the 1940’s, in order for an employee to qualify as an exempt “white collar” employee, he/she had to meet three “tests”: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations). The DOL last fully updated these regulations in 2004, setting the current minimum salary threshold at $455 per week (or $23,660 per year).
In May 2016, the Obama-era DOL attempted change to the overtime rule that would have doubled the minimum salary level for the so-called “white collar” exemption from $23,660 to nearly $48,000 per year. This proposal would have also increased the total annual compensation requirement needed to exempt “highly compensated employees” to $134,004 annually (previously set at $100,000), established a mechanism for automatically updating the minimum salary level every three years and allowed employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the new standard salary level.
Ultimately, the May 2016 proposal was challenged in court. On November 22, 2016, the U.S. District Court for the Eastern District of Texas enjoined the DOL from implementing and enforcing the proposal. On August 31, 2017, the court granted summary judgment against the DOL, invalidating the May 2016 proposal. Currently, the Department is enforcing the regulations that have been in place since 2004, including the $455 per week standard salary level.
While an appeal of that decision to the United States Court of Appeals for the Fifth Circuit is pending, the current DOL seeks to formally rescind the Obama-era DOL’s 2016 proposal with this Proposed Rule. In its place, the new Proposed Rule would raise the minimum salary level for exempt employees to only $679 per week, or $35,308 annually. The Proposed Rule does have many similarities to the 2016 proposal, including:
- Allowing employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test (provided such bonuses are paid annually or more frequently);
- Increasing the total annual compensation requirement needed to exempt “highly compensated employees” to $147,414 annually (currently set at $100,000 annually); and
- Not proposing any changes to the standard duties test for the white collar exemptions.
If the Proposed Rule is adopted, the DOL estimates that over 1.3 million workers who are currently classified as “salaried exempt”—and thus, not eligible for overtime—will become eligible for overtime pay. While an increase, this figure is lower than the estimated 5 million workers who would have become eligible for overtime under the 2016 proposal. As with the prior proposal, observers feel the number could rise well above the projected increase. If implemented, the Proposed Rules will undoubtedly result in greater expense or operational change for many employers as they struggle to deal with a shrinking pool of workers who are eligible for an exemption from the overtime pay.
The Proposed Rule is still subject to a lengthy comment period before implementation. The DOL encourages any interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov (Rulemaking docket RIN 1235-AA20).
Though the Proposed Rule has not yet been finalized, employers are encouraged to be proactive and engage their legal counsel to begin planning for the change now. Preparations should include auditing current practices and projecting the cost of change and FLSA compliance under the anticipated new framework. This includes evaluating the possibility and effects of significantly higher operating costs.
By: John E. Milner, Brunini, Grantham, Grower & Hewes PLLC
By: L. Kyle Williams
Over the past year, several petroleum distributors, and other entities, have advocated for moving the point of obligation under the Renewable Fuel Standard (“RFS”), seeking to remove this responsibility from refiners and importers, and place it on “position holders” or those parties that blend renewable fuel into transportation fuel.
The RFS promotes increased blending of ethanol, biodiesel and other renewable fuels. Obligated parties—currently, refiners and importers—bear the responsibility of complying with annual renewable fuel volume obligations (“RVOs”) established by the U.S. Environmental Protection Agency (“EPA”). These parties ensure the requisite amount of renewable fuels gets blended into the fuel pool, to offset petroleum fuel production and, in turn, they receive Renewable Identification Numbers (“RINs”) for blending, which are credited toward fulfilling their RVO. Obligated parties can either blend the fuels, earning the corresponding RINs, or they can purchase them.
Valero Energy Corp. filed a petition for reconsideration with the EPA, asking it to change the definition of “obligated party”, as provided by the RFS to no longer include refiners or importers, but rather, “the entity that holds title to the gasoline or diesel fuel, immediately prior to transfer from the truck loading terminal or bulk terminal to a retail outlet, wholesale purchaser-consumer or ultimate consumer.” In addition, CVR Energy and the American Fuel and Petrochemical Manufacturers filed separate but similar requests with the EPA. Proponents of moving the point of obligation argue the current system is fraught with inefficiencies, and larger retailers have a competitive advantage by benefitting from profitable RIN sales. In addition, Valero claimed changing the point of obligation will incentivize the growth of renewable fuels, while the current system has the effect of limiting renewable fuel use. In its petition to the EPA, Valero further claimed the existing point of obligation “harm[s] renewable fuel producers, independent refiners, retailers and U.S. consumers.”
On November 10, 2016, the EPA announced that it proposed to deny all requests to change the point of obligation but will take public comment on such proposals to ensure it will “receive input from the wide variety of stakeholders that could be affected.” In its Proposed Denial, the EPA stated, “We are therefore opening a docket to formally receive comments on the petitions submitted to EPA to change the point of obligation in the RFS program from the refiners and importers of gasoline and diesel fuel to other parties, such as blenders or position holders of these fuels.” The comment period will last sixty days, beginning November 10, 2016. The EPA’s announcement comes after many trade associations, retailers and other entities discouraged any changes to the point of obligation, instead, advocating for the continuation of the current system. These parties include the National Association of Truckstop Operators, the American Petroleum Institute, and the National Association of Convenience Stores. According to these organizations, any changes in the point of obligation would harm consumers by negatively impacting the U.S. fuel market and would raise fuel prices.
The EPA has put forth a comprehensive report detailing its rationale for proposing to deny the requests. Its main arguments in favor of maintaining the current regime include: (1) the current program structure appears to be working to achieve the goals of the RFS program; (2) changing the point of obligation is not expected to result in the increased production, distribution and use of renewable fuels; (3) changing the point of obligation would significantly increase the complexity of the RFS program; and (4) changing the point of obligation could cause significant market disruption. While it is not readily known how the effects of the comment period or the recent U.S. Presidential election will impact this requested change, the EPA’s decision is of great importance to the industry and should be closely watched by industry professionals.
There were many things from the recent settlement of Fair Lending and Fair Housing Claims against BancorpSouth that didn’t surprised me (see United States of American and Consumer Financial Protection Bureau v. BancorpSouth Bank, Case No. 1:16cv118-GHD-DAS, U.S. District Court for the Northern District of Mississippi, Aberdeen Division). I was not surprised that BancorpSouth settled a Fair Lending investigation since it had been fairly well known that the bank was undergoing an investigation that had put on hold its regulatory applications for two planned bank acquisitions. I also was not surprised that a Mississippi bank was the subject of such an investigation since Federal regulators have long utilized Mississippi’s tortuous and inescapable past as a reason to plow its fertile ground and harvest a rich political yield in the form Fair Lending investigations. This regulatory tendency has existed at least a decade, going back to when the FDIC started sending Mississippi banks nasty letters about their HMDA data. There were three big points worth noting, though, some of which were concepts I already knew but had reinforced by the settlement. Others, however, were eye-opening revelations. Below is a description of each.
- HMDA Data Matters
I have never represented BancorpSouth on this or any other matter so I don’t have any knowledge of how this investigation began or what exactly triggered it. However, by reading through the lines in the complaint, there are too many references to “regression analysis,” “statistically significant” rate differentials, and the Memphis MSA to not think that it may have begun as a review of the bank’s HMDA data from Memphis. That is just a guess, but based on prior experience, it seems to be a good one. The way these things typically play out, the Feds, after sticking their statistics geeks in the corner with a bank’s HMDA data, find that there are statically significant differentials as to interest rates charged or denial rates for minority borrowers relative to non-minority borrowers.
Their questions start out benign at first, asking whether these differentials can be explained by business non-discriminatory reasons. What they are looking for is for you to provide them a rate sheet, loan policy, or some other objective measure that shows why the mortgage borrowers were charged a certain rate on a certain loan or why a minority borrower was denied credit. If they select a sample of loans and find that the rates charged followed closely a standard rate sheet used to price mortgage loans, or if denials of minority applications were the result of the applicant clearly not meeting objective credit standards stipulated in their loan policies, and those factors were carefully documented in the file as the reason for the decision made by the loan officer, the regulators will conclude (hopefully) that the “statistically significant” differences were caused by other non-discriminatory factors and move on to their next prey, I mean bank. However, if they take a sample to test, and in the process cannot find any objective reason for why minority borrowers would be treated differently, the bank that is the object of the investigation had better hold on; it is going to be a bumpy ride! This leads me to my second point . . .
- Underwriting Discretion is the Fair Lending Death Nail
I am the son of a community banker. Like all of us, I remember asking my dad one time when I was small why he decided to pick his career. His dad became a banker later in life, and both of my dad’s older brothers are bankers, so his choice was not a novel one. Family influence, though, was not the reason he gave. Instead, my dad believed that, as a community banker, he had the opportunity to help people meet the needs of their businesses and families. Of course, one of the greatest tools a community banker has in his or her toolbox to pursue this divine calling is good common sense to exercise reasonable discretion when warranted. Not only does it assist the community banker in pulling that customer out of a tough financial place in life, it also allows the community banker to compete with larger, less flexible institutions that have a tremendous advantage when it comes to economies of scale, especially in today’s compliance environment.
That tool now, though, has become the regulator’s number one enemy. When it comes to Fair Lending, discretion is a four letter word, especially as to HMDA reportable loans. If your bank’s LAR reveals that rates paid by minority borrowers or women are slightly higher on average than the control group, and they discover that your loan officers have the discretion to assign to borrowers whatever rates they, in their professional opinion, deem appropriate, your bank is presumed to be guilty of discriminating against minority borrowers until you somehow prove yourself innocent. This all but forces banks to standardize their pricing and credit decisions, turning consumer credit into a commodity and erasing any competitive advantage community banks may have on such loans over their larger brethren that see the borrower as another number. Unfortunately, what regulators don’t realize is that the one who really suffers is the borrower, black or white, who just needs a break to get over that next financial hurdle. After all, you don’t receive any compassion from a loan policy or a rate sheet.
- The CFPB is Taking No Prisoners
I’m sure no one was shocked that the CFPB would aggressively pursue fair lending enforcement, especially among those banks that are larger than $10 billion in assets and within the wheelhouse of their examination authority. There is a reason why that threshold was a big deal during the Dodd-Frank negotiations. I was flabbergasted, though, by the lengths they went to in order to satisfy their appetite for a trophy kill. Secret recordings of lower level management meetings and spies sent into branches in markets totally unrelated to where the original problems were found are just two examples of that. This was not a regulatory investigation; it was a James Bond novel. Apparently, the CFPB has inherited the playbook of the KGB.
Not only that, but in a settlement that was supposedly negotiated, they felt compelled to include in the complaint unnecessary and embarrassing quotes from their secret recordings just to rub salt in the wound. I can only hope that waterboarding was not used to convince the bank to accept the complaint’s content.
Make no mistake, the CFPB is on a war path, and it is scalps, not justice, that it is after. As an agency that is still trying to prove its worth and fend off political and judicial challenges to its constitutionality and unfettered administrative authority, the CFPB is more worried about justifying its existence than protecting its charge, the American consumer. What will happen to American consumers, though, much less our financial system, when the CFPB scares half of our community banks into ending consumer lending all together and assaults the reputation of the other half until their safety and soundness is compromised? They will be forced into the arms of industries much less regulated and unconcerned about their wellbeing, I’m sure. This case may be the best illustration yet of what happens when you separate the consumer regulator from the prudential one.